Reg A+ is as an alternative to an Initial Public Offering (IPOs), allowing businesses that have a shorter trading history a way to raise capital, with fewer disclosure requirements than a typical IPO. Many of these mini-IPOs have not performed well and some have been dogged by concerns over fraud, prompting both Nasdaq and the New York Stock Exchange (NSE) to raise their listing requirements for Reg A+ companies.

However, Blockstack is being heralded as the first approval from the SEC since it started it’s “crackdown” on Cryptocurrencies, in particular, ICOs, as many of the ICOs were perceived as being securities by the regulator. This is significant as it sets a precedent for other firms that wish to raise capital in the USA using Reg A+ regulations i.e. obtaining investments from non accredited investors – the general public. Blockstack has used the SEC approval, and in doing so, has raised $28 million via the sale of its digital token. Approval from the SEC did not come without a significant cost for Blockstack, as it spent $2 million to get approval for its ICO.

Blockstack’s achievement to gain permission from the SEC could prove to be an inflexion point for Cryptocurrencies, but investors will still need to be vigilant. However, are we now going to see other firms using this route to raise capital and get listed on Nasdaq or the NSE, as opposed to the various new Digital Asset exchanges currently being established?

With the announcement of Libra, Facebook’s new Digital Currency, it was reported in The South China Morning Post that Wang Xin - a director of the People’s Bank of China (PBOC) – said recently at an academic conference hosted by Peking University’s Institute of Digital Finance “If [Libra] is widely used for payments, cross-border payments in particular, would it be able to function like money and accordingly have a large influence on monetary policy, financial stability and the international monetary system?” China was one of the first countries to look at Digital Currencies back in 2015. Indeed China has enjoyed huge success replacing cash as its economy goes digital. Wepay (owned by Tencent) recorded 460 billion annual transactions in 2018, while Alipay (owned by Alibaba) recorded 197.5 billion transactions.

The widespread use of Alipay has created Yu’e Bao (Chinese for secret treasure), the world’s largest money market fund at $150 billion in size! Merchants use Alibaba’s fully digital C2C and B2C platforms which connect consumers and businesses while providing logistics, payments, and credit facilities. This means that merchants often decide to leave, in effect, their cash flow in Alipay’s Yu’e Bao’s fund.

Possibly, given the fact that daily life for many Chinese people is conduction without using cash, the PBOC does not wish to lose control and see a foreign Digital Currency, especially one backed by non-Chinese fiat currencies such as Facebook, gain too much traction in the Chinese economy. The PBOC, after receiving approval from the State Council, has been working with market institutions on creating a central bank digital currency, according to Wang Xin. However, there have been no public announcements of progress.

Cai Weide, a Chinese professor of Blockchain and crypto, who has worked around the world said “China was “lagging behind and that they should not underestimate the importance of Libra, an invention that, is (one of the) major financial technology reforms in the past 500 years”. 

There is no guarantee that Libra’s Facebook will succeed, but the ‘genie is out of the bottle’ causing many organisations and governments to take Digital Assets more seriously, as they begin to understand the challenges and opportunities these Digital Assets offer!

Arun Kumar, Group CFO, Vedanta Group, said, “Vedanta will benefit from the digitized and simplified workflow which shortens the laborious process running into hours to just a few minutes and complete transparency that this platform offers to all stakeholders.”

Increasingly, we are seeing new business models being developed to hold, manage, and process data by implementing technologies such as Machine Learning, Blockchain, and Artificial Intelligence. With ever more data and the roll-out of smart meters, the “Internet of Energy” is slowly becoming a reality, increasing the need for data management even further.

In 2017, Cryptocurrencies fuelled interest in Blockchain technology, with many start-ups and pilot projects being funded by Initial Coin Offerings (ICOs), which seemed to be being launched on an almost daily basis! In the energy sector alone, there were over 150 projects using Blockchain, according to SolarPlaza, which it highlighted in a ‘Comprehensive Guide of Companies involved in Blockchain & Energy’. 

If you look at Google Trends to see the interest in terms of searches since December 2017, “Blockchain Energy” has fallen from 100 to 26,  so clearly, the hype has gone. However, we are still seeing a number of projects in the energy sector being developed in different parts of the world.

In France, Grenoble Ecole de Management conducted a survey to ask 112 experts from industry, science, and public administration in France about the role of Blockchain technology in the French energy sector. It wanted to understand how these experts thought Blockchain would be used in the next five years. Peer-to-peer energy trading and electric vehicle charging and sharing were the most popular choices.

Digisol, based in France, is a project designed with an objective to enable the sharing of solar energy between two apartments within the same building.

Meanwhile, in Japan, an Australian company has been using Blockchain technology to enable solar initiatives and working to expand the renewable energy market in Japan. Perth-based Power Ledger has announced a partnership with Japan’s Sharing Energy Company. Power Ledger is providing a Blockchain-based tokenised energy trading platform while Sharing Energy is a provider of solar installations and equipment.

According to Solar Market Insight, the USA installed 2.7 gigawatts (GW) of solar PV capacity in the first quarter of 2019. This brings the total amount of solar power installed capacity to 67 GW, which is enough to power 12.7 million homes. Furthermore, it is estimated that PV installations will double in the next five years, which will assist in reducing the impact of power generation on climate change. However, it presents some real challenges for power management and the electricity grid in the USA. In California, for example, solar farms have previously had to shut down on sunny days because the grid in the state was unable to handle the amount of solar energy being generated.

In 2012, Germany experienced industrial companies sustaining damages due to the instability of its electricity grid due to unprecedented solar and wind fluctuations. In Australia, there were major state-wide blackouts in 2016 for the same reasons.

This week a company called LO3 successfully gained funding from Royal Dutch Shell and Japanese giant Sumitomo Corporation Group. LO3 is looking at using Blockchain technology to track energy supplies, allowing users to select which supplier they wish to select so making peer-to-peer energy much easier. LO3 Energy Blockchain-powered platform was used in Brooklyn in New York in 2017 and was the world’s first peer-to-peer electricity trading project, developed with  Siemens.

Blockchain technology is helping power grids become more decentralised, so accommodating microgeneration and peer-to-peer power supplies. By using Blockchain technology buyers, sellers and transmitters of energy can be sure of the privacy and security of the transactions (also reducing the number of intermediaries), so improving electricity market efficiency. In addition to this, the use of Smart Contracts enables the automation of records and payments, by potentially using Digital currencies.

ConsenSys is a Blockchain consulting business set up by Joseph Lubin, co-founder of Ethereum. Although this is not the first time these two companies have signed an agreement, in 2018 they agreed to collaborate on technical training to help developers who wished to use the Ethereum blockchain.

SK group has been active in the Blockchain sector, having agreed to support Ok CashBag which is a Korean mileage loyalty program that has enrolled approximately 38 million people - 50% of South Korea’s population! The intention is to use Cryptocurrencies as part of the incentivisation program that Ok CashBag operates.

LG, the second-largest manufacturer after Samsung, has been developing a Blockchain-powered platform to help improve the transparency of information about food that is supplied to school canteens across South Korea. The intention is to have details about the production, processing, distribution, purchase, and consumption of products that school canteens use. As all of this information will be recorded on a Blockchain, it will become available for authorities, schools, and parents to see what is being consumed and who the suppliers are.

Samsung, which has dominance over the insurance, real estate, electronics, and payment sector in Korea, has been allocating most of the resources of its crypto and Blockchain department by developing its Cryptocurrency ASIC mining hardware. This hardware is used by people wishing to mine Cryptocurrencies like Bitcoin.

Hyundai, which is Korea’s leading car manufacturer, has been building a Blockchain-powered platform to monitor information about second-hand cars, such as mileage, age and service history.

According to a study by the Harvard Business School, increasing your customer retention by just 5% can have outsized benefits on profits of up to 95%! However, low redemption rates are a big problem for providers of loyalty schemes, as it can result in a lack of engagement. Loyalty schemes are often not that popular with companies’ accounts’ departments as they can create a large, intangible liability on a company’s balance sheet. Loyalty scheme members that do not redeem their rewards are not actively engaged but, on the flip side, members who do redeem points typically spend more and have greater satisfaction with loyalty programs.

According to Mckinsey, US companies spend $50 billion a year on loyalty schemes alone, and if you get it right, loyalty programs can generate as much as 20% of a company’s profits! However, with increasing online shopping, and particularly shopping on mobile devices, consumer retail behaviour has been changing dramatically and reward schemes seem to have lost some of their appeal. Customers often cite the difficulty of being able to redeem rewards and the fact that they may have many different loyalty schemes with few of them operating together. This is where Blockchain technology is able to help bring multiple brands together, offering a wide range of products to consumers in order to redeem their reward points.

Blockchain technology allows a customer to store all points in a single wallet rather than trying to manage these multiple schemes. It would be possible to create a solution enabling all schemes to have compatible rules for acquiring and redeeming points from different loyalty schemes. It is thought that Facebook’s proposed Digital currency, Libra, could be a real boost for loyalty schemes, as it may allow some form of global standard to develop for smaller schemes to then adopt. One challenge Facebook has is that regulators do not like the collection of data from individuals without the user being compensated. However, if Facebook started to pay it’s 2.3 billion users in Libra for clicking on content, it could be a way to satisfy regulators and, in turn, create the world’s BIGGEST loyalty scheme overnight! 

Loyalty schemes using Blockchain technology and Smart Contracts can automate many of the transactions, making the running of loyalty schemes autonomous. Data can be stored in a highly secure manner using a Blockchain platform, enabling the privacy of users’ information, which will increase the trust of the brand among these users. Implementing joint loyalty schemes with other brands becomes easier because Smart Contracts can handle the transferring and converting of reward points while validating users and redeeming these points. Furthermore, the brands/ retailers are not giving up control or access to their most important asset – their customers’ data!

This has led to Deutsche Bank cutting 18,000 jobs.

In April 2019, Christine Lagarde, Managing Director of the International Monetary Fund, told CNBC that cryptocurrencies and financial technology developments are “clearly shaking” the banking system. She also added, “We do not want innovation that would shake the system so much that we would lose the stability that is needed.”

However, like the story of the emperor who wore no clothes, the real problem is DEBT at a personal, corporate, and national level - and it is a global problem. Furthermore, with historically low-interest rates, the options available to central banks to stimulate economic growth in the event of an external crisis are extremely limited.

To give you a feel for the truly horrific state of affairs of how utterly out of control the debt in most major countries is, look at the US Debt Clock which illustrates in “real-time” how debt mountains are piling up in a selection of the very biggest countries in the world.

While the national debt numbers are a cause for concern, what is truly alarming is the foreign debt - otherwise referred to as the external debt as a percentage of Gross Domestic Product (GDP). This is the ratio between the debt a country owes to non-resident creditors and its GDP. External debt is the part of a country’s total debt which was borrowed from foreign lenders and is, therefore, vulnerable to the confidence foreign investors have in the ability of another country to keep paying its own debts.

The amount of debt owed to foreigners as a % of GDP for different countries has to be of concern - France 201%, Germany 145%, Italy 136%, Japan 105%, USA 87% and Holland with a massive 457 %. Asking for your money back, or not lending an indebted nation any further capital, potentially is one of the levers that foreign investors have in the event of the escalation of trade wars, disputes, and disagreements.

As we have seen, geo-political uncertainties can also trigger an enormous financial crisis e.g. the financial crash in 2008, and was also demonstrated by the spike in the price of oil in the 1970’s and the Wall Street crash in 1929 (which led to the global depression in the 1930s and was arguably the precursor to World War II).

Deutsche Bank estimates that the impact of the U.S - China trade wars has already resulted in over USD 5 trillion from the financial market, and the two largest economies in the world have yet to agree on terms. Given the uncertainty in Europe over Brexit, Greece has just voted-in a government that is going to reverse the spending cuts and tax hikes that it agreed to, as part of its financial bailout. If this leads to Greece getting back into financial trouble, will the Germans agree to bail it out again? Meanwhile, Italy looks to be headed for a confrontation with the European Union as its national debt spirals out of control to over $2.3 trillion (which is the third-largest after USA and Japan!)

It is tragic for the 18,000 Deutsche Bank staff who have just lost their jobs, but already they are looking for new opportunities. Indeed, in the last week, I have personally spoken to a number of banking staff at Deutsche Bank and elsewhere because, as one of them said to me “The writing is on the wall, technology is replacing jobs”, and they are worried about their long terms job prospects. One former Deutsche Bank employee, Medio Demarco, was astute enough to see this ‘writing on the wall’, saying on Twitter that he left his former employer a year ago for crypto. According to his LinkedIn profile, Demarco was employed by the Wall Street bank for two years. Now Demarco is the co-founder of Delphi Digital, which provides research and analysis on crypto.

With the new Fintech start-ups and business that are setting up all over the world, whilst they are creating jobs, they are also exposing the weaknesses of many of the traditional banks and forcing change upon them. These FinTech firms are using technology like Blockchain, AI and Big Data to usher-in new systems and procedures but, in turn, are forcing many of the traditional financial services companies to shed staff in order to try and keep up.

Cryptocurrencies, as Christian Lagarde has mentioned, are a threat to banks. However, one wonders as we see the likes of Facebook with $41 billion (and growing) in cash and short-term investments, talk about Libra being used to help the unbanked, is their real target the broader financial services sector? Indeed, how long will it be before we see other global brands following Facebook and issuing their own digital currency, and so further undermining the need for banks?