China’s central bank has called on the government to strengthen supervision into ‘speculative’ financing and investments in the blockchain sector.

The Research Bureau of the People’s Bank of China, the country’s central bank, published a working paper titled ‘What can a blockchain do and cannot do?’ on Tuesday.

An early analysis of the working paper by CCN China can reveal that the central bank’s research arm is studying the impact of blockchain and various projects aimed at commercializing the decentralized tech in society.

Pointedly, the central bank authority called for a measured view on blockchain technology. “Firstly, don’t exaggerate the function of the blockchain,” a translated excerpt from the working paper reads. Some industry practices in the years since the advent of blockchain technology have “proven that some blockchain applications are not feasible,” particularly in the financial sector.

“So far, no technological innovation has had a disruptive impact on the financial system, and blockchain is no exception,” it added.

Further, the PBoC’s research unit also called on relevant Chinese government agencies to enhance supervision of financing into the sector after claiming public token fundraising through ICOs areis violation of laws.

For context, Chinese authorities including the PBoC issued a sweeping ban on all ICOs in the country.

The PBoC’s working paper, translated by CCN China, stated:

Currently, the bubble in the blockchain investment and financing sector is obvious. Speculation, market manipulation, and even violations of laws and regulations are common, especially for token projects involving public offering transactions. Relevant government departments should strengthen supervision and prevent financial risks.

Today’s paper follows a public notice by the PBoC in September that warned consumers and investors to be wary of the risks in cryptocurrency trading and initial coin offerings (ICOs).

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Recent times have seen banks hedging their bets or even fully integrating cryptocurrencies. The acquisition and filing of patents is how large organizations truly express their interest in a given field, and Bank of America continues to lead the way, now having secured its latest patent in the blockchain and crypto space, one for “tamper-responsive” remote storage of private keys.

Digital Safe Deposit Box?

According to the patent filing, which was finalized and entered into the record this week but initially filed two years ago, the problem with existing storage methods for private crypto keys is “such devices do not provide for real-time response to such breaches, such that misappropriation of private cryptography keys is prevented.” The patent notes that the vast majority of private keys are stored in regular consumer-grade devices and “susceptible to being misappropriated by an entity that desires to usurp a user’s identity.”

In essence, Bank of America wants to serve as a bank for private keys — a digital safe deposit box, of sorts, with the requisite insurance and backing of a major banking corporation. Such a product is certain to find a gracious market in quick order, and that they have a patent on the idea means they might for an extended period be the only game in town — if they commercialize it.

Novel Tampering Detection

bank of america crypto

The last bit is the novelty of the device or system, whatever form it takes. Bank of America wants to offer clients the ability to know in real-time when their private keys are being tampered with and to have some method to deal with such events. This invention can serve all types of clients, but one imagines exchanges and other larger clientele who are most frequently the target of hack attempts being the biggest beneficiaries.

The patent describes a system of redundant keys in which the system automatically responds to tamper attempts by deleting the key from the potentially compromised device.

“In specific embodiments of the system, the storage device further includes one or more sensors in communication with the first processor. In such embodiments of the system, the first processor is further configured to, in response to receiving the tamper-related signals from the one or more sensors, delete the one or more private cryptography keys from the first memory.”

It can also perform this function if physical tampering is detected, say a device is stolen:

“In other specific related embodiments of the system, the one or more sensors further comprise at least one of a shock sensor, an acceleration sensor and a temperature sensor, In such embodiments of the system, the first processor is further configured to, in response to receiving the tamper-related signals from at least one of the shock sensor, the acceleration sensor and the temperature sensor, delete the one or more private cryptography keys from the first memory.”

A third such instance where it might ghost a protected key off the client device is when a virus or malevolent code is detected:

“In other specific embodiments of the system, the first processor is further configured to receive the tamper-related signal, from the computing node. In such embodiments of the system, the tamper-related signal indicates that a user has exceeded a predetermined number of attempts of inputting user authentication credentials to the authentication routine.”

According to the patent, users will be required to configure what tamper signals are and how they are processed.

Time will tell what, if any, form this patent will take as a product. Secure storage of private keys remains an important topic in cryptocurrency, especially as the community grows and the number of bad actors increases.

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Galaxy Digital, a crypto merchant bank operated by billionaire investor Mike Novogratz listed on Toronto-based stock exchange TSX-V, has become the first alpha crypto custody client of Fidelity Digital Assets.

This week, Fidelity, the world’s fourth-largest asset manager with $7.2 trillion in assets under administration as of October 2018, launched Fidelity Digital Assets, a subsidiary of Fidelity that will provide crypto custodian solutions to institutional investors and accredited investors.

Through the platform, all 27 million customers and 23,000 businesses of Fidelity will be provided with sufficient infrastructure and services to invest in the cryptocurrency market.

Demand From Hedge Funds and Institutions

In an official press release, Fidelity CEO Abigail Johnson said that the long-term mission of the firm in the sector of cryptocurrency is to increase the accessibility and improve the infrastructure surrounding the asset class.

“Our goal is to make digitally-native assets, such as bitcoin, more accessible to investors. We expect to continue investing and experimenting, over the long-term, with ways to make this emerging asset class easier for our clients to understand and use.”

The core operations of Fidelity Digital Assets include assisting institutional investors such as hedge funds, pensions, and academic institutions to invest in the cryptocurrency market with appropriate institutional products.

Fidelity Digital Assets founding head Tom Jessop said that the establishment of the company’s digital asset arm can be considered as the recognition by Fidelity of sufficient demand from institutions for cryptocurrencies.

Within less than 24 hours since its launch, Fidelity Digital Assets secured Galaxy Digital as its first custody client, a company that aims to achieve a similar objective as Fidelity to institutionalize the cryptocurrency market.

Jessop stated:

“This is a recognition that there is institutional demand for these assets as a class. Family offices, hedge funds, other sophisticated investors, are starting to think seriously about this space.”

In January of this year, Novogratz contributed $302 million to Galaxy Digital to build a full-service merchant banking business in the crypto and blockchain space. Months later, Galaxy Digital was listed on Canada’s stock market, enabling investors to directly invest in the cryptocurrency market.

Apart from its core business of investing in cryptocurrencies and blockchain projects, Galaxy Digital offers high profile investors and institutional clients consultancy to facilitate large investments into the market.

“The resulting firm will have over 70 employees with deep institutional experience spanning across technology, investing, advisory, and trading. The Firm has also invested significantly in its management, operations, legal, and finance departments,” he added.

The partnership between Fidelity and Galaxy Digital is expected to lead to clients of the Novogratz-led firm to invest in the cryptocurrency market through Fidelity, similar to how prior to the launch of Fidelity Digital Assets, clients of Fidelity purchased cryptocurrencies like Bitcoin and Ethereum through Coinbase, a partner company of Fidelity.

Future Remains Bright

The infrastructure of the cryptocurrency market, specifically pertaining to the institutionalization of the asset class, has improved exponentially in the past nine months.

Increasing efforts to strengthen the infrastructure of the cryptocurrency market suggest that regulated financial institutions are seeing solid demand for crypto from their existing client base, which could fuel the next major movement of the sector.

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Elvira Nabiullina, the head of the Central Bank of the Russian Federation, claimed that investors’ excitement toward cryptocurrency has begun to cool. Her remarks came at the FINOPOLIS innovative financial technology forum.

Cryptocurrency Fever ‘Beginning to Disappear’

The famed Russian economist and former economic advisor to the Russian President Vladimir Putin represented businesses’ point of view to the bearish crypto market. She hinted that the failure of a majority of blockchain projects and their ICOs has made investors more practical and sober than ever.

“We are holding the FINOPOLIS forum for the fourth time. Earlier, this event used to witness a cryptocurrency fever everywhere. But now, it is visibly beginning to disappear,” said Nabiullina according to a rough translation. “Back in old times, technologies like blockchain caused a great deal of enthusiasm, but, in our opinion, now a more sober attitude towards such technologies has begun.”

The statement from Russia’s central banking chief surfaced in the wake of growing crypto and blockchain adoption inside the country. President Putin in his earlier comments has confirmed that they would create a regulatory framework for blockchain economy as the pressure of U.S.-imposed sanctions grows on the land. But the legislative walk to recognize bitcoin and similar digital assets so far has proven to be slow.

Russia bitcoin cryptocurrency

Nevertheless, investors in Russia are already long on the outcomes of blockchain and crypto over an extended time horizon, as can be seen in their dominant presence in crypto community forums and blockchain project teams. Nabiullina herself offered an optimistic view towards the technology, acknowledging that aftermath of 2018’s bearish action would allow businesses to improve blockchain by picking practical projects over sensational ones.

“Business is trying to improve such technologies, looking for cases for the practical application of them,” she explained.

ICOs an Excellent Method to Raise Funds

Nabiullina acknowledged the initial coin offering (ICO) model as an efficient way to raise funds, in contrast to many of her global peers who maintain a negative stance towards it. The central bank chief nevertheless reminded that the first major wave of ICOs included plenty of frauds, as evidenced by the failure or scammy nature of more than 90 percent of projects launched in the last two years.

The comments helped to showcase the Russian central bank’s attitude towards ICOs in particular but also appeared in contrast to Nabiullina’s historical attitude towards crypto assets.

In 2017, the Russian economist compared cryptocurrency craze with gold fever, while later she expressed her disinterest towards regulating cryptocurrencies or even putting them in the same category of foreign currency.

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