February 28, 2017

Can Blockchain speed up Post Trade Processing?

Posted on February 28, 2017 | by [email protected]

The inception of cryptocurrencies has added a lot of value to the financial markets and the business of transactions. However what came as a blessing in disguise is the ledger based technology that has huge potential in disrupting trade finance and settlements. Similarly, Post-trade derivatives processing is a complex and important part of everyday global financial markets. As blockchain-inspired technology for financial services continues to mature, post-trade infrastructure providers are collaborating with the industry to explore how it can be used to increase the efficiency of systems and processes driving the contracts of the global derivatives markets.

Post Trade Processing Overview:

When a trade between two parties has been confirmed on a trading platform, a ticket is passed to both sides, allowing them to carry out post-trade activities. Both parties receive a digital representation of the commercial contract into which they have entered. As time passes, real-world facts (e.g., price movements) are taken into account and the contract might be revalued. Parties then agree on what action is to be taken (who pays whom, how much of what) and settle the contract.

Traditionally, this process involves multiple systems within each organization, independent data storage etc either directly between the two parties or against a third-party intermediary.

How Blockchain can fit:

Instead of recalculating the market pricing at every step and renegotiating the stance, any calculation performed during the trade’s lifecycle would anyway use exactly the same input data. Hence storing the input data functions into Blockchain by mutual consent would allow for processing even at a very later stage.

This means that the reconciliation of data is built-in at every step, reducing process overheads. Payments can also be made with immediate effect, if the ledger has a representation of the cash or asset being paid. This can also be calculated and disbursed with appropriate mutual consent. This programmable blockchain post processing methodology might be exactly what markets need right now. Built into the foundation of distributed ledgers, the information can be also monitored even after long periods of time to check for compliance issues if required.

Can Blockchain Power Insurance Domain – Part 3?

Posted on February 28, 2017 | by [email protected]

In my previous post in the series – “Can Blockchain Power Insurance Domain”, I have elaborated two other potential markers that would require blokchain’s aid to make the insurance sector gain good traction on the data front. The markers described are purely related to the kind of data that would disrupt insurance sector and its capture and maintenance methods through blockchain and other technological advancements. However it doesn’t talk about how Blockchain can empower the operations and procedures involved directly in insurance proceedings. This last post would be completely dedicated to the same cause. Let’s look into how blockchain can transform the operating procedures of insurance domain:

Updated Distribution and Payment models:

Many global insurance providers are collaborating and developing alliances to identify new payment business models (like bitcoin and other cryptocurrencies),to efficiently handle data through a single global ledger. More efforts have been dedicated to increase automation to proactively capture risk data in contracts also offers new opportunities to build market knowledge. This in turn helps in streamlining payment methodologies suitable to the needs of the users. On top of that, at the least, Global insurers can cut down on the asset management costs, by reducing the hedging fees that they generally pay to protect themselves from the currency fluctuations that exposes them to risk in the international transactions.

Reinsurance:

Reinsurance has always been a hot topic in the insurance sector where, expiration of insurance period might require parties to renew their policy by manual process. For industries and for the insurance of automobiles, smart contracts can be designed that would diligently cut down the work that is put in by middle men in re-enabling the policy. Also when a particular insurer is seeking to offload an equal amount of risk to two separate insurers. A blockchain ledger can provide insight and notification if one of those reinsurers then tried to offload some of its portion to a subsidiary of the other reinsurer.

Hence we see that from detection of fraud claims to stream lining the data for exploratory analysis, Blockchain also weighs good on the process optimization front of insurance sector and has true potential to power it in the time to come.

How to invest in Bitcoin Profitably – Part 3?

Posted on February 28, 2017 | by [email protected]

In the previous post of the “How to invest in Bitcoin profitably” series, I explained how indirect investments in Bitcoin would work. Though the methods described can be heralded as safe or risk averse, the returns are substantially small and are incurred over longer durations. But part 1 explained methods that are pretty risky if the market gets volatile. So people more often ask me a smart way of investing in the cryptocurrency where either the risk is not too high but the returns are substantial or a way that gives them additional benefits apart from the profits for the kind of risk they are incurring. Well there are a couple of ways and that is what this final post in the series of bitcoin investment posts is about. Let’s look into those methods:

Bitcoin Investment Trust’s GBTC:

‘Bitcoin Investment Trust’ was launched in 2013 by Barry Silbert, is an open ended trust that is invested exclusively in bitcoin and derives its value solely from the price of bitcoin. It enables accredited investors, with annual incomes greater than $200,000 or assets of more than $1 million, to gain exposure to the price movement of bitcoin for a minimum investment of $25,000 without the challenges of buying and securely storing bitcoin. The price of GBTC shares roughly account for 10% of Bitcoin price and hence people wouldn’t be directly exposed to the risk of Bitcoin. It also gives you additional tax benefits apart from the reduced exposure.

Bitcoin Investment Retirement Account:

While GBTC holds good promise, it is available only for accredited investors. The other instrument which is the most common one, that also provides tax benefits along with good return on investments in Bitcoin would be Bitcoin IRA. Bitcoin IRA allows users of any scale to invest directly in Bitcoin and hence directly apes investments in real time Bitcoin markets. The customers hold the Bitcoin directly where Kingdom Trust acts as the custodian and BitGo secures the cryptocurrency. The firm uses Genesis Trading to purchase Bitcoin and has an annual contribution limit of $5000.

Due to GBTC’s limited availability, Bitcoin IRA proves to be the better option with good amount of returns aggregated over a period of time. It would also provide tax benefits and good exposure to Bitcoin markets.

Can Blockchain Power Insurance Domain – Part 2?

Posted on February 28, 2017 | by [email protected]

I have elaborated in the first piece of these series of posts, how insurance sector has been functioning in a legacy system. I outlined the various problems that have cropped up over time owing to the set process imbibed into the insurance sector, over a period of time. Majority of these problems are prevalent due to the Data discrepancy and bad data capture. These issues many a times affect the insurance sector on the compliance front and also lead to losses that amounts to 1-2% of the total revenue. Mere monitoring of these issues at times might prove out to be costy. Hence I was exploring into ways Blockchain can cut into insurance sector and increase efficiency. We have already dealt about Fraud Detection and Risk prevention in the previous post. Let’s look into further issues that are potentially dangerous and can be resolved using blockchain:

Claims prevention and management:

While big data, mobile and cloud based models are already being employed to store and process claims data, it becomes inadvertently important to make the system transparent. In the processing of Claims prevention itself, new data streams can enhance the risk selection process by utilizing local and external risk and coupling it by analytics. Under such cases, a distributed ledger can help both the insurers, customers and other parties to instantly access the updated relevant information. The use of data stream from mobile phones or sensors can adjust the claims submission, reduce loss adjuster cost and increase customer satisfaction.

In the same fashion, the combination of sensor, satellite, imagery, mobile technologies and blockchain could facilitate claims payments and rescue services when natural disasters occur.

Internet of Things (IoT) and Product Development:

The actuarial analytics are actually dependent heavily on the data presented by technological set ups. As more devices and objects are connected owing to the data packs available, a lot of data will be collected and stored over a period of time. This data will be valuable to insurers as they would seek support for their models with updated data from time to time. Hence blockchain comes into play for managing these volumes of data independently and facilitates its availability for all the parties involved.

Hence we can see in the above cases that Blockchain can actually become the backbone of insurance sector. Follow this space for the next and the final part on how blockchain can power insurance.

Malta’s PM thinks Europe should be the Bitcoin continent and here’s why it’s perfect

Posted on February 28, 2017 | by [email protected]

When it comes to Bitcoin adoption and experimentation with cryptocurrency, Europe indeed has been the forerunner. With an industry ecosystem that inherently supports Fintech, Europe has offered a lot to Bitcoin’s journey. With recent reforms towards abolishment of high denomination cash transactions, the continent has taken one step closer to the adoption of cryptocurrencies and potentially supporting their developments. Owing to these above factors, Prime Minister of Malta recently proclaimed that Europe can be the Bitcoin continent. Let’s deep dive into the underlying factors behind the idea:

CEPS Ideas Lab:

Innovation platform of exchange, the CEPS Ideas Lab, brings together national think tanks across Europe for exchanging and collaborating on ideas and innovations. CEPS Ideas Lab 2017 – Reconstructing the Union took place on February 23 and is one of the main events in Brussels with Malta’s Prime Minister, Joseph Muscat as keynote speaker. The event consisted of over 1000 participants from 43 different nationalities with Government representatives, businesses, NGOs and other key European Institutions who gathered to discuss and debate over key European policies and issues.

Joseph Muscat’s view:

In a very captivating speech, Joseph Muscat has given an overview of his views on cryptocurrencies and how he envisages Europe can proactively rebuild the continent for the better. Among other ideas listed, Muscat fondly propagated that “Europe should become the Bitcoin Continent”. He believes that the rise of cryptocurrencies can only be slowed down but cannot be stopped. The financial institutions have come to understand the efficiency, transparency and cost effectiveness cryptocurrencies fetch. The PM elaborated on the above statement as follows:

“My point is that rather than resist, European regulators should innovate and create mechanisms in which to regulate cryptocurrencies, in order to harness their potential and better protect consumers, while making Europe the natural home of innovators.”

With Europe’s bid to become a blockchain country with friendly regulation, the idea really doesn’t seem far fetched.