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U.S. President Joe Biden has recently released an executive order pushing forward studies and development for digital assets.

Since its release, this had garnered attention and different opinions from the public. Most experts have greeted this as a possibility for better regulations and development of the digital asset industry.

But what does this exactly mean for the digital community and the current banking systems? Should we be expecting the long-waited American CBDC soon?

Read More: Executive Order on Ensuring Responsible Development of Digital Assets | The White House

The Two Truths with Regulations

One major thing that many experts have observed from the executive order was the lack of any immediate policies and regulations. Rather, it contains long lists of call-for-action items for multiple branches of the government to operate and perform exhaustive studies from every aspect.

During the drafting period of the executive order, many had expressed scrutiny and concerns, thinking that this would involve excessive regulations that would hinder current digital transactions and activities. But in contrast, the report rather reaffirmed that cryptocurrency is here for us to embrace and deal with.

The executive order reflects how the U.S. is taking the right track for the digital industry, acknowledging its significance for America’s competitiveness in the financial market.

Instead of manifesting some kind of repression for the industry, we received an order directing agencies to responsibly identify issues and perform studies to outline necessary resolutions. This had apparently conveyed the Biden administration’s desire to harness the presented profits while securing a safe industry.

President Biden’s Order on Digital Assets: A Nudge for a U.S. CBDCMany experts have previously called out that the U.S. should start mobilizing its arm s and draft regulations, given that digital assets are greatly taking over the financial sector. Given the amount of change crypto had caused, we should start minimizing any systematic risk as soon as possible.

The crypto market has been growing at a high speed, impacting our traditional financial systems. Based on multiple studies, these are some of the signs that a financial crisis is hitting a market. It is important that we invest in regulations to ensure minimal impact in case of any disruptions.

However, we should be cautious that together with certainty, the public also demands favorable regulations.

This is the exact reason why some experts have expressed concerns that actions from the U.S. government might cause regulatory issues the community might find too exhaustive, resulting in customers shifting to other countries with much more favorable policies.

Regulations while Securing Competitiveness

A quite major portion of the executive order leans towards sustaining the economic competitiveness of the U.S. market by ensuring efficient services while keeping up safe and well-regulated transactions.

However, in reality, things are much more complicated than mere words. There would always be the fear that one day, we might wake up with an industry regulated too tightly.

The Crypto industry was once a self-regulating business. However, in actuality, there would always be interventions from the government, one way or another.

Is the Internet a Trustworthy Foundation for this Critical industry?

Upon the release of Biden’s executive order, Thomas Vartanian, a writer, and a famous banking expert, remarked that most issues we encounter with digital assets are inherent from historical issues we have from the internet, which we are still trying to keep firm grip on .

In his books, Thomas had previously called out for a much more secure internet space. He mentioned that the lack of action over the last decades regarding the matter is alarming. Now, he is troubled by the apparent fact that more forms of digital assets, including CBDCs, will soon transition to the unsecured platform we have – that is, the internet.

As we progress with various studies on digital assets, we should expect that these types of concerns will be addressed. However, some financial veterans have given warnings that these explorations might give us results that are not as pleasing as we want. There are numbers of experts who are sceptical about how the digital industry would impact the overall financial sector, given the limitless number of things that could wrong.

Crypto has been here for more than a decade and we’ve been handling it well so far, however, an awful amount of loss would be ahead of us if we do not continue working with it smartly.

Biden’s Nudge for a U.S. CBDC

Although the recent executive order by the White House does not provide certain directives regarding the establishment of an American central bank digital currency or CBDC, its instructions are clear to mobilize federal agencies for further studies and preparations.

President Biden’s Order on Digital Assets: A Nudge for a U.S. CBDCThe report provides a noticeable sense of urgency towards CBDC and a clear prominence of the U.S. entering the competition. There’s quite an emphasis on the U.S. maintaining its global market leadership, which received different responses and opinions from the community.

Few banking institutions have expressed concerns on how their businesses would be impacted by creating a CBDC, specific to activities such as funding and lending.

Conversely, experts pointed out that the banking industry should not treat CBDC as a competition, but instead leverage it for further service development, given the number of roles private banks could take part in, once created.

The executive order clearly pushes forward the concept of an American CBDC, in relation to the notable slow progress of the Federal Reserves Board in terms of conducting studies. The Fed has been long waiting for a directive from Congress and the executive branch, and with this recent order by the President, we should expect the Fed to act and move forward.

Additionally, the order has provided instructions to the Justice and Treasury departments to perform necessary preparations for any legislative changes needed upon establishing a U.S. CBDC.

Although no words are set in stone, the executive order is an apparent nudge from the White House calling a huge sense of urgency for CBDCs.

Is Urgency for a U.S. CBDC Really Needed?

Although the U.S. government has called the “highest urgency” for CBDCs, the same is not shared by the rest of the community, as many emphasise the risks that this would cause in the traditional systems.

Some banking veterans pointed out that many from the financial sector have the misconception that faster and smoother transactions could only be attained through CBDCs. They expressed their concerns that the U.S. federal should look at the matter with a more careful approach given the huge role the U.S. dollar plays in the global financial market.

Although some other nations are getting ahead in terms of testing and pilots, specifically China with its e-CNY, some experts stated that this shouldn’t be an important consideration for the U.S.

President Biden’s Order on Digital Assets: A Nudge for a U.S. CBDCEven though it might seem like this is China’s indirect attack to put the U.S. dollar down in the global market, experts mentioned that the U.S. shouldn’t confuse it for a need to rush and compete, without proper preparations.

What’s Next After the Executive Order

Although the executive order has clearly shown how the U.S government is leaning towards the creation of CBDCs, one thing that the community agreed on is the lack of any signs that the authorities favor any type of digital assets. So far, the mandate is clear that digital assets in general would be developed and studied.

The executive order has not shown any impact on the current business activities and no noticeable actions are taken by the digital community. The industry continues with its plans but should be more cautious as changes might come faster and sooner than expected.

This order is a good way to spark conversations as we go through the rapidly changing digital industry, however, we should expect that things would get rough once we go into details.

Visit our page at https://coredo.eu/contacts/ for more reads like this!

The cryptocurrency industry in Estonia through the years

Estonia is one of the first countries to venture into cryptocurrency. They are the first member of the European Union to provide standard regulations and exercise control over cryptocurrencies. Hence, Estonia was known to be one of the top crypto-friendly countries in Europe.

Three years ago, in 2019, the Financial Intelligence Unit (FIU), a council established to gather suspicious activities of individuals and institutions, released about six hundred licenses for crypto. These licenses are called Virtual Currency Service Provider licenses. When looking into Estonian law, an institution that received its license is required to do business six months after its license has been released.

Come 2020, the regulators further tighten their control by emphasizing that virtual currencies must be treated just how traditional financial firms are. This means they should also comply with Money Laundering and Terrorist Financing Prevention Act.

Having the AML Act in Estonia, is it still crypto-friendlyIn 2021, Estonian authorities revoked about 2000 crypto licenses. The nation’s government made the rules even stricter by adding audited annual reports and due diligence for digital financial institutions.

Today, crypto enthusiasts are required to get a license under the new Estonia cryptocurrency regulation.

Anti-Money Laundering (AML) Act

As regulations are the weakest point of cryptocurrency, authorities are finding a way to combat this. One of the solutions they introduced is by applying Anti-Money Laundering (AML) Act in the crypto world.

Now, what is AML Act? Generally, it refers to a series of laws, procedures, and regulations a country has to unmask illegal funds that are disguised as legitimate earnings.

It was a response in the ever so growing virtual currency industry wherein tokens may be used for illegal purposes. This act has requirements that a business must comply with. In doing so, financial institutions may also develop a more sophisticated system of due diligence that would benefit both their customers and their management.

In Estonia, AML Act was applied on the 23rd of February 2022. The biggest updates regarding this are listed below.

 2 New Service Types

  1. A digital currency exchange service refers to one that enables a payment transaction to be electronically executed through a digital cryptocurrency service institution in the name of the main user. Its purpose is to transfer crypto tokens from the original owner to the recipient, despite having a different or same crypto provider, or if the recipient and original owner are the same.
  2. The solution of organizing public or private transactions or offering financial services concerning releasing of digital currency.

These newly introduced definitions are an addition to the current service types the industry has. Since digital currency is defined to be a service in the paradigm where virtual keys are produced for the clients or clients’ encrypted virtual keys, these are very useful in storing and exchanging digital currencies.

It was previously defined that a digital currency exchange service is where an individual’s or firm’s virtual currency can be traded for a fiat one, or vice versa, or against another digital currency.

Now, the two new types of services listed above must be interpreted in agreement with the recommendations set forth by Financial Action Task Force (FATF), an institution that implements counselling for anti-money laundering and counters terrorist financing measures. As per FATF, one’s revision is not in compliance with the regulations until they offer the listed services above.

DAO, Defi, and WEB 3.0

Decentralized Finance (DeFi) and Web 3.0 programs have always been the top concern and are in agreement that real decentralized autonomous organization (DAO) type programs must be maintained beyond the realm of regulations. This concept includes local-based apps, wherein all users must coordinate with another user to have the capacity to provide and move the service, and involves software programmers whose function is to process the verdict of the DAO to execute a role into the crypto protocol.

In the course of the conversation, the Estonian government commented the following: their country’s legislation cannot make up for the window of individuals in decentralized financial services. To emphasize, their regulations do not focus on such services and technological advancements.

The modification must be interpreted in association with the current standard of the definition of the service provider. That is, say, please see below:

  • A service provider must be a single person
  • Commercial activities should be within the paradigm of the professional, economic, or exchange activity of the person

More so, the digital currency institutions are required to be evaluated according to the substantial will of the institution and the type and purpose of their businesses.

Companies’ requirements to hold or apply for a license

The path of these newly introduced laws and regulations is obviously not far from their original drafts. However, they are more compassionate in some sectors. You may find the updates of the new regulation compared to the current ones below:

Having the AML Act in Estonia, is it still crypto-friendly

  1. Cryptocurrency service providers are prohibited from presenting their financial services externally from their determined professional relationship.
  2. A straightforward veto was programmed for accounts that do not have credible information.
  3. Having a travel rule. This means that there will be a responsibility for information to be sent for outbound-going payment transactions. If in case the crypto receiver cannot accept the data sent, the provider shall conduct a course of action to track the data and have a clear analysis of risks.
  4. A cryptocurrency provider shall keep the records related to the travel rule within 5 years after the last day of the business partnership.
  5. More information will be required throughout the licensing period. These include income statements such as balance sheets, and also business plans, and information on the company’s Information Technology (IT) systems and other technological data.
  6. Companies that are licensed are required to have an external and internal auditor.
  7. A minimum amount of € 250,000 for remittance service on share capital, and € 100,000 for the rest.
  8. Funds to be owned are necessary, as well as its liquidity, just like those required for credit companies.
  9. Reached higher education plus a minimum of 2 years of experience in business management.

How much does the license application costs? Currently, it is about € 10000, a great increase from the initial € 3,300 only.

Please take note of the deadlines below:

  • June 15th – Deadline for submission of updated documents for companies who have valid licenses. FIU may extend this for about one hundred fifty more days. Once the updated documents are submitted, licenses will be renewed. Otherwise, they will be revoked.
  • March 15th – First-time application of license which will be within the scope of new regulations.

If you need more help with the licensing, we have financial experts who could help you. You may reach us at Coredo.

History of Decentralized Finance

Decentralized Finance, or DeFi, originated with the hopes of having a financial system that would allow its end users to trade currencies without the need to undergo any government control.

In 2009, bitcoin (BTC) was introduced as the first DeFi asset in the cryptocurrency industry. It was a big hit, especially for crypto geeks, and is now considered one of the major investments a coin holder can have. BTC paved the way for the development of DeFi, in general.

Six years into the technology, in 2015, another coin entered the market – Ethereum (ETH). It gave rise to the Initial Coin Offering (ICO) market which enabled the whole industry to be in the mainstream, being comparable to traditional financial services.

DeFi was further modernized in 2020 due to the pandemic. Since existing firms were pinned down by the lockdown, Decentralized Financial applications were developed to cater to those who cannot be entertained by the traditional firms. Such applications enabled DeFi individuals who lost their jobs to borrow, lend, and invest during the pandemic.

DeFi A threat or being threatenedWe can say that DeFi is like an oasis in the desert of financial instruments. It serves a variety of services which is currently the key to keeping it running.

Institutional Markets under DeFi’s Grasp

Having a virtual peer-to-peer system, DeFi does not pose a barrier to any monetary transaction and is inclusive to all. Hence, they can operate like conventional brokers and banks, but in a digital way.

As such, it keeps on convincing individuals and institutions to invest in them and take DeFi products and services as another form of the trading process.

To back this claim up, three big institutions have invested in DeFi – State Street Corporation, Fidelity Investments Inc, and BNY Mellon.

Learn more: DeFi is taking over the institutional markets

Concerns about DeFi

While it is indeed true that DeFi is evolving quickly and on a positive trajectory, there are still issues that make this industry a cause for concern.

First is its weak foundation in the regulatory system. International Organization of Securities Commissions or IOSCO released a report stating that although DeFi is mirroring the regulations traditional markets have, it is still insufficient. Yes, it is acknowledged that it brings investors several benefits, however, it also possesses multiple risks.

IOSCO reported on the 24th of March that it developed a new team to develop policies to lessen the risks of the fast-pacing industry. The same firm announced that the team will be comprised of ninety-five percent of securities regulators globally. It is intending to have a standard regulation for DeFi.

Another worry is regarding conflict of interest. To provide some background information, the most familiar Decentralized Financial tokens are decentralized exchanges (DEX’s), exchanging crypto, loaning applications, and blockchain programs.

IOSCO’s study, suggests that though DeFi was designed to have a peer-to-peer ecosystem, virtual open markets still have centralized controls. Such markets are project developers, venture institutions, and several financial investors with exceptionally large control of the crypto administration coins which can vote on admin matters. Thus, the issue of conflict of interest arises.

Focusing on Power

Tokens in DeFi are being managed by a smart system called decentralized autonomous organizations or DAOs, either in its starting or advanced phase. Every arrangement is selected through a voting process via a one-to-one, token-vote methodology.

This is where we can see the gap in its administration since most decisions are made by voting, may it be for a minor or significant issue. It, therefore, results in having holders of huge coins even if they only have small votes.

DeFi A threat or being threatenedFurther, even though DeFi claims to be decentralized, changing information and votes makes it centralized in real life. The reason is that investors still communicate through platforms, for example, Discord, which allows them to discuss how the investment will go through, of course, for their advantage. And taking into account that the number of voters is not big, the possibility of conflict of interest emerges.

Aside from that, several individual investors maintain their coins in the care of major centralized trading platforms. This may bring forth an effect for their customers’ coins to be voted, however, in smaller chances.

One more concern is considered when blockchain authenticators reinforce bonds for better practices which permit them to conduct the latest business arrangements toward a blockchain in trade for brand new crypto coin premium. Symmetrical to BTC-based mining with no ecological issues, authenticators are chosen in a random pattern to create more tokens congruent to the amount of what they invested.

In conclusion, a large number of authenticators motivate coin owners to allocate – loans to them, specifically – their coins in a swap for a portion of the premium. This grants them voting powers for those coins.

More so, IOSCO emphasized that multiple large-scale centralized trades give users a clear path towards decentralized financial applications and self-executing agreements. It is also worth noting that others even provide customers with the capability to finance in loaning and investment programs digitally, undoubting the trade’s process.

However, as previously mentioned, there are still remarkable risks which include conflict of interest, unexpected currency fluctuations, potential loss of investment portfolio concerning cryptocurrency-asset management via ownership, and risk in exchange.

DeFi administration also has a minor influence on voters. That is through what they call the “Bribe Protocol” which means that one can pay the industry’s governing body to hold cryptocurrency coins and vote right.

In the Future

As Decentralized Finance is now established, individuals and institutions are encouraged to enter the market. They are risking their savings and funds in hopes to leap into the emerging industry and loan their consolidated possessions to something that has become collected money that is liquid enough to serve both all and no one, simultaneously.

On the contrary, the technological advancement of this new payment system has the promise of a free and inclusive financial process. Yes, there are regulatory issues, and it is still a work in progress, but DeFi is unquestionably a significant competitor of the existing financial institutions the world currently has. Globally, it is also great support for the economic system and capital appreciation.

Thinking about the future, one cannot only think about the amount of money DeFi can provide to the economy. Instead, investors must also consider how this money should be allocated and managed. There is always a threat from central financial institutions, but DeFi is resisting this and is being a threat to them as well.

So, what do you think about this? If you need advice, connect with us at Coredo.

The Czech National Bank has long been known for its devotion to transparency. Just recently, it won the prestigious Central Banking Transparency Award 2022 for its top tier initiatives in terms of programs and initiatives for disclosure. Just in 2021, the Czech National Bank has taken the bar to a new level, by introducing its new Monetary Policy Report, which replaced the old Inflation Report after 23 years.

The Monetary Policy Report is a quarterly publication that discloses issues, processes, and reasoning behind the central bank’s monetary strategies, plans, and programs by using non-technical words and terminologies that can be easily understood. Its launch has been acknowledged by the public as a great testament to CNB’s dedication to promoting transparent banking.

Followed by this new paper, the CNB also recently commenced the release of its attributed minutes, which mainly focuses on the independent dispositions of each board member, together with the bank’s economic forecasts.

This well-established adherence to transparency and proper communication by the CNB has been established through digital and traditional mechanisms, which undeniably aid in maintaining trust from the public and its stakeholders.

CNB’s MONETARY POLICY REPORT

The Czech Monetary Department was the one who inaugurated the creation of CNB’s Monetary Policy Report, which was then highly assisted by the Board members of the bank. It aims to disclose comprehensive illustrations and presentations of monetary issues that were deemed essential by the national bank when they do analyze and make banking decisions.

Czech National Bank is Taking Transparency to a New LevelAn integral part of the report was the inclusion of some components that were missing in the CNB’s earlier Inflation Report, such as economic policy cogitations and deliberations, which before were only published internally. This, together with its concise and straightforward language, make the new Monetary Policy Report way superior and much preferred by the stakeholders to the earlier Inflation report.

The focal point of the report is the discussion of monetary programs and policies taken by the national bank, together with pertinent information that impacted those decisions. It includes comprehensive and elaborative presentations of the overall deliberation that happened, and the factors involved in the process.

Adapted from the earlier Inflation report, these new publications also include timely predictions of future banking positions and provide emphasis on the impact of local and multinational economic issues and development in the bank’s decision making. This significantly helps in sustaining public trust by providing profound awareness regarding the CNB’s current market position, economic predictions, and policy-making mechanisms.

The CNB’s communication division has previously mentioned that with the Monetary Policy report, they purposely altered the level of details and overall construction of the report, with the aim of offering a deeper kind of transparency to the public. They stated that their current goal is to provide reasonings and rationales behind its monetary strategies, together with exhaustive presentations of the bank’s predictions. The choice to use straightforward language is to make the papers more accessible and easily understood by the general public.

ATTRIBUTED MINUTES

Upon the establishment of the Monetary Policy Report, CNB also started its initiative to publish their so-called “attributed minutes”.

The goal of these minutes is to apprise the stakeholders about the arguments and thinking process of the board behind their votes in any particular decisions. These minutes are intricate reports of rationales behind the decisions made by each member of the bank’s board.

The CNB aims to improve the predictability of the independent policy dispositions of the board members, and the central bank altogether. Some experts have previously raised concerns about possible attempts of attracting favorable attention to make decisions outside the board. However, the CNB stated that no signs of such are seen thus far.

With these attributed minutes, the board members’ judgements and independent points of view are not only available during internal deliberations but are now officially presented to the public. This way, the CNB believes that financial experts are well knowledgeable, and have a better insight in terms of the bank’s policy-making systems.

G3+: CNB’s FORECAST MODEL

Aside from the release of the quarterly Monetary Policy report and the attributed minutes, the CNB has truly raised the bar in terms of transparency, by disclosing a report with a thorough elucidation of its forecasting model, called G3+.

The experience of CNB from the past decades motivated the creation of G3+, with new structural features that allow the bank to attain better prediction accuracy by taking factors of macroeconomic changes, locally and globally.

The report was released back in early 2021 and presents the new stylish features of the G3+ economic model, along with the rationale behind its adaptation. It was published with the aim of maintaining a reliable decision-making process through a transparent and accurate economic forecast.

PUBLIC TRUST IS THE MAIN GOAL

The CNB has undeniably illustrated its great commitment with regards to transparency, and it can be said that the public trust the bank has attained is one of the fruits it is currently reaping. The growth of CNB’s social media accounts is a testament to this.

Czech National Bank is Taking Transparency to a New LevelRecently, the CNB declared that their LinkedIn account has the most followers out of all Czech public organizations. Together with its Twitter and YouTube profiles, CNB has also set up an Instagram account and is also leveraging Facebook, in providing details behind its monetary initiatives. The CNB is now strengthening its digital customer connections through these platforms with various mechanisms to provide information.

The CNB believes that proper mechanisms for data disclosure are prerequisites to sustain public trust and are necessary to provide the bank’s perspective especially now, when the financial market is facing high inflation rates, impacted the pandemic constraints and supply chain issues.

Effective communication has proven to be necessary when the CNB encountered political pressure coming from the government last 2021 Czech elections.

The CNB was urged by the authorities to hold back any increase in rates, justifying that the then-inflation was stimulated by international countries. However, the CNB insisted on the rate increase, believing that the Czech’s economic position was different from other countries. This decision by the CNB was backed by the public’s support and was then proven right with the eventual price hike.

With that encounter, the CNB believes that the bank would serve its purpose by abiding by its mandate. This also convinced the CNB of how important independence and public trust in a national bank are.

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Fintech and crypto experts show support for a U.S. central bank digital currency, but the Fed’s has not taken an explicit stand yet, but instead provided a detailed illustration of  how establishing one in the U.S. could impact American banking.

Central Bank Digital Currencies or CBDCs are electronic or digital tokens like cryptocurrencies, being regulated and issued by a certain central bank. In more basic terms, CBDCs are just digital versions of your regular money or the so-called fiat currency, such as US dollars, Chinese CNY, and Philippine pesos .

Many countries have previously reported that their own CBDCs are under development, and some have even implemented them.

Recently, the U.S. Federal Reserve Board have issued a much-anticipated announcement, discussing the possibility of the U.S. implementing its central bank digital currency.

In this paper, the Board lays out a clear illustration of the direction a federal electronic currency could take, and how it could remarkably impact the future of the current traditional financial systems.

Is the American Market Ready for Its Own Central Bank Digital CurrencyThe report did not provide an explicit stance on whether the United States of America is ready to have its own digital currency and made it clear that the paper is not intended to show support for either side or provide any decision.

Rather, they mentioned that proceeding with an American CBDC is a resolution that should not be handled by the Board, but rather by Congress and the Executives.

The paper focuses on the meaning of “money”, specifically virtual currency, and how its different directions and variations could essentially modify banking. The Board outlined that electronic money that is dollar-oriented might be a simple and basic concept, but is more complicated in terms of usage, application, and future developments.

For example, there could be a CBDC dollar version that would be developed to perform scheduled transactions, which could be executed inside a blockchain without any human touchpoint. This suggests the possibility of micropayments in CBDC.

The Board’s report also detailed some alternatives in terms of policies and provided questions open to the public’s comments and suggestions.

U.S. CBDC Fundamentals

Many experts in the banking and crypto market have previously pointed out that the U.S. is at the back of many other countries in terms of building its own CBDC. For example, China was the first of the nations that had taken action for its own CBDC, named e-CNY.

The Board stated that this undeniably impacts the international image of the U.S. dollar on the global financial market. They believe that the non-existence of a U.S digital currency makes other nations more captivating to the public and that creating one might help protect the huge identity the dollar has in the market.

The Board also explicitly mentioned that a CBDC is a cautious and most protected asset in the digital market, “with no associated credit or liquidity risks.”

In the same report, the Board detailed four factors fundamental to establishing a U.S. CBDC:

  1. Middleman Distribution Model: The paper lays out the clear stance of the Board that it doesn’t envision being involved in between the business of the consumers and banking transactions. Non-government institutions and other private financial businesses would be the ones to provide digital accounts to handle CBDC-related payments and transactions.

The Board stated that a system intermediated by private organizations would provide opportunities to leverage the currently existing processes and privacy protection rules that the private ventures have . This could also pose advantages from the private businesses’ capabilities in terms of innovations and reduce major disrupting impacts to the current U.S. banking.

  1. User Identity Verification: The current U.S. financial system provides substantial anti-money-laundering policies, which is similar to what the Board envisions for a U.S CBDC. This would pose a CBDC with systems that would provide innovation capacities to the private businesses and has requirements built to reduce potential credit risks.

Federal Reserve Board mentions in their report:
“As such, it could provide a safe foundation for private-sector innovations to meet current and future demands for payment services. All options for private digital money, including stablecoins and other cryptocurrencies, require mechanisms to reduce liquidity risk and credit risk. But all these mechanisms are imperfect.”

  1. Protection and Privacy: A balance in providing transparency and user protection is essential to avoid potential criminal abuses. This would create a much more engaging services.
  1. Transferability: A CBDC should be transferable between customers and businesses, providing seamless transactions, and providing the actual liabilities to the Board.

Impacts of CBDC on  U.S. Banking

Although a CBDC might look just like a digital form of a nation’s fiat currency, the impact it’s establishment could have is much more complicated, contingent on its form.

Is the American Market Ready for Its Own Central Bank Digital CurrencyThe Board described CBDC as the best replacement for commercial currencies, and this substitution poses benefits in the banking market. Creating a CBDC could help expand banking financial reserves by bringing down aggregate banking deposits, and consequently reduce liability risks for consumers. The Board also pointed out in its paper that a form of CBDC with interest payments could raise demand from the public.

The paper made it clear that the Board do believe that CBDCs are most probably the safest digital asset and could potentially be a safety net during financial crises.

According to the paper:
“The ability to quickly convert other forms of money — including deposits at commercial banks — into CBDC could make runs on financial firms more likely or more severe.”

Currently, the usual public alternative to insurances and other traditional services in times of financial stress are stablecoins. The Board believes that in its existence, a CBDC would be a more attractive refuge.

Crypto stands still and it is here to stay. However, we have a problem. Compliance is not only the tip of the iceberg, but rather a whole new one we are yet to break-off.

Throughout the years, the crypto market and how we view it had immensely evolved. Now, it is no longer perceived as some mysterious thing from the dark corners of the web. It’s a complicated thing that we have been able to accept and understand better, trying to come to grips with what it is and how it works – and we are continuing to do so.

Crypto Has a Compliance ProblemThe rapidly evolving nature of blockchain has shown great opportunities and potential in changing the financial market. However, the anonymity it provides had also shown the inherent potential of being abused by criminals for various scams and money laundering schemes. This and its popularity in the global market have caused scrutiny from the authorities.

By its very nature, cryptocurrencies are freewheeling, unrestrained from currently existing regulations, posing a problem to authorities who are used to well-defined assets, with clear-cut rules. This is the exact same reason why compliance has been, and still remains, a huge challenge for crypto users and operators.

In terms of regulations and compliance, there had been cases in the past which forced government agencies to take action.

Just last 2021, the Justice Department and IRS (Internal Revenue Service) of the U.S. investigated Binance, the largest cryptocurrency exchange platform. This is due to some reports of a potential money laundering s which had also been a concern by policymakers from Japan, the United Kingdom, and Germany.

Recently, the crypto trading platform BitMEX was prosecuted by U.S. courts for claiming that they will be prohibiting American citizens to trade, but allegedly doing the opposite.

These evidently show that we have a problem and so far, the picture is not looking good.

Compliance is a challenge crypto must face one way or another, the sooner, the better.

THE PROBLEM IS TOO BIG TO GRIP WITH

The digital market has never stood still. It constantly presents new forms of crypto-related assets constituting to a big part of the problem – a sundry of transactions to regulate. And as unbeholden and borderless the cryptocurrencies are, assets and transactions to regulate, and regulations itself, can come from different horizons.

For example, the need to comply with state sanctions creates unproportionate rules across the global market. The U.S. had provided specific controls over digital transactions in Iran and Cuba, forcing Binance to ensure the deactivation of accounts from these countries.

There’s also ConsenSys Academy which banned over 50 Iranian users from the platform, in the fear of legal sanctions from the government.

Now, what should the regulators do in facing this challenge?

In order to minimize the size of the issue, the authorities should try to shift their focus away from regulating decentralized and on-chain applications and concentrate on more centralized transactions. Trying to impose regulations on decentralized applications will most likely be nothing but a waste of time, given that these often provide new alternatives.

By applying more rules to fund owners from centralized businesses, we can ensure better integrity for the market, protection for investors, and provide other safeguards essential in ensuring AML (Anti Money laundering).

Crypto Has a Compliance ProblemBut does this does not mean that we should completely abandon retail investors out? Rather, concentrating on centralized protocols and exchanges would likely help avoid market manipulation by huge businesses, which would prevent abuse to retail investors.

ENACTMENT OF THE TRAVEL RULE

According to the CoinDesk, “The Travel Rule means that providers of virtual assets need to collect and share customer data for transactions over a certain threshold. It simply means crypto providers must stick to international rules that ensure the protection of legitimate finance and prevent illicit finance.

In the U.S crypto market, the Travel Rule was used by the Financial Action Task Force (FATF) by creating a threshold that once reached, a compulsory collection of information for any international transaction is being imposed, as well as a retention for related transfer of information. This is an attempt by the FATF to prevent the public from choosing the most favorable international compliance rules.

Banking firms were the only ones previously involved in the Travel Rule. But back in 2019, the FATF applied the same to crypto organizations, together with their local rules intended for AML.

With the current FATF regulations, the threshold applied is USD 1,000 for transfers involving the U.S. However, the Financial Crimes Enforcement Network (FinCEN) have recently brought forward a proposal, adjusting the threshold to just USD 250. This creates a new problem for crypto users.

However, it is very much ideal to fully implement the Rule. Realistically, it would be difficult to determine a definite travel system that would perfectly satisfy the market. Aside from this, there is also the issue of anonymity in the blockchain, presenting a challenge on identifying exact owners and addresses involved in the blockchain.

CUSTOMER VERIFICATION: THE UNDERLYING PROBLEM

One primary problem that most crypto businesses face in terms of compliance is the lack of proper customer verification. This makes them more at risk for scams and abuse, facing fake IDs, documentation, and leaked databases.

With a little bit of research, you will see fake accounts being sold at USD 1 on the internet. There are also verified IDs accessible for only USD 300 coming from intercepted databases. More high-end schemes involve seizing information using Deepfakes and unsecured browsers.

These are just a few examples of the overall picture of the problem the crypto market has. There are more sophisticated attacks out there, where users are directly routing themselves to the traps, creating more complicated issues for the industry.

These issues are also expected to strike banking firms that have been recently entering the crypto landscape. Recent studies have shown that banks devote around 4 to 6 % of their revenues to ensure compliance. However, around 10% of these banks lack proper customer verification process, risking insufficient data protection.

COMPLIANCE IS A SERIOUS MATTER

Crypto Has a Compliance ProblemPaul Brody of Ernst & Young Global recently said: “The only way that blockchains will deliver upon their true promise to the world is if public blockchain networks are the preferred path for enterprises and investors.” 

However, the crypto industry must work on ensuring protection and market integrity. Compliance is a huge challenge ahead of us. There is no way for us but to confront and deal with it head-on. Postponing the much-needed confrontation and overlooking the problems will just lead us to much more complicated challenges down the road.

In the traditional landscape, financial firms are mostly unenthusiastic in scrapping off their profit margin to deal with compliance. Businesses are mostly reluctant and tend to underinvest when it comes to ensuring proper regulations. However, investing as early as possible would likely save us from more issues that could snowball in time

Compliance problems have been here since the birth of the crypto industry. It is a challenge we must solve as soon as possible, or else, more damage might strike us that will be too late to cope with.

We in COREDO provide crypto compliance consultation and services. Reach us through the below link so we can help you.

Contacts

Central banks have been the heart of financial systems since the very beginning. They use a variety of strategies to achieve their countries’ mandates, which we call monetary policies. These banks control the money supply and interest rates, and their actions greatly impact imports, exports, and local and foreign investments.

However, take note that central banks operate with intermediaries and physical offices which require additional fees for its users and salary expenses for the employers, respectively.

Now, cryptocurrency barged in and introduced itself as an alternative to central banks in terms of economic and technological functions. In the case of its top coin, bitcoin (BTC), it allows users to make payments without third-party involvement.

Bitcoin as a traditional bank killerInstead, through “peer-to-peer” transactions, only. This concept gave an upper hand to bitcoin versus central banks as it solves three problems traditional banks are facing:

  1. First, due to BTC’s secured cryptography, it cannot be used for double-spending. Meaning, hacking and replication are avoidable, as one can’t spend it more than once.
  2. Second, given that transaction in bitcoin needs approval from nodes in its global market, it generates trust among clients. Hence, although BTC is decentralized, single disapproval would make a requested payment transfer ineligible.
  3. Lastly, as it is decentralized, it terminates intermediaries in trading different cryptocurrencies. It, then, can streamline transactions into one process which results in a cheaper and faster alternative than traditional financial systems.

Problems with Bitcoin

As BTC poses threat to the financial systems used for decades, several institutions and individuals tried to sabotage bitcoin by naming it a Ponzi scheme, fraud, or an accomplice of criminals and terrorists.

There are also criticisms raised for it being improperly regulated, illegitimate, and anonymous. Further, bitcoin’s standard legal status is still unidentified across the globe and only a few nations recognize bitcoin as a legal tender.

One of the examples was when the Chief Executive Officer of J.P. Morgan Chase, James Dimon, called bitcoin a “fraud” in September 2017. However, even with their efforts to destroy bitcoin, they had no choice but to go with the emerging industry.

As such, J.P. Morgan is now considered as the first bank to offer metaverse, presenting a virtual image of their CEO, Mr. Dimon, in their company’s lounge.

Other banking institutions are now also trying to catch up with the crypto industry and hoping to gain from it. Why? Simple – crypto is what customers want.

Banks’ current struggles

We are at a time when the financial system is longed to be defined. As mentioned earlier, central banks have been the heart of this system. With these banks, payments and the creation of credits have been easy, and without it, monetary transactions could be in chaos.

However, for the past ten years, one cannot deny the fact that even if these traditional institutions tried to block the emergence of technological improvements, the financial revolution still occurred. That is in the case of bitcoin and other virtual trading systems such as “peer-to-peer” lending, crowd-sourced investments, and other financial system innovations.

Bitcoin as a traditional bank killerThis brought about the struggle for the banks since they now have zero option but to go with the booming crypto industry and get out of their bubble.

The concept of banking is that money coming from the deposits of clients is then invested in a loaning program for other customers. They manage the cash flow by working with their countries’ governments. A classic example of intermediaries.

The good thing about bitcoin is that it does not operate with intermediaries. Cryptocurrencies such as BTC work by allowing an individual or a company to trade straightforwardly.

This left the banks currently with no choice but to sprint with the fast-pacing innovations and are even trying to convince regulators to decelerate the crypto industry to make way for laws that would be to their advantage.

Catching up with crypto

Going back to J.P. Morgan, they released a report that there are as many as three hundred banks that will enable clients to trade BTC through mobile applications starting quarters one and two of the current year.

In addition, a Manhattan-based newspaper company that focuses on financial services, American Banker, conducted a survey and showed that forty-four percent of traditional banks will be offering cryptocurrency services before 2023 starts.

Another multinational financial company, Visa, started to provide crypto consulting services in 2021. They also launched a series of apps that offers BTC support to banking institutions.

Mastercard, on the other hand, is now lending a hand to banks in terms of navigation of virtual currencies. This includes basic education for beginners, evaluation of potential risks, and cryptocurrency and non-fungible token strategies.

NYDG, a bitcoin company that is a subsidiary of USD 10B-worth NY-based fund manager, Stone Ridge, collaborated with a big financial tech company, FIS. Their goal is to allow banks in the United States to start offering BTC months from now. Right now, hundreds of banks already signed up for the program.

Simultaneously, more and more banks across the globe are investing in crypto and blockchain technology. To back this claim up, thirteen of the biggest banks in the world have investments amounting to about USD 3B in the said industry.

As per a study conducted by Blockdata, you may find through the below the top investors in crypto companies and their number of investments:

  • Barclays Bank – 19
  • Citigroup Inc. – 9
  • Goldman Sachs Group Inc. – 8
  • JP Morgan Chase and Co. – 7
  • Banque Nationale de Paris and Paribas – 6

Another research from Cornerstone Advisors suggests that sixty percent of cryptocurrency holders prefer to utilize banks in investing in crypto. Some thirty-two percent said that they may do the same, and four percent claimed that they would not use banks in crypto investments.

If you are going to investigate the regulations side, there is good news as well. United States President Joe Biden signed an executive order to further examine the risks and advantages of cryptocurrencies. This made banks become more at ease with the said virtual financial platform.

Now, traditional banks indeed do not have a choice. Right now, all they have is the trust of customers. Technology is not on their side. They need to catch up with these technological innovations in the financial sector and be competitive. Otherwise, they will be swallowed by the waves of cryptocurrency.

Need more crypto advice? Connect with us at Coredo.

What is Bitcoin Mining?

In cryptocurrency, there is a variety of coins to be traded. One of those is bitcoin (BTC). Bitcoin enthusiasts often acquire them through mining. It is the process of producing new bitcoin by solving mathematical puzzles. More specifically, computers are equipped with specialized microchips where the puzzles are loaded. Miners are then rewarded with bitcoin once these puzzles are solved.

NextGen Nordics Top Nordic region newsSince the process depends on electricity, it is harmful to the environment if the source of energy is fossil fuels. Hence, it is highly encouraged to perform bitcoin mining in countries where there are renewable energy sources to reduce its negative impact in the environment which may contribute to climate change.

Bitcoin mining in the Nordic region

The Nordic region is considered to be one of the best places to mine bitcoin. This is because they already use renewable energy sources.

In fact, the majority of the top countries for bitcoin mining are in this region. Further, there are no current restrictions or bans on cryptocurrency mining. Hence, a “Bitcoin’s green haven” indeed.

NextGen Nordics

Now, let us introduce to you a company from the Nordic region which brings together several institutions to provide payments innovation – NextGen Nordics. Their program includes central and banking communities, and both public and private trading beneficiaries to technologically improve payment systems in the Nordic region.

They planned to have a conference on the 27th of April of the current year and you may register through this link.

In line with this, let us give you some top news from the region.

  1. Sweden’s Green BTC Industry

Having been supporting the green movement, Sweden expanded its crypto industry to be on the same track. A Swedish company, Genesis Digital Assets just publicized that it will launch its newest bitcoin mining system in 2024. The private industrial-scale bitcoin miner claimed that the new mining process is self-hosted and is expected to have a 100-megawatt of power capacity. Further, the power to be used will come from 100 percent clean energy resources. Statistically, 54.5 percent is from hydroelectricity, 42.8 from nuclear, and 2.7 from wind energy. You may read more from here.

  1. Denmark’s Neobank Lunar

Neobanks are financial technology companies that provide internet-only financial services. They usually lack physical branches which traditional fintech companies have.

One of the neobanks in Denmark is Lunar. They claimed to offer the country’s lowest priced business account which has an all-in functionality.

Now, this bank increased its capital by up to EUR 70 million while preparing for the roll out of its new trading system and Business-to-Business payment solutions. The whole financing process is an addition to the bank’s EUR 210 million fund in 2021. Lunar, now, has gained a total of EUR 345 million and reached almost EUR 2 billion in valuation.

As per their Chief Executive Officer, Ken Villium, the garnered funds will empower them to keep up the pace in their expansion in the Nordic region.

In detail, they even started a new Nordic platform for crypto at the beginning of 2022 which made their business partners accept and trace card payments through the web. This new offer will allow their users to exchange and liquidate crypto coins like ETH, ADA, DOT, and DOGE via Lunar app.

They are also expecting to have mergers and acquisitions ventures for their Nordic customers.

  1. Visa’s acquisition of Tink

On the 10th of March 2022, the multinational financial company, Visa, announced that they have already acquired Tink.

The acquired company is a European open banking institution that enables financial firms, financial technologies, and traders to create financial goods and services, and transfer money.

Before its acquisition, Tink is already working with over 3400 banks and other financial firms in Europe. Now that the acquisition has been completed, it is expected for the users to deliver significant benefits in controlling their financial experiences which include management of their money, data, and goals.

According to Visa Europe’s Chief Executive Officer, Charlotte Hogg, as virtual instruments are now the new heart of the economy, this acquisition will greatly empower financial systems as it will bring forth a better choice and quality for the clients.

On the other hand, Tink’s Chief Executive Officer and cofounder emphasized that Visa would provide them with an increased connection to another 15000 financial companies, and they could also make use of Visa’s reputable image to further improve the financial sector in Europe, and even across the globe.

NextGen Nordics Top Nordic region newsThough Tink has already been acquired, it will still operate independently in the near future having its current management continue with the organization’s leadership.

Check this link for more information.

  1. Cardlay’s capital increased by USD 6 million

A Danish fintech company, Cardlay, has just secured an investment worth USD 6M or DKK 40M. In context, Cardlay offers financial solutions to enable and serve banking and other financial institutions. They intend to provide an easy spending process through their advanced and smart commercial payments system.

Cardlay received its fund from the existing investors they have and is planning to allocate it in further developing their commercial payments solutions, connect with another international bank, and serve an order for a German client.

Further, the financial company also publicized that it would appoint its new Information Technology director, which is Morten Christensen, a previous employee of BankData and Energinet, and the recipient of 2019 European Chief Information Officer of the Year.

  1. Pleo’s new CPO

Another Danish company which specializes in smart cards and automated expense reports, Pleo, welcomes it new Chief People Officer (CPO) – Mette Hindborg Gade.

Before joining her new company, Mette worked at McKinsey and Company as an Associate Partner. She has a background in engineering and a professional in leadership and problem solving. Gade has also been working with Pleo to help build, start, launch the smart company’s new process unit.

This innovation will allow the company to move into fifteen more markets, recruit more than 500 employees across the globe, and improve career growth and inclusion for its current employees, all before 2023 starts.

JPMorgan launches its own virtual world in the metaverse, predicting huge market opportunity in virtual gaming and virtual real estate properties.

Marking as the pioneering bank to set foot in the metaverse, JP Morgan had officially opened its own “lounge” in Decentraland, currently one of the most popular blockchain-based virtual reality gaming platforms. This makes JPMorgan the first banking firm to get involved in the metaverse, as it eyes on huge market opportunities.

The metaverse, is a 3D virtual world that features content for social interaction among its users in augmented reality. Currently, arguably the largest augmented reality platform in the market is Decentraland, which is built on top of the Ethereum blockchain. Decentraland allows its users to experience and monetize in-game content while exploring its virtual world.

Read More: https://itsblockchain.com/decentraland-complete-beginners-guide/

JPMorgan Launches OnyxJPMorgans’ own space in Decentraland is named Onyx, which features a virtual shopping district called Metaiuku, copied from Harajuku District in Japan. Upon entering Onyx, users are greeted by a tiger that wanders around, with a picture of Jamie Dimon, the Chief Executive Officer of JPMorgan. The lounge also currently features videos about the banks’ achievements in the blockchain space and talks about fintech and crypto market.

Money and Opportunities – What JPMorgan Sees

Upon launching Onyx, JPMorgan had expressed how they see “limitless” opportunities and huge market potential that the metaverse presents. The bank’s perception of this 3D augmented reality focuses on how the economy of metaverse offers potential opportunities in various areas and how the dynamics of the offered supply and demanded products drives the people into the market.

Based on the bank’s previous press release, they currently see around US$1 trillion of annual gains in the metaverse. There’s currently no doubt on this given how the virtual and digital market has skyrocketed over the last year.

The Sandbox and its rival, Decentraland, two of the biggest virtual reality platforms, reported almost $500 million of sales for around 90 thousand virtual item transactions in 2021. Second Life, an online metaverse gaming platform, reported roughly $700 million in GDP for the past year.

Currently, NFTs offer a $41 billion market cap. In recent months, six of the biggest virtual platform brought over $160 million of sales on Opensea, one of the biggest NFT trading platforms.

See also: Opensea, biggest NFT market place

Although prices for metaverse properties have skyrocketed over the past year, price is only one factor contributing to the spotlight on metaverse. There’s also the various potential to commercialize virtual properties in gaming, content creation, and other ventures.

With its recent entrance into the space of metaverse, JPMorgan aims to be one of the pioneers in the market by industrializing its own brand in the economy.

Engaging 3D Gaming Ecosystem and Virtual Property Ownership

JPMorgan Launches OnyxAs mentioned in the metaverse statement released by JPMorgan, the firm is ready to traverse the various rooms that the metaverse pose. The bank ensures that the success they will aim to build will be highly contingent on establishing a well-built financial system that allows flexibility to the people in interacting via the 3D digital reality.

The bank mentioned that it’s eyeing to enable a gaming environment that will mirror the global financial economy. They intend to institutionalize a digital landscape with its own in-game items, payment methods, and digital assets, which users can commercialize and monetize. Given its global high-standard banking ecosystem, JPMorgan believes that this is a huge opportunity for them to initiate the same in the metaverse.

Virtual property ownership is also one key opportunity area that JPMorgan seeks to enter. This is in line with the recent rise of virtual real estate prices in the market. Just in six months last 2021, prices for virtual lands skyrocketed, amounting to $12,000 in the month of June.

JPMorgan believes that virtual property ownership would be a profitable area on their end since they have already developed a competitive stance on real-world real estate lending. The bank envisions a virtual real-estate market that will mirror the banking ecosystem and services provided in the real world, such as lending, rents, mortgages, and credits.

However, some financial analysts believe that the Metaverse will require a different type of banking ecosystem and that the current financial foundations might not be as functional in the metaverse economy.

 Inventors Seeing Metaverse as a “Worth It” Venture

Even though JPMorgan had been the pioneering bank to mark its existence in the virtual space, there were multiple investor giants who have already foresees the virtual space as a potential trillion-dollar venture.

JPMorgan Launches OnyxThe rival global banks and investment services companies Goldman Sachs and Morgan Stanley had previously acknowledged the potential of the virtual world. Goldman Sachs believes that the meta-economy poses a global market opportunity with potential gains of $8 trillion, while Morgan Stanley only sees it as a huge investment in China.

Last 2021, Cathie Wood of Ark Invest mentioned that the metaverse will eventually enter different sections of the economy, going beyond the current gaming and virtual property areas. She believes that with its limitless potential, metaverse could be a multi-trillion opportunity.

Grayscale, one of the largest crypto and digital currency investing companies, mentioned in a press release that it foresees more than $1 trillion dollars annual sales for the meta-economy given the potential of blockchains in the digital world.

Multiple bank analysts have also noted that the metaverse market could reach $4 trillion in China alone as it provides a more interactive platform to the public but could go higher than $8 trillion once investors have explored different opportunities like education and real-estate ownership.

Given the huge opportunity it poses, it is expected by most that more banks and investors will probably join the metaverse within the next years.

Are you interested to learn more about metaverse? We have experts that can help you!

In any business, the basic rule is simple – how you provide your service dictates how satisfied the customers would be. Is the transaction fast? Are the requirements easy to acquire? Or the is process too complex?

In the current financial market, many companies have already transitioned their processes to a more modernized and digitized way to better cater their customers.

Applying for a bank loan? Of course, you would expect to know whether it was approved or not immediately.

Getting a new credit card? You would want to receive updates in real-time.

Financial companies are now expected to provide every detail in the palm of your hand – transaction records, purchase statuses, and historical summaries should be instantly accessible.

Most financial transactions are now digital for customers, but the supporting procedures pose vast room for optimization. The underlying processes involved in these transactions are usually still manual which are most likely negatively impact the end-to-end experience of the consumers.

This exact thing is the ultimate challenge for most companies who have relied on traditional practices and are now trying to evolve their processes. It involves great pressure created by the demand for a more digital experience in order to compete.

To be able to keep pace in the competition, financial institutions should take a look into the “paradox” of modernizing their rigid traditional processes.

Digital KYC: Might be a Double-Edged Sword

Since the birth of FinTech, the market has rapidly transitioned to digitalized processes in providing services to the consumers. This caused over-the-roof expectations from the public when it comes to financial services. At the forefront, you can say that these digital solutions are seamless.

Customer Satisfaction in FinTechHowever, the underlying steps and procedures involved are still, in most cases, manual.

For most complex processes, there are most likely supporting procedures that are being manually completed at the back end. These pose a disjointed end-to-end user experience leading to customer dissatisfaction.

Normally, companies rely on technology solutions when it comes to process improvements. This commonly involved automation which include applications that are supposed to manage data and step-by-step processes from a manual to a digital form.

These type of streamlining come as project initiatives with a team as oversight to the overall transition, matching and mapping, lots of testing and loads of meetings, just to improve a single process. These, of course, usually require resources and huge efforts.

You might think that these kinds of projects should greatly lessen manual tasks and the overall workforce needed. However, it’s the opposite that usually happens. In most cases, tool improvements have led to an increase in the human workforce.

Humans are usually not eliminated, but rather, given new tasks that relate to the connection of the manual and digital procedures. These tasks usually include compliance checks and are usually more complex, hence, need more staff. One example of this is the bank giant ABN Amro which has previously shown a great increase in its compliance workforce. In 2013, they have around 1,000 staffs. Come 2019, the number skyrocketed by thrice of this.

It is undeniable that digital automation give companies the opportunity to re-engineer their processes, with the aim of providing much smoother services to the customers.

However, if not done right, digitalization could be a double-edged sword. Aside from the fact that it would most likely increase cost, manual complex processes could also lead to an increase in waiting time and longer retention, leading to unsatisfied customers.

Recalibrate and Break the Paradox

To ensure that a process change would likely provide benefits to the company and drive customer satisfaction, businesses should start with a thorough assessment of all manual steps involved in a specific process. With this, it could be determined whether that certain process could potentially be transformed to drive a positive impact.

Customer Satisfaction in FinTechThe first thing you can consider is to assess whether that specific activity could be completely removed. Take a look into its essence and identify if it is really necessary or is it something you can streamline or better, eliminate.

If not, further analyze and ask the question, is it something that can be automated?

There are many existing technologies that do not require advanced knowledge in programming. You can leverage no-code applications involving machine learning and data processing that once developed, do not need any manual intervention.

With these no-code platforms, you can instil technical capabilities to your staff even though they do not have a great foundation in IT. This could potentially lead to creating a work environment that highly promotes and values digitization.

By performing proper examinations to the company’s day-to-day practices, businesses would be able to transform complex tasks and procedures into highly efficient processes.

Appropriate streamlining and automation could help break the potential of digital processes in creating unsatisfactory services, and instead provide a better end-to-end user experience.

What is bitcoin?

Created in 2009, Bitcoin (BTC) is a digital currency operating through peer-to-peer technology. Unlike the traditional currencies we know, it does not rely on bank or government operations, but instead, on cryptography.

To those who are interested in the convenience of transacting through the internet, BTC is a big help since it was designed with the ambition of being an alternative to the existing remittance systems we currently have. Even better, it is free from central control but functions as fine as traditional currencies.

Problems with BTC

More than a decade passed, and bitcoin has now become one of the top financial assets the public considers. However, there have been multiple criticisms with regard to the crypto coin. These include the virtual currency’s regulations, safety, and anonymity.

Is-Bitcoin-AnonymousIn this article, our goal is to focus on the issue of BTC being referred to as “anonymous”. Meaning, can criminals use it for their advantage?

Well, let us tell you right now. The answer is no, they are not anonymous. The law can trace bitcoin and illegal activities can’t be covered.

Sample Case

There are many cases involving bitcoin. There are hacking situations, fraudulent acts, and illegal use of bitcoins in private institutions, including on and offline transactions. Let us focus on one of the top cases in the field.

In the Republic of Korea (ROK), there is a man named Jong Woo Son. He runs the largest child porn site ever caught by the Federal Bureau of Investigation, “Welcome to Video”. The law enforcers raided Son’s house and saw 250000 tape recordings as evidence. He was then declared guilty in 2019 and will also be indicted in the United States should he flee into the country.

How did the Federal know about this case in the first place? Well, because of bitcoin. With its blockchain, the criminal had profits coming from as much as one million bitcoin locations. Take note that each virtual address or location is unique. Now, since the blockchain is transparent to each user, the enforcers bought and sent the payment to the porn site’s crypto wallet.

They, then, traced to which crypto trading platform it was transferred to and for the record, it was Coinbase. On this platform, Mr. Son was forced to comply with anti-money laundering control by providing his self-identification credentials.

Taking off the Disguise

We mentioned earlier that bitcoin is not anonymous. Instead, it is something that rhymes with said word – pseudonymous. What is a pseudonym? It refers to someone or something that uses a fake or fictitious name, a disguise we may say.

This gave an upper hand to the authorities in tracing bitcoin. How? It is via the two different key codes a single BTC has – public and private.

For a background, public code refers to crypto being identified on a blockchain. The latter refers to those who have the necessity to transfer crypto from one virtual pocket to a second one.

This 2-key code structure made the online payment process possible for every digital coin by allowing them to be sent straightforwardly without any intervention from financial companies or banks. Meaning, the process cuts off the 3rd party involvement from a transaction, only relying on the two main parties who sends and receives the payment. Therefore, this does not involve any trust to both parties as every transaction is recorded on a blockchain.

Having this concept being publicly known prevents double-spending — which is a scheme where an individual uses a single cryptocurrency more than once. Hence, its anonymity is indeed not true since the crypto coin can be traced from when and where it was acquired until when it will be transferred.

The problem is that its owner will still not be disclosed during the tracing. It will be, though, when a person’s identification credentials will be required through a privatized key code. The said code is for one-time use only and will be burned once used. After so, a current one will be released when the new owner receives it. Thus, both people in the trade will not have any idea of who sent it or received it, but there will still be evidence that a cryptocurrency settlement has been done due to the blockchain.

We said that the owners are not disclosed, rather, they are covered by the publicized key codes that are accompanied by privatized ones- a pseudonym it is.

However, it is also worth noting that though there are private key codes, they are different from rightful or legally recognized owners.

Nevertheless, several cryptocurrency holders get away with this. For example, Monero is a private cryptocurrency company that is considered to be the best at hiding transactions. The secret is that they mix business solutions and split the arrangement string by sending BTCs from a certain class of separate holders and then trading them in a random sequence.

Finding the Exit Lane

Cryptocurrency tokens such as BTCs are convertible to cash. However, remember that the process involves taxation and of course, a 3rd party broker. To explain this clearly, the 3rd party will act as the intermediary between the exchange of your coin and the money to be sent to your bank account. These 3rd party vendors require identification proof before an individual can withdraw and it usually takes two to three business days to process the request.

Take note that this meticulous requirement got the trust of experts of the field because of its safe and reliable fund security.

This made it possible for the criminal we mentioned earlier to be caught. The Korean criminal got out of his hiding when he intended to cash out his acquired bitcoins.

Is-Bitcoin-AnonymousAnother case where bitcoin is involved is of the couple Heather and Ilya Lichtenstein. They were caught when they tried to checkout a USD 500 worth Walmart card via cryptocurrency. Based on the investigation, they plundered USD 4.5B of crypto from Bitfinex trading in the year 2016 and were taken into custody on February 8th of the current year.

We can also look into another case where a person was tracked down since he used an e-mail address that is connected to a virtual wallet.

See how the law enforcers took bitcoin as their trump card? Online trading may be possible with crypto, but it is difficult to use it illegally in our society without intervention from a 3rd party. This is because there is a thing called “Know-Your-Customer” which requires people to submit their identification credentials to those licensed money transfer institutions.

The only way to skip the legal process is by letting your money be handled by criminals.

Studies in tracing illegal blockchain activities are not yet done. In fact, it is just starting. Experts and regulators are highly invested in how the industry works – from small details to general information. Patterns are also being observed to solve the puzzle of its complexity.

The good thing is, they are now identifying the hacks and secrets of crypto, even before platform designers and hackers do.

Have you ever thought about why Decentralized Finance (DeFi) emerged quickly in the financial technology world? Well, let us explain to you what the hype is all about.

DeFi-is-Taking-Over-the-Institutional-MarketsFirst off, let’s get to know Decentralized Finance or DeFi per se. DeFi is a system that provides financial services without the need for intermediaries.

For better understanding let’s look at its opposite, Centralized Finance. In Centralized Finance, your money is within the banks or institutions, and hence, the control is theirs. For example, you purchased a bag using your credit card. It will be charged from the seller to your bank, and will then be forwarded for payment.

The difference is that, in DeFi, asset and business owners are allowed to control their own transactions using the said technology. It promises that it can do almost all the things a normal financial institution can do, but even better. They claimed that since intermediaries and normal paper works are no longer needed, the transactions within DeFi are also faster.

The way it works is through a computerized peer-to-peer ecosystem, which does not have any barrier and is open to all. Meaning, it is like a digital option to brokerages and venture banks such as Wall Street or the City of London, but since it is digitized, there are no added costs for office spaces and employee salaries.

With all these benefits of DeFi, its Total Value Locked (TVL) blew up from USD700 million to about USD20 billion in a period of only one year and is currently assessed to be as much as $200 billion based on this link.

In fact, DeFi’s first project, Maker, has been a topnotcher with regards to TVL of ether among all DeFi systems ever since it started. For a little background, it is a permissionless loaning platform that created DAI, the very first Ethereum-based decentralized stable coin.

This emerging system definitely keeps drawing people and other financial institutions to even consider DeFi products as a form of exchange. To back this claim up, the United States (US) has just announced that stable coins will be offered as income returned on the users’ investments.

Institutions Drawn by DeFi

According to Dexalot’s COO, Tim Shan, three major enterprises namely State Street Corporation, Fidelity Investments Inc, and BNY Mellon, have now put their money into the digital currency industry and started offering services of the same.

State Street. This $40 trillion-worth custody bank already began to have crypto-based services as its investment approach to their private-reserve clients by launching their digital division for the past year.

As per Shan, even the most traditional Repurchase Agreement (Repo) markets started to lend on bitcoin, from their usual transactions using treasuries, securities, and bonds.

Though DeFi started with its goal of only having services like loaning and to be used in a proof-of-stake process, others are optimistic about its progress.

James Taylor, the Chief Business Officer of Unizen, a line that caters to both central exchange and decentralized trading, emphasized that DeFi is undoubtedly drawing businesses since it presents improved credit risk management and higher return of investment than the usual bonds, and therefore gives more confidence to the clients.

Regulations

Global regulators are now more engrossed in this financial technology due to its fast-paced progress. It has been emphasized by the Chairman of United States (US) SEC and former investment banker, Gary Gensler, that DeFi isn’t exempted from surveillance. More so, it is worth noting that one of the main concerns is its legal organization type.

Filling in the spot of the business’ regulatory system, United States’ Congress has formed a paradigm to regulate it in the country. The said framework consists of specified roles for its different agencies.

As for the global framework of cryptocurrency and computerized assets, the ex-chief of BIS Innovation Hub, Benoît Cœuré, spilled that talks about the issue have intensified because of the emerging DeFi industry.

In addition, UDHC’s Chief Executive Officer (CEO), Steven Becker, compared DeFi to oceans. In his view, even though you can’t control oceans, you can still control ports and shipping systems. Hence, the company’s main point of business is now on decentralized finance with regard to government laws.

Educational development, and operation and user-friendly approach. These are the suggestions of a governing body at HyperDex, Stefano Jeantet. Jenatet claimed that developers must break the information barrier and thrive to have an operation that is less intimidating for customary investors.

In conclusion, more input from regulators must be obtained in order for the public money (i.e. pensions, taxes, etc.) to be funded in DeFi freely.

Answers from Institutional Markets

Several institutions have answered questions thrown at the industry. First is VALK. This end-to-end digital transaction platform in United Kingdom (UK) is included in UK’s Financial Conduct Authority’s regulatory sandbox. This allows them to have goods and service testing in an environment with controlled parameters.

DeFi-is-Taking-Over-the-Institutional-MarketsVALK created a digital wallet that authorizes companies to be in charge of their DeFi fund on a single environment using one account. This is called Merlin. It is one of those programs that is indeed an answer to the flourishing DeFi system.

Another one is from Aave. This $12 billion worth of TVL enterprise has introduced “flash loans”. It is one of their flagship products that allows clients to get loans without collateral, the first in the said financial industry.

Where are we now?

According to VALK’s study, DeFi holds 30% of the investment in the global market and is anticipated to add 39% further in the next six months.

However, it was also identified that investors are worried on the regulation side, which is about 54%, and 52% on being secured.

As a whole, 84% of the participants are still waiting for the regulatory system to be improved in 3 years, and 12% for the bank-related aspects.

Antoine Loth of VALK and Mr. B. Mahoney of Alkemi, a liquidity network company, have the same perspectives. They expressed that since DeFi is quickly emerging, it must be transparent and liquid, just as what financiers are looking for.

What’s next?

It was found out through VALK’s research that 69% of funders are into DeFi through web browsers as their digital wallets, 48% through tangible ones, and about 43% through custodians. On the other hand, 27% of them are into privacy-preserving computation, and 83% are on merging-based programs.

In conclusion, decentralized finance (DeFi) has really evolved rapidly, but its journey is still long. One cannot say yet that it is already a replacement to the traditional institutions we have in the financial world.

Got questions about this article? We have experts at Coredo who are more than glad to assist you.

Diving in with the NFT craze this year? Here’s the top 5 NFT projects that are best for your investments.

Have you ever heard of NFTs? Who am I kidding, of course you have. Over the years, cryptocurrency has immensely changed our view of finance and investments. Its unprecedented rise in the market shocked economies, to the point that it’s difficult not to know or at least hear about it, for which NFT is not an exception.

Non-fungible tokens, or NFTs, can be anything. It can be a photo, an art collection, audio or an in-game item and it has been paving the way for blockchain adaptation through the years. Based on a study made by  nonfungibletoken.com,  spending on NFTs last month of May 2021 amounted to over $75 million. As you might have guessed, only an upward trajectory is expected in the following years. Given its natural adaptability and capacity to evolve, the limit is out of the horizon, and only growth is anticipated.

Currently, a variety of NFTs are on their way to stardom. These have differing types of projects, platforms, and concepts per se. They differ depending on what specific blockchain is involved, markets and areas they target to capture, and even the type of NFT or “products” involved. It can be in a form of digital arts you might want to collect, or short videos that excite you.

Given NFTs’ current popularity in the market, we know that you might want to broaden your knowledge and most probably invest in such. If so, you may want to check below top 5 NFT projects that we think is best for your investment.

TOP 5 NFT project this 2022:

CRYPTOPUNKS

Top on the list is one of the most popular and more unique NFT projects in the current mainstream market – CryptoPunks. CryptoPunks is a collection of pixilated digital arts being monetized as non-fungible tokens (NFTs) living under the ETH (Ethereum) blockchain. It has been one of the pioneers in this concept since its first rise in 2017, and currently, there are over 10,000 “punks” collectables available in the market.

The idea was inspired in the age of the English punk scene, featuring various forms. Some are monkey-like, human, alien, with different features making each punk unique and cannot be replicated. These NFT collectibles being crazed with all over the internet is available in two of the biggest NFT platforms, Larva Labs and OpenSea.

Same with other NFT collectibles, CryptoPunks are usually utilized as investments that can be bought and sold, with its own risks and benefits. Although there‘s no guarantee for future returns, being backed by a huge community is a solid reason to believe that these are of great value as investment assets. As of writing, the most expensive cryptopunk collectable ever sold amounted to $11 million.

Twitter Account: @larvalabs

Website: https://www.larvalabs.com/cryptopunks

Read More: https://nftnow.com/guides/cryptopunks-guide/

 

BORED APE YACHT CLUB (BAYC)

If you have spent a specific amount of time watching TV or browsing Twitter, you have most probably seen a Bored Ape Yacht Club (BAYC) NFT. Many famous celebrities, such as Jimmy Fallon, Eminem and Stephen Curry, have already joined the hype for this. Bored Ape Yacht Club, also an NFT project inheriting from Ethereum blockchain with punk-related concepts, have been successful through the years from an internet sensation turning to an influential NFT brand.

TOP 5 NFT PROJECTS TO INVEST IN 2022Same with CyptoPunks, each “apes” has different items building its rarity. Currently, there are only a total of 10,000 apes existing in the market, in which the highest selling item went for almost $3 million. This limited supply might be perceived as a disadvantage to make investors back out, however, given the popularity, the large community it had developed, and a number of celebrities and brands joining the craze, that fixed supply could be anticipated as more valuable and profitable.

Twitter: @BoredApeYC

Website: https://boredapeyachtclub.com/

Read More: https://nftnow.com/guides/bored-ape-yacht-club-guide/

 

MUTANT APE YACHT CLUB (MAYC)

As you might have guessed from the name itself, this one is basically a “mutated” spin-off of Bored Ape Yacht Club. Mutant Ape Yacht Club (MAYC), which started as a project to support investors who could not afford BAYC NFTs, is also now a huge hit among investors and mimicking the success of its “forefather”.

Mutant Ape Yacht Club’s success propelled through the months of year 2021, and now consists of 20,000 mutated apes. This project basically introduces an entirely different NFT collection which is exclusively available for traders at OpenSea. Anticipation and continuous success are deliberately expected by the market as more and more brands and celebrities get involved in this project.

Twitter: @babymutantape

Website: https://opensea.io/collection/mutant-ape-yacht-club

Read More: https://www.finder.com/mutant-ape-yacht-club

See also: Opensea, biggest NFT market place

 

Cool Cats

Cool Cats, also a take on digital arts concept of NFT, has considerably grown ever since its drop last July 2021. One can say that it launched on a perfect timing, taking advantage on the early rise of Bored Ape Yacht Club (BAYC). Cool Cats is also built on-top of Ethereum blockchain, which consists of cat-like collection of 9,999 NFTs. These collections feature unique traits in each cat, with various items, outfits, and color, some making the cat rare.

One main reason why Cool Cats have remained on top is due to the various perks that the project provides to its owners. It claims to give back at least 20% of ETH raised in the market to the community via airdrops. Investors have chosen to hold their cool cat NFTs due to the occasional contests and giveaways the project has.

However, since it hit the market, there has been a considerable decrease in prices. But don’t worry, there are still various reasons to believe that Cool Cats could continue to grow given the solid community of holders it has created. There are also many celebrities and prominent collectors getting involved in the craze.

Twitter: @coolcatsnft

Website: https://www.coolcatsnft.com/

Read More: https://nftnow.com/guides/cool-cats-guide/

 

DECENTRALAND

Aside from the realm of digital arts, one of the best use cases of NFTs is in online gaming. This concept has provided to have huge growth capabilities and has been in the mainstream market over the years. One of the first blockchain-based games to pioneer this field is Decentraland.

Decentraland, powered by Ethereum blockchain, is a virtual reality (VR) gaming platform which allows users to experience and monetize in-game items and contents. It is perhaps one of the most popular NFT games in the virtual land platforms. In this game, you can buy and sell 3D land within its virtual reality universe, in which you can control with your own creativity.

Owning a land will allow you to build all sorts of things such as galleries, arenas, or whatever you desire, which you can explore and create content with.

Twitter: @decentraland

Website: https://decentraland.org/

Read More: https://itsblockchain.com/decentraland-complete-beginners-guide/

 

Interested to learn more about NFTs? Let our team in COREDO help you! We have blockchain experts ready to assist you!

Have you ever thought of how blockchains can directly connect with each other? Like, how can they operate to vitally enable crypto owners to exchange their data and multiple cryptocurrencies without compromising the time and cost for the said trade?

The answer? Bridge protocols. These bridges work by taking a fund in crypto using one currency — let’s say, for example, Solana (SOL), and then putting it in stake in a bridge protocol, resulting in a token that can be used on the second blockchain of your choice, in this case, for example, Etherium (ETH).

This makes bridges a very important part of crypto settlements, in particular, decentralized finance (DeFi). However, as crypto industry spreads past decentralized application (DApp) platform Ethereum up to multiple driven blockchains, including metaverses, non-fungible token (NFT) markets, and lending programs, crypto-proprietors are currently being siloed in blockchains that can’t straightforwardly speak with one another. They are at risk.

What’s worse is that hackers have been very active, making as much as $1 billion since last August.

For a breakdown, the thieves got $425 million for three bridge protocols in the last two weeks. Then, another $612 million from the case of Poly Network in August (though for the record, Poly hacker returned everything back).

Nonetheless, bridges still want to be in the market, more so, being ambitious. For example, the Polkadot blockchain bridge empowers clients to automate the trading operation and add information to the exchange. As a result, one could take crypto tokens from the 100-sub blockchains it will host and then send them directly to another blockchain, let’s say DeFi lending or borrowing program, and even add commands to invest the tokens in a specified loaning pool to gain interest.

Cross-Chain Crypto Payments: Is it Safe or NotThis will add convenience to the exchanging activity, plus it could likewise successfully transform the siloed crypto blockchain industry into one system. Consequently, a major objective in the business will be accomplished.

The Problem

Looking at the recent crimes below, let’s explore the problem.

  • Wormhole’s $325 million theft, Jan. 27
  • Qubit’s $80 million loss, Feb. 8
  • $4.4 million attack on Meter Passport, Feb. 5.

First, being just online. Sender’s tokens must be typically stored into the bridge protocol straightforwardly. Meaning, they are kept on the web, and subsequently, considered as the powerless “hot wallet”.

Second, minting is the way these tokens generally get through the cross-chain cryptocurrency swap. “Wrapped” renditions of the beneficiary’s tokens are what’s being exchanged. Therefore, if a hacker can mint these wrapped tokens, they can redeem them for TKTK, and then can send them off right away to their private wallets and coin mixing services.

The catch is, if bridge protocols are ripped off, it’s not the cryptocurrency exchange or DApp development company that suffers. It’s the huge number of individual clients who took a chance with their cash completely all alone.

In contrast, the investment firm which backs Wormhole, Jump Crypto, “replenished” its funds with $320 million worth of ether. This strategy is effectively keeping their investment from being bankrupt and is accepted to be reimbursed over the long run.

The Theft, Explained

Binance Smart Chain (BSC)-based Qubit’s QBridge protocol was hacked on January 27. The hacker took advantage of an imperfection which convinced the DApp’s shrewd agreements in minting 77,000 wrapped ether tokens, qXETH, without actually using any assets. It was worth $185 million. They then, at that point, reclaimed the tokens for 207,000 of BSC’s Binance Coin (BNB) token, worth $80 million. After running away with the cash, both the developer and thousands of clients were exhausted.

February 11. Mound, which is Qubit’s development team head, declared that they can never again pay any further work on Qubit or Bunny Finance, another bridge convention. Instead, they would change over concentrated ventures into DeFi protocols managed by a decentralized autonomous organization (DAO). In this case, they left with nothing.

Cross-Chain Crypto Payments: Is it Safe or NotAs for the Meter Passport hack, $4.4 million was stolen. It began when entertainers utilized a trick to mint wrapped ether (wETH) and BNB tokens. To make matters worse, the attacker sold the BNB on SushiSwap, a top DeFi trade, right away. It then resulted in BNB’s local price crashing. This attracted individuals to purchase the crypto coin efficiently and afterwards use them to take out credits on the Hundred Finance loaning platform.

To put that into perspective, the said loaning stage acknowledged them at the ordinary worth, and were exchanged for other unaffected tokens. Since BNB had to be returned, the lenders were left with uncollateralized loans, costing them millions of losses. To reimburse its users and Hundred Finance, Meter set aside $4.4 million of its local MTGR tokens.

With the same scam strategy, the Wormhole hack also caused a bridge to create wrapped tokens and reclaim them for genuine ether. To be specific, it was through the Solana-to-Ethereum bridge.

Lastly, returning in August was the Poly Networks hack. The hacker, who was nicknamed “Mr. White Hat”, found a vulnerable spot on the bridge and let him move all of the $612 million worth of cryptocurrency into his own wallet. Take note that this money was from the individuals who had involved it as a security to purchase wrapped tokens. Luckily, Mr. White Hat returned everything back following half a month.

As such, just like any other investment projects to which people entrust their money with, faith is key. Bridges are indeed strong now, but what if there comes a time that they seem to be vulnerable?

The United States of America is the most attractive country for doing business. America cannot be called offshore, but the taxation system here is quite adaptable and developed, one of the most progressive in the world. Consequently, if you are planning to set up a business in America, you need to understand the taxation mechanism of this country.

What you need to know about taxes

The primary feature of the US tax system is its three-tier structure. It means that people in business must pay taxes at several levels:

  • federal;
  • state ;
  • local administration.

Federal and local taxes are independent. They can’t influence each other. Moreover, the federal government cannot interfere with the system that the state institutes. District authorities establish only those fees that are prescribed by the legislation of every state. In general, US companies pay the following charges:
• at a profit;
• sales tax;
• for real estate;
• for capital gains.

There are different types of taxes depending on the classification of the company.

What taxes do firms pay in the USA?

Corporation taxes in the US are set by both the house and state authorities. Companies are obligated to repay four main types of taxes. These are corporate income taxes, sales, real estate charges. Furthermore, capital gains are likewise taxed. Not only that, but payroll taxes are required at the federal and regional levels in America, and the quantity relies on the state.

As said before, taxation in the US exists at the local and regional levels — in these cases, taxes fluctuate. It can be an environmental tax or charges on the property or retained earnings.

In addition, do not forget about the benefits. Despite the rigidity of the US tax system, tax breaks are also present in it. For instance, the government offers massive bonuses to farms — in drought years, these benefits can reduce the taxation of farmers in America to zero.

Types of US companies available for registration to non-residents

There are two types of organizations available for non-residents in the USA.

The first is an LLC, and the second is a type C corporation, abbreviated as C-corp.

C-corporation

A C-corporation is a lawful entity that pays state income tax and federal income tax. First, the corporation pays corporate tax on its profits, and then its shareholders also pay income tax on two levels.

Most often, this type of company is chosen by large businesses or IT startups. Almost all major American corporations, including Google and Apple, are C-corps. And even if your business is still far from Apple, you should still think about organizing a business in the form of a C-Corporation.

Limited Liability Company

Limited Liability Company — successfully combines the advantages of taxation at the owner level (as in partnerships) and limited liability of participants (as in corporations). The simplest and most beneficial form is an LLC with one owner, the so-called single-member LLC, or the transparent structure. With one owner, the company will not pay tax, and it will be paid by the individual who owns this company. The earnings of the company are estimated to be the income of a person.

Corporate Income Tax

The amount of this tax primarily depends on the type of company. So, S-corporations do not pay this charge on their behalf. All gains, losses, and surcharges are divided between the members of such a corporation.
C-corporations pay federal income tax in America, and regional taxation differs from state to state. For instance, in Iowa, you will have to pay 12%, and in Delaware — not a cent.

The tax system can treat an LLC company as both an S-company and a C-corporation. This tax is growing. That is, its size grows step by step, depending on the amount of gross income. It is essential for smaller companies with low revenues. So, for the first fifty thousand dollars of payment, the company pays at a rate of 15%, for the next twenty-five thousand — 25%, for another 25 thousand — 34%, for the received more than 235 thousand dollars of income — at a rate of 39%. Finally, 34% income tax is payable on all gains of more than $335,000.

Income Tax

Income tax in America is levied on any income that an individual earns in the US. The average US income tax ranges from 10% to 39.6%. Income tax in the United States is paid on:

  • wages;
  • bonus payments;
  • compensation payments.

Opening your business in America, if desired, is real. The procedure consists of several stages: choosing the state and the optimal type of company, registering a company, opening a bank account, obtaining a tax number, selecting a tax strategy, etc.

It will be easier to draw up a plan, optimize assets, and keep track of all tax liabilities with the help of professionals. For more information about doing business in the USA, contact the company’s specialists.

 

An extremely unpleasant situation with the worldwide pandemic has affected businesses and economies of many countries. Other victims of the coronavirus are supply chains – many enterprises had to revise their logistics routes and some of them failed to satisfy the needs of many clients. But during the next year, the same companies and organizations faced an increased demand for ADR changes in Singapore so the goods could be delivered on time.

In normal conditions resolving a conflict according to the law will take more time and assets. The situation has become worse when some governments decided to activate extremely strict measures and created some kind of a blockade to prevent spreading the virus.

One should know that now if a person is trying to create a company in Singapore, they can only meditate. It is the only way to settle a commercial dispute according to Singapore and many other countries’ laws.

SIMC Protocol

SIMC Protocol is the solution that is aimed to make the process of resolving disputes easier. At first, this protocol has been created as an addition to the legislation. It is aimed to completely prevent legal actions from any party that started a dispute. This protocol provides an opportunity to resolve a conflict without the help of a court.

If any businessman decides to create a company within Singapore territory, they can exploit SIMC protocol in the following situations:

  • A dispute has been initiated because of the coronavirus situation.
  • If the described protocol could be used to resolve a conflict.

If the Protocol can be used any party can apply for meditation in Singapore and to do that they pay 250$ (the standard fee is 10000$).

After transferring the fee parties can agree to meet online at any time (10 business days is the limit). Taking into account the amount of the dispute, all parties have to transfer the following fees:

  • Around 3000$ in SGD currency.
  • 6500$ or 0.3% of the disputed sum in SGD currency.
  • 10000$ or 0.13% of the disputed sum in SGD currency.

SCM

Why Singapore system of resolving international disputes is the best? It is because SCM has been created and signed on the territory of this country. In 2019 46 states signed the agreement and another 6 states joined later. The main aim of the SCM was to make international disputes easier and more efficient.

Experts from COREDO are always there for you to provide with more information or giving an advice about business in Singapore. 

 

All matters concerning TM registration in Italy are handled by the TM and Patent Office. The main legal source of TM regulation in Italia comes from the Industrial Property Code but also does not exclude international agreements and conventions.

According to the Industrial Property and Civil Codes, unregistered TMs can be protected too. Protection is given to the owners of valid IP rights and secures them against acts of unfair competition (only in the area of TM use). When it comes to foreign ones, once the TM owner is able to prove that the Italian public is familiar with their product and they are planning to launch the products in Italy, a foreign TM can be protected as well.

Benefits of TM registration

Registering a trademark in Italy provides the following advantages:

  • Protection from being confused or associated with other TMs
  • Protection in whole Italy for five years
  • In case of losing its distinctive character, the TM keeps the protection (unregistered TMs lose it)
  • The owners can exercise rights related to other similar TMs registered later.

Use of TMs

In Italy, there are no extra criteria about being an applicant for a TM – anyone can do it. The applicants are not even required to conduct the business. It is the reputation of the brand that makes a TM known and reserves the name and the right to use for the creator. There are many things that can be registered as TMs such as words, names, sounds, number, and many others. The registration is possible if those features make a product distinguishable and identifiable.

Registration process

The first step is to start the application process. This requires the applicants to:

  • Appoint a qualified representative
  • Define what class of products or services their mark belongs to
  • Settle the registration fees
  • Provide official proof of their TM distinctiveness.

The process of TM registration in Italy typically takes about a year. This period is used to make sure that a TM really can be registered, compare it to the other ones, confirm that no laws are violated. Once the registration is granted, it comes into force from the moment of decision published in the registration authority’s bulletin. In case of any disagreements, third parties can challenge the new TM registration for 90 days. The TM protection can be used for 60 months. However, the protection period is doubled – 120 months and can be renewed for the same period of time.

It is interesting to note that the application can be canceled at any time. Or the whole process can be done electronically.

Experts from COREDO are skilled to provide you with more information on IP and TM protection in Italy and other European countries.

Acquiring a business is always a complex and multiple-step process. Buyers need to evaluate all risks connected to the deal as precisely as possible to ensure the profitable results. Among many other aspects to analyze, tax due diligence is often disregarded when evaluating a target company.

Especially in the case of share purchases overlooking tax due diligence can place the buyer in high risk. With a share purchase agreement, the buyer gains responsibilities and liabilities of the acquired company even if they were discovered after the purchase.

 Why is it so important?

Depending on the scope and reach of the activities, all companies work as a part of their local tax regulatory regimes. In addition, international businesses must also comply with tax regulations in all regions where they are present. This is a part of the difficulty for the buyers: each jurisdiction has an uncountable number of taxes for different company types. That is why buyers struggle to efficiently assess whether a potential target company truly complies with al needed tax laws to the full extent.

Once there are any tax issues discovered after the purchase, it significantly and quickly degrades the deal. To illustrate, these issues can be non-filing exposures, overstated non-capital losses, underreported tax liabilities, or others. The goal of tax due diligence is to find out about these problems before the purchase takes place. Basically, it helps the buyer to:

  • Define the structure of the deal
  • Determine agreement terms
  • Make informed purchasing decisions
  • Obtain support for negotiation.

Processing tax due diligence

Traditionally, tax due diligence is processed by accountants or lawyers who have experience with corporate tax. Their job is to evaluate different types of tax exposures imposed upon a target company. Crucially, the experts do not only review corporate tax returns but also focus on high-risk areas such as:

  • Foreign affiliates
  • International business activities
  • Transfer pricing.

Typically, tax diligence also involves a review of tax and legal documents including foreign reporting forms, objections, past audits, any pre-closing tax structuring steps.

Does tax due diligence seem like a difficult process to you? We will be happy to do this work for you. Experts from COREDO are true specialists in this field and have been performing such tasks for multiple years now.

 

Financial planners sometimes have a dilemma: should we add a securities license to the portfolio of our current services? The truth is, this service is quite requested by clients nowadays and can be very lucrative. By adopting this qualification, companies can be a one-stop-shop of financial services.

However, it is important to prepare for the process of obtaining a securities license. First of all, it is necessary to have a sponsorship from a broker-dealer, then study and pass the exam. But even after achieving the license, you must continue the education to fulfill the license requirements. This why it is so important to evaluate and compare the benefits of obtaining the license against the struggles it brings.

Choosing the right platform

At first, the company should decide whether a securities license will be a part of their first or second business line. Regardless of the choice, they need to find a broker-dealer who would be prepared to sponsor their new incentive. The decision should be based on several factors like the level of payout on gross commission or the goods and services the potential sponsor offers. Generally, there are retail and independent broker-dealers.

Retail companies

In retail firms, brokers who are technically independent contractors work as employees. A manager oversees their activities. Also, they receive corporate support features like health insurance, an office, and others. In return, brokers in return firms face higher amounts of work and receive a lower commission. Retail firms are a good option if you are starting your financial industry path: they are able to provide you with all the necessary tools.

Independent firms

When it comes to independent brokers, they are traditionally able to combine multiple financial planning practices. This is the main reason why professionals with an established practice usually prefer to work with independent broker-dealers. Nevertheless, it is still important to take time and find a firm with a suitable offer of products and services to fit your clientele as well as possible.

The studying begins

Once the decision about the sponsor is made, you need to start studying right away to pass the securities and insurance exams. This stage can be unpleasant but is necessary. Typically, retail brokerage firms provide you with an in-house training program and pay you a salary. It is based on the previous income you received before studying began. As for independent firms, they are known to provide less support. But sometimes they have an agreement with a training provider which gives you a discount for study materials.

Obtaining a securities license can be an overwhelming and effort-consuming task. If you are truly dedicated to this goal let our experts help you. Specialists from COREDO specialize in assisting in obtaining different kinds of financial licenses including a securities license.

Capital is a crucial part of economic growth. However, some countries cannot meet their capital requirement. This is when foreign investments come and help. The most common ways of investing in other countries are foreign direct investment (FDI) and foreign portfolio investment (FPI).

With FDI, investors put their money directly in the productive assets of a foreign economy. When it comes to FPI, we speak of investing in financial assets like stocks and bonds that belong to entities overseas. In some terms, both of these investment types are similar. Yet there are clear differences between them, too. For retail investors, it is vital to be informed about the differences between them. Mainly, it is important to know because markets with high FPIs tend to be heightened and highly volatile at uncertain times. Meanwhile, FDI is considered to be less volatile.

Examples of FPI and FDI

Let’s imagine a situation where a multi-millionaire from Germany is deciding whether to invest in company acquisition in a foreign country that produces industrial machinery or to buy a large stock of the company that makes machinery. The first option is an example of foreign direct investment and the second – of the foreign portfolio investment.

It is thought traditionally that FDI is a privilege of big investors who have enough capital for investing directly into a foreign economy. Meanwhile, an average investor would probably choose FPI. Basically, buying foreign stock and bonds, mutual funds or exchange-traded funds means becoming engaged in FPI.

Attractiveness of investments

Capital is always in demand and is very mobile. To evaluate the level of its desirability, investors use standard criteria:

  • Political factors – government’s approach to business, political stability
  • Economic factors – GDP trends, currency risk, inflation, the strength of the economy
  • Motivations for foreign investors – tax incentives, taxation levels, property rights
  • Other factors – local competition, skills and education of the labor force, and others.

Key differences

The first difference between FDI and FPI is the level of control the foreign investor obtains. Typically, FDI investors are active participants and decision-makers in the companies they invest in. When we speak of FPI investors, they are usually quite passive and are not involved in the daily activities of the company. Unless FPI investors have a controlling interest in the company, they do not engage in strategic planning either.

The second difference is the timing. FDI investors take a long-term approach to their investments since it may take years before the project is completely launched. As for FPI, investors can profess in the long run but more often invest in a shorter timeline. In other words, in the case of economic turbulences, FPI investors can quickly leave the nation and liquidate their assets. But for FDI this procedure may not be this easy.

For more investment consulting visit our website and leave your contact details. COREDO experts will be happy to schedule a personal meeting with you.

 

 

 

South Korea does not consider cryptocurrencies legal. While exchanges are deemed legal, they still need to obey a set of strict regulations. Since transactions in crypto cannot be viewed either as cash or financial assets, they are not taxed which makes crypto taxing a grey area in South Korea. Nevertheless, the local government has stated its intention of levying taxes on cryptocurrencies in the nearest future and plans to issue the framework in 2022.

The regulation of crypto exchanges in South Korea can be judged as quite harsh considering the mandatory government registration and other rules dictated by the Financial Supervisory Service of South Korea (FSS). In 2017, the local government forbade financial institutions in South Korea to host Bitcoin futures transactions and restricted the use of all anonymous crypto accounts. Moreover, the reporting requirements for banks with crypto exchanges became stricter in 2018.

According to the new laws, a trader must create a real-name account with the same bank as their cryptocurrency dealer. In other words, cryptocurrency trading is restricted to “real-name bank accounts” and this is the only way to use e-wallets. Also, there are AML/CFT rules that oblige the bank and the dealer to authorize the trader’s identity.

This new legislation was published in 2020. It extended the AML/CFT conditions that cryptocurrency exchanges in South Korea must comply with. In addition, it orders all South Korean exchanges and requiring companies to gain an operational license from the Financial Intelligence Unit which is part of the Financial Services Commission by the end of September 2021.

Who do the regulations apply to?

The new regulations in South Korea apply to Virtual Asset Service Providers (VASPs) who perform these activities:

  • Administrating or keeping virtual assets
  • Transmitting cryptocurrencies
  • Trading cryptocurrencies
  • Performing crypto-to-crypto transfers.

These operations include cryptocurrency exchanges, Initial Coin Offering (ICO) projects, and custodian wallet providers.

The key novelties

So what are the changes for all crypto service providers in South Korea? After the implementation of the new legislation, they all are obliged to register with the local financial regulators and upgrade their AML/CFT systems. Even though these conditions are not completely new as they were published in 2018, it is only recently that they became mandatory.

From now on all VASPs are required to:

  • Open a corporate bank account and offer real-name accounts with the same institution
  • Put in place enhanced AML/KYC processes
  • Obtain a certificate of an Information Security Management System from the Korea Internet and Security Agency
  • Give the company’s data including the bank account information to the financial intelligence unit.

The transition period is still ongoing and will end in September 2021. The punishment for not having an approved bank account can be extremely strict and include prison detention or fines up to 43,000 USD.

Are you planning to enter the South Korean market as a crypto exchange? COREDO is here to help with complying to all necessary requirements or applying for a license.

 

Nowadays, prepaid cards allow people to have direct and fast access to their money, yet they do not have to be carrying any cash around. There are a few options for companies to choose from when they plan to issue prepaid cards to employees, customers, or others.

One of the options is white labeling. The process goes like this:

  • One company develops a product, for ex. a prepaid card
  • The use of that product is sold to another company
  • That second company puts its branding and logo on the product.

The pro of this approach is the fact that a company does not need to build a card from scratch. Meanwhile, it can take advantage of using reloadable prepaid cards.

Advantages of white label prepaid cards

Using the white label method of issuing prepaid cards has many benefits. To illustrate, here is a list including some of the advantages:

  • Easy setup

White label prepaid cards save your company efforts and time because you do not need to research the best strategy and technology to bring the product to the market. You only put your logo and the rest of the product is created by another company.

  • Customization

Prepaid cards can be customized when it comes to color and design. Moreover, you can also define who is able to use the cards: customers, contractors, employees, etc.

  • An additional stream of revenue

The fees always depend on the settings put into the prepaid cards. For example, your company can receive a percentage from every sale and get the fee that was charged when a cardholder used the ATM. These opportunities represent an additional source of revenue.

  • Optimized payroll

Your company can save a lot of money and time thanks to prepaid cards because they really streamline the payroll process. This characteristic especially applies if a business has a large workforce. Once the prepaid cards are connected to employees’ earnings, the process becomes automated. In addition, no extra money spent on paper checks.

  • Higher customer loyalty

Prepaid cards can be a way of offering customers rewards like cashback and bonus points. Thus the customer is motivated to choose your company among others and builds personal loyalty to the brand.

Are you already thinking of offering prepaid cards to your employees or customers? Are you looking for an additional revenue stream? COREDO can help you issue prepaid cards using white label technology.

Generally, codes, source code, programs, and all related software are protected by copyright law. Not only the database structure but also its content must be thoroughly protected. The reason for this is the expenses spent on the financial, material, organizational, and other aspects. However, costs like these are assumed once the number of materials reaches ten thousand elements.

Defining a database

What is a database? Independent materials of various types can be collected and presented in one set that is designed to be systematized in a certain way. In order for a database to be useful, the materials must be available to search and be processed by a computer. People who create a database and collect, process, and situate all the elements are called database manufacturers.

Registering copyright in Hong Kong

There is no specific copyright registration regime stated in Hong Kong. Automatically, copyright is assigned to every original and tangibly recorded work. Holders of copyright have an exclusive right to create copies of their work and to distribute it publicly. Surprisingly, under the Copyright act in a special administrative region in China, software and databases belong to the category of literary works.

Copyright protection

The protection of copyright basically consists of punishment for its infringement. Perpetrating copyright is considered a civil liability. Moreover, if someone unrightfully uses the work of the copyright holder for example for sale, they can even carry criminal liability.

Patent registration

Besides copyright protection, there are special regulations for protecting innovations by granting their creators with a patent. In Hong Kong, a patent can be registered for usage in the industrial domain and must not be a part of the excluded invention classes. Traditionally, patents are divided into short-term and standard. In a special administrative region of China it is necessary to apply for a patent registration at one of the offices:

  • UK Patent Office
  • EU Patent Office
  • State IP Office of China.

When it comes to patenting software, the successful patent registration depends on whether:

  • The software is new
  • It has an inventive nature
  • It solved a specific technical problem.

The final word

Thanks to this short post we have discovered how databases can be protected in Hong Kong. Firstly, it can be protected under copyright law since it falls under the category of literary works. Also, they can be protected by obtaining a patent under the condition that the software complies with the patent requirements.

For a more detailed consultation on copyright protection do not hesitate to contact COREDO. We are happy to provide you with a free consultation.

 

It is such an easy concept if you think about it. But let’s put in words its real definition and discuss different types of companies. A company is a legal entity that is created to operate a business. The creator can be either a group or a sole individual who would like to conduct commercial or industrial business. The jurisdiction of every state has predefined corporate laws that dictate the variety of company organization ways including rules for taxing and financial liabilities.

The creators of a company can choose a type that suits their needs and future activities as of partnerships, proprietorships, or corporations. Another way of distinguishing companies is deciding whether it is private or public. Each type involves different regulations, financial reporting, and structures of ownership. What is a similar characteristic for all types is that they are aimed at earning profit.

Explaining the basics

How does a company work? Well, basically it is an artificial person. Corporate personhood given to a company is what mainly differentiates from individuals who are a part of the company. As mentioned earlier, companies are traditionally made for earning a profit, yet there is an exception which is nonprofit charities.

Although countries have specific regulations regarding the definition of company types and their organizations, many similarities can be found around the world. It is also important to mention that companies have very similar rights to the ones an individual has. For examples, we can take the right to pay taxes, hire employees, enter into contracts, or borrow funds.

When it comes to finding benefits of starting a company, we can talk about certain freedom that is given by an opportunity of income diversification, visible correlation between effort and reward, flexibility. However, there are disadvantages as well: responsibilities for staff, legal liability, financial responsibility, and possible long work hours.

Company types

In this part, we will discuss basic the basic company classifications. It diversifies:

  • Partnerships – formal arrangements of two or more parties who manage and operate a business together;
  • Corporations – legal entities that are separate from their owners, have their own corporate personhood;
  • Associations – any group of individuals who create a legal entity together for social, business, or other purposes. The structure and purpose dictates the rules of taxation for this type;
  • Funds – businesses involved in pooled capital investing;
  • Trusts – a third party holds assets on behalf of beneficiaries.

Do you need to create a legal entity for your business intentions? Do not hesitate to entrust this administrative process to the team of COREDO.

 

The procedures Know Your Customer and Customer Due Diligence can seem similar at a first glance. Nevertheless, we can spot differences between them. KYC aims at creating a risk profile of a customer: before starting any kind of business relationship, it is useful to retrieve the customer’s information. Alternatively, CDD is a way of confirming that the customer’s data is truthful and correct. In addition, CDD consists of background and utility ownership checking.

To define the main difference, KYC puts emphasis on financing. CDD also includes the financial part, but it generally is carried out in a continuous way. It represents a continuous framework of assurance serving especially organizations that have numerous transactions on daily basis as for example real estate companies or banks. Institutions like these use advanced programs that are set to monitor moves of funds in order to identify suspicious transactions. Thus a well-processed KYC can serve as a great basis for maintaining quality CDD, and altogether they can guarantee that the institutional systems are not being misused for money laundering purposes.

Nowadays, Customer Due Diligence is a crucial part of the AML routine. It is regularly performed in certain time intervals. The check-ups include control of geographical distribution, amount of money, or transaction volume. In our modern age, the software runs the monitoring automatically, However, the automated systems must be updated regularly.

It is interesting to mention that previously used KYC procedures were considered not effective enough, which is why those procedures have turned into automated CDD applications. This novelty helps to reassure CDD during the whole business relationship. This is vital because a customer’s risk profile can change drastically over time.

In COREDO we assist our clients with creating risk profiles, compounding CDD and KYC. Write us a quick message and get your free consultation.

When a group of companies and customers concentrate around one certain niche and become all interconnected, they basically create a vertical market. Vertical markets have specialized needs: companies customize their goods and services according to those needs and normally do not serve broader markets. An opposite of a vertical market is a horizontal market where companies offer their goods to various industries.

It is typical for vertical markets to have high entry barriers and their own business standards. For companies, it may be hard to become a part of a vertical market, but entering it gives them an opportunity to realize higher profits while focusing on a narrow customer base which eventually makes their marketing campaigns more cost-effective. Companies in vertical markets get very competitive, they also can be characterized as highly experienced and specialized in their market’s specifics, terminology, and regulations.

Specifics

Unsimilar to horizontal markets, vertical markets create products and services for niche customer groups. That is why companies in vertical markets do need to choose a completely different strategy in comparison to the ones in the horizontal markets. The managers of vertical market businesses decide whether they would focus on certain industries or demographics.

However, focusing on one industry and specific demographics does not mean that a customer base must be small. This customer can be wide and at the same time provide a great revenue opportunity as the demand for a specific product rises.

Advantages

The possibility of having a comparative advantage is definitely a positive for vertical market operators. They can choose a segment and gradually grow expertise within it which means they become professional with the respective terminology, regulations, etc. Given that all companies behave like this, the competitiveness among them grows as well.

Another benefit of participating in a vertical market is an opportunity of saving marketing expenses. Operators only need to target a smaller group of customers instead of reaching out to wide masses. This is also the reason why their campaigns can be focused and concrete. Vertical market operators know their customer base very well, therefore they are able to adapt their goods, services, and approach in general.

In COREDO we assist our customers with their investment decisions which among other aspects includes processing market analysis of different types. Leave us your contact and we will be happy to arrange a consultation for you.

The year 2021 is marked to host another M&A forum in Japan. A series of interactive panel discussions is planned for September, but we can discuss Japanese M&A already now. Let’s take a closer look at the procedure of mergers and acquisitions and how they are done in Japan.

Typically, the process contains the following stages:

  • Signing an NDA
  • Processing the due diligence of a target company and assets
  • Optional conclusion of an MOU
  • Negotiating and signing a final agreement.

Depending on the size, structure, and complexity of the deal, the timing of the procedure may vary. Normally though, it takes about three to six months. More time can be required if the transfer involves share exchange, business transfer, or corporate divestiture.

Regulation of M&A

In Japan, the Companies Law is the main piece of legislation applicable to company acquisition. Potentially, purchasers also need to comply with other regulations:

  • AMA
  • BRA
  • FEFTA.

It is also important to mention that all documentation including acquisition agreements must comply with the local Japanese laws. In fact, business transfer agreements or purchasing of shares can be ruled by laws of other jurisdictions, yet they are typically regulated by the Japanese one.

Ownership acquisition

It is typical of buyers to purchase the whole ownership of shares and assets issued by the company. In case certificates of shares are issued by the company, issuing share certificates becomes the way of transferring shares. Alternatively, shares can be transferred through a transferring agreement between buyers and sellers. This kind of agreement requires the consent of counterparties and creditors, which is what makes it different from the acquisition agreement.

Purchasing shares

When a company sells its shares, the shareholders must agree with it. Sometimes minority shareholders can disagree with such a decision. In this case, majority stakeholders can repurchase their shares. However, it must be added that this action has to be approved by the BoD and should not happen without notifying the minority stakeholders. In Japan, the whole process of forcing minority stakeholders cannot exceed a twenty-day period.

COREDO would be honored to assist you with the M&A procedures taking place in Japan. We will help with planning and carrying out all needed transactions.

In order to match the level of returns one expects from their portfolio, it is necessary to rebalance the portfolio on the regular basis. Basically, rebalancing means buying some stocks and selling some bonds or vice versa – a similar maintenance procedure like visiting a dentist regularly. This procedure also helps match the asset portfolio with the level of risk you are ready to take. Rebalancing is a part of the long run of the passive investment strategy.  If rebalancing is approached in a disciplined way it can increase long-term returns by preventing the investor from making panicked moves.

Asset allocation

The percentage of different investments in the portfolio is defined as asset allocation. Investors predefine their target asset allocation which can only be reached by regular portfolio rebalancing. Let’s say you hold more stocks. This way the value of your portfolio will be more volatile due to the market swings, therefore you will be taking on more risk. However, stocks usually have higher performance than bonds in the long run. That is why investors tend to expect a bigger part of their returns from stocks.

Typically, rebalancing involves selling stock and reinvesting the money into bonds. It might seem that it is more beneficial to hold 100% of the portfolio in bonds. Yet it is not so from the viewpoint of emotions that every investor has. For example, seeing a retirement account go down due to the decline in the stock market can force an investor to make poor rushed decisions such as selling stocks at a loss. On the other hand, rebalancing portfolios with bonds that are more stable can help keep the portfolio on track to the target allocation and match the desired risk equivalent.

How to rebalance

Although there is no optimal frequency for rebalancing strategy, there is the main principle of how it should be done. Rebalancing mainly represents selling overweight assets.

To take an example, we can imagine that an investor holds 70% stocks and 30% bonds in their portfolio. When a stock market does well, the portfolio value represented by these stocks goes up from 70% to 75%. It seems like a positive change, but in fact, the portfolio becomes riskier. To avoid taking a higher risk, the investor should sell that 5% of the stock and invest that money in buying bonds. That way the portfolio becomes rebalanced.

Without a doubt, selling the stock at the moment when its value grows can be challenging from a psychological point of view. Nevertheless, it is crucial to remember:

  • Stocks could go low and bring bigger losses that you were prepared to take;
  • Rebalancing in such situations means buying low and selling high which is the desired outcome;
  • The process of rebalancing typically involves lower percentages.

Do you need any help with managing your finances? Our team of exceptional specialists are ready to assist. We will be happy to see you at COREDO headquarters.

Large corporations and even small businesses often have problems with protecting their intellectual property. We will mainly focus today on protecting IP in the United States. Protecting intellectual property is not only ethics but even modern-day politics. The reason for this is that materialized ideas are valued extremely highly.

The United States, being a very individualistic society, actively promotes the importance of the intellectual property. It is given by the thought of ideas processed by the human mind being a part of the comparative advantage. This is why the intellectual property protection systems in the US are among the effective ones in the world.

Protecting IP rights in the United States

All original inventions are recommended to be immediately filed for a patent application in the US Patent and Trademark Office. Once the certificate is granted, the copyrights are valid for 20 years. It should be mentioned though that the validity term of IP protection varies for each type and can actually be renewed in the future.

Another way of protecting intellectual property is registering a trademark. All the identification details used for product or service marketing including names, logos, or symbols can be protected under the trademark rights. After the TM registration, trademark protection in the US covers it. There are other examples:

  • Colors
  • Smells
  • Slogans
  • Logos and corporate designs
  • Sound signals or melodies
  • Words or phrases.

Although, the US federal protection automatically applies to creative works without the US Copyright Office registration, registering your work can be helpful as it enhances one’s rights.

The problem of rightsholders abusing TM rights is still relevant in the US. Those people register trademarks with the only aim – restricting marketing competition. An example of such activity is the artificial extension of copyright protection term by retroactively including a co-author after the original author’s death.

Conclusion

Protection of IP in the US and generally in the whole world remains a high priority. It can seem premature maybe for startup processes, yet in the future, this aspect can influence the accessibility to get funding or preventing unfair competition.

In case you are planning to reinforce IP protection on your valid assets, contact COREDO to receive a detailed consultation.

 

The process of transforming funds achieved in criminal activity into legal properties is defined as money laundering. Its goal is to disguise the illegally earned money as funds from a non-criminal activity. For proving that a certain case can be deemed money laundering, it must meet the following three elements.

The awareness about a fraud money source

To accuse someone of money laundering, it must be proven that the defendant was aware that the money they hold came from fraud. Otherwise, even if one participated in money laundering but not consciously, they cannot be accused of criminal activity since they did not suspect that they are performing a crime. Nevertheless, the prosecutor’s burden of evidence or circumstantial proof is rather low. The prosecutors actually have to prove that you knew of the illegal status of funds obtainment.

The defendant started or completed a financial activity

For accusing someone, the prosecutor must demonstrate that one was involved in the beginning or end of a financial transaction such as purchasing, donation, loan, withdrawal, transfer, credit extension, safe-deposit operations, etc.

The defendant participated in the three money laundering phases

A person can be accused of money laundering if they were involved in one of the following money laundering steps:

  • Transfer – a large amount of “dirty” money was placed in a financial company. Financial institutions pay attention to cash-rich companies. If such companies deposit larger cash amounts, it triggers the institution’s suspicion.
  • Layering – another triggering activity is participation in misleading financial practices aiming at masking illegal income as a part of regular business activities.
  • Implementation – this step means that money was taken back to the local economy, now being identified as legal.

Proof for accusation

The task of the prosecutor is to find out what happened during the money laundering case. They need to link the illegal activities to the people who conducted them and prove that those individuals were aware that the funds were coming from an illegal source. Moreover, the prosecutor needs to find evidence that the convicted individuals deliberately planned to “launder” the “dirty” money and make them look legal.

Would you like to learn more about anti-money laundering structures are processes? We would be happy to provide you with a personalized consultation at COREDO.

Since Bulgaria is a member of the European Union, it is rightly considered to be a favorable location for developing business. The same reason applies to the active growth of financial technologies and crypto asset operations in this country. Are you also planning to start a crypto company there? Then you have stumbled upon the right post: we will discuss the innovations in the crypto business regulation field of Bulgaria.

Crypto regulation

It is vital to acknowledge that last year Bulgaria took some active steps towards harmonizing its local legislation with the EU Directives covering illegal income. Now to start a crypto business in Bulgaria, entrepreneurs need to take care of anti-money laundering compliance and customer due diligence requirements. This is especially important for crypto exchange services providers and e-wallet providers.

The adaptation of cryptocurrencies in Bulgaria is not stopping. Therefore, companies are required to take AML compliance seriously. To prevent money laundering and support the combat against criminal activity, crypto exchanges and their operators have to register at the National Revenue Agency.

The innovation in regulation taking place in Bulgaria mainly relates to solving the problems that arise with:

  • Fintech regulation adaption in Bulgaria;
  • Digitalization of the financial sector;
  • The growing risk of using digital platforms for illegal activities as money laundering.

Conclusion

Money laundering remains a big problem internationally. Unfortunately, the development of cryptocurrencies only supports this challenge. Yes, no doubt that cryptocurrencies offer faster and cheaper international transactions, yet they attract criminal activity to the sector. The innovations in Bulgarian regulation aim to support the business transparency initiative promoted by the EU. That is why these changes are important to consider while starting a crypto business in Bulgaria.

Order a private consultation with COREDO if you have more questions about AML compliance or crypto regulation in European countries.

The selling company that extends credit to buyers needs to consider allowance for credit losses. It is an estimate of debt that probably will not be recovered by the company. Typically, companies do not conduct cash transactions with each other but rather use payment on credit. Selling goods or services on credit can be viewed as risky since not all payments are guaranteed to be collected. To anticipate this possibility, companies establish a certain amount of allowance for credit losses.

The main purpose

When creating financial statements, the allowance helps companies to take into consideration these possible losses and not overestimate the potential income. A company then states how much of its receivables will be irresponsible. In fact, it is not necessary to know which client or what debt amount will not be paid. Instead, an approximate amount that will be uncollectable should be used. In accounting, these expected losses are placed in a balance sheet contra asset account and called:

  • Allowance for credit losses
  • Allowance for doubtful accounts
  • Allowance for losses on consumer financing receivables
  • Allowance on uncollectible accounts
  • Provision for doubtful accounts.

For compensating credit losses, companies have a bad debt reserve, and that’s where any increase of allowance for credit losses should be included.

Calculations allowance for credit losses

Delinquent or bad debts can be calculated by using statistical modeling, for example, default probability. This can be performed on the basis of historical data taken from the given company or the whole industry. The current statistical modeling allowance changes all the time. This is the reason why companies need to change the allowance for credit losses on the regular basis.

This accounting technic is not only used by businesses providing goods and services, but also by financial institutions. For example, banks report uncollectible debts on loan payments.

Do you look for assistance in the sphere of corporate finance such as calculating the allowance for credit losses? Specialists in COREDO have quality experience in providing such services internationally.

The abbreviation of SEPA means the single euro payment area. It was created by the EU in order to harmonize the transfer process of cashless payments among euro countries. The SEPA architecture was designed as a convenient tool for European consumers, businesses, and government agents while making direct debit or credit payments. Besides, this system is governed by the European Commission.

History of SEPA

It was the year 1999 when the story of SEPA began. At that time the banking industry already considered a need of having a single payments area since it would lead to further integration of EU economies. Yet only in 2007, the EU passed the Payment Services Directive that offered the legal basis for SEPA. As the SEPA architecture was progressing, in 2011 it replaced national payments and in 2017 allowed banks to transfer 15000 euros in a record time of ten seconds.

Starting from 2018, the European Commission made a proposal of stopping the extra cross-border charges for non-EU states. In addition, the proposal contains the rule that everyone in the EU can transfer euros for the same price as with their domestic transfer. Also, the new condition came: consumers must be informed about the cost of a currency conversion before paying abroad.

SEPA’s members and goals

The main goal of this system is to make foreign electronic payments as cheap and smooth as internal transfers. Moreover, the single euro payments area brings competition to the industry of payments: it creates a single market and brings the prices down. According to statistics, SEPA covers the area where more than 520 million people live, and those people process more than 122 billion e-payments annually. As of 2021, the area includes 36 countries. In fact, it does not only cover the EU member states but also San Marino, Monaco, Liechtenstein, Switzerland, Vatican City, Norway, and Iceland.

The managing regulators of SEPA are the European Commission and the European Central Bank. Together their task is to govern the board and to process the agenda together with government and consumer groups.

Are you looking for a SEPA solution for your financial company? Do not hesitate to contact the COREDO office to get more details.

 

Hungary has a significantly leading position in international trade, lending services, property registration, and enforcing contractual conditions as it was stated in the World Bank ratings. This country has many advantages as a business destination thanks to having a stable political situation, developed infrastructure, skilled labor force, and high living standards. Moreover, Hungary is considered a developed market economy and offers investor-friendly taxation and laws, the visa-free regime in the Schengen zone, simplified residence procedure.

If you are thinking about starting a business in Hungary, it could be useful to focus on eco-farming, IT, power generation, hospitality, transport, mining, and mechanical engineering. In addition, it goes without saying that Hungary is a suitable business destination since it is an EU member. However, there are other pros of Hungary that are not so obvious. Those include affordable office space pricing, little red tape, and perks of SMBs.

Forms of business organization

Let’s take a look at the list of organization forms possible to register in Hungary:

  • PLLC (zRt)
  • LLC (Kft)
  • LLP (Bt)
  • PLC (nyRt)
  • Subsidiary (Fa)
  • Representation office (Ki).

Taxation for businesses

Hungary is a popular place for foreign entrepreneurs to open a company there, one of big reasons being Hungary’s investor-friendly taxation. Being the lowest one in the EU, income tax in Hungary equals only 9%. That is why it makes more sense to open a company there than in an offshore zone. Furthermore, the foreign companies that participate in environmental protection projects, food industry, Internet provision, warehousing, or film industry have a possibility of receiving a tax relief of up to 80% for as long as 10 years. Hungary also does not impose any taxes on dividends, royalties, and dividends.

When it comes to other corporate taxes, they are the following:

  • VAT rate 27%
  • LBR – starting from 2%.

Our clients are people who are in the process of registering a company in different European states including Hungary. Do not hesitate to contact COREDO specialists with the requests related to this topic.

Particularly since 2018 cryptocurrencies have been experiencing unseen growth. Yet there are not the only attractive products present on the market today. Among others, there are NPLs which represent a series of “financial instruments”. Many economists and investors are greatly interested in them.

However, we will focus on another subject: the use of state-created virtual currencies issued by national banks as an alternative means to cash or cryptocurrencies. The first states, China and Sweden, forecast an unofficial issuance of the e-currencies in 2021 and 2022. Another country to join the race might be the US forecasting the digital dollar issuance already in 2021.

Characteristics of Digital Euro

The European Union is also preparing to issue its own e-money. The initiative is aimed at replacing the use of cash altogether and gaining greater control over financial crime prevention. The new digital euro is supposed to have the same financial quotation on the currency market as euro banknotes have. It will have the same operational area meaning Europe and Eurozone countries. The difference is that the currency will be centralized and permanently monitored by the ECB and the national central banks. While establishing the idea of the digital euro, the European Parliament aimed at creating a new instrument of preventing an economic monopoly of private individuals because they determine rules and conditions of currencies and exchanges outside of any regulation. The digital euro project is to start in the middle of 2021.

Mainly, the cryptocurrencies and the state digital currencies differ in the initiatives they preach. The path of the digital euro is to create greater transparency, exclude volatility by keeping the price value the same, and mitigate the financial risks connected with the use of cryptocurrencies.

Opportunities

The establishment of the digital euro brings the following opportunities:

  • Shorter timing of financial transaction exchange between banks and customers;
  • Reduced management and transfer costs by excluding the intermediary figure (the Central bank will manage all transactions);
  • Ecological saving by not producing banknotes;
  • Immediate customer support;
  • Greater control by authorities and traceability;
  • Digital user recognition;
  • Remote customer due diligence.

Disadvantages

  • Insufficient customer inclusion – some citizens do not have access to digitalized services and innovative tools (growing inequality gap);
  • Absence of uniform legislation;
  • Increased risks of cybercrime and financial crime.

Does the question of digital currencies catch your attention but you still need professional advice on this topic? Please get in touch with our office agents in COREDO.

 

The modern community of financial advisory is well aware of how important the services such as retirement and investment planning as well as general financial counseling are. Nevertheless, the general public can underestimate the value of these services which is intensely influenced by the smartphone accessibility to financial services, robo-advisory, and low-cost brokerage services. Yet according to the industry research, the advisors’ role is still very important.

The industry studies

A low-cost investment management company called Vanguard Funds has published a study Advisor’s Alpha. According to the study, clients who work with a quality financial advisor are estimated to have a 3% annual value grow of their portfolios. Understandably, this progress cannot be proved to be linear and in perfect order. Instead, the study considers that the bigger part of such an increase comes during the periods of higher greed and fear on the markets which is the moment when advisors are supposed to provide their clients with assistance on following their financial goals.

In its whitepaper Alpha, Beta, and Now … Gamma, Morningstar supported the Vanguard’s opinion. The gamma in the name actually referred to the extra income received by an investor thanks to making better financial decisions. The whitepaper deems that investors who receive professional services from financial advisors register a 1.82% growth of their annual returns.

The outcome of these studies is the fact that financial advisors act rather like behavioral coaches than money managers. Seeking financial advice proves to bring higher annual returns which is also shown by another study from Aon Hewitt. It demonstrated that the annual return of those who received professional financial advice were on average 1.86% higher than of those who decided to seek financial advice in online sources. The numbers were proved to be higher once again on the example of receiving financial advisory during the uncertain years 2009-2010.

Conclusion

To sum it up, we can say that financial advisory comes truly in handy during the times when markets are volatile. The reason being redundant emotions influencing the investor. Moreover, another crucial task executed by financial advisors is helping the clients stick to their long-term goals.

COREDO provides professional financial advisory services for private profiles and companies. Please contact our office to arrange a personal consultation.

The Financial Action Task Force (FATF) has the policy of reporting countries with insufficient AML / CFT regimes from 2000 and has proven to be successful over the years. Three times a year the FATF issues public documents that include jurisdictions whose measures against money laundering and terrorist financing are poor. In general, the FATF has inspected more than a hundred jurisdictions as of 2020 (80 of them were publicly recognized). Out of those 80, 60 jurisdictions made an effort to implement the reforms needed for addressing AML / CFT insufficiencies which means that they do not use the system anymore.

Monitoring of high-risk jurisdictions

The international financial system can be harmed because of the significant deficiencies in anti-money laundering, anti-terrorism funding, and anti-proliferation financing regimes of those high-risk jurisdictions. That is why the FATF urges all countries and jurisdictions to conduct a deeper level of due diligence on the listed countries. In fact, other countries are asked to conduct countermeasures in order to prevent continuing money laundering, terrorist funding, and proliferation financing.

To be able to reflect on the countries’ success in overcoming strategic flaws, the FATF and its regional bodies (FSRBs) work in collaboration. The FATF urges the countries to form an action plan, praises their success, and monitors their activities. The organization recommends following through with the details of risk assessments.

The list of jurisdictions under increased monitoring includes the countries whose progress is being monitored and evaluated by the FATF. The organization encourages to continue the progress these countries made in fighting money laundering and terrorist financing. According to the report published in February 2021, the jurisdictions with strategic deficiencies are:

  • Albania
  • Barbados
  • Botswana
  • Burkina Faso
  • Cambodia
  • Cayman Islands
  • Ghana
  • Jamaica
  • Mauritius
  • Morocco
  • Myanmar
  • Nicaragua
  • Pakistan
  • Panama
  • Senegal
  • Syria
  • Uganda
  • Yemen

The review process

As the countries with strategic AML / CFT weakness pose a potential danger to the whole international financial system, the FATF needs to determine them and track their performance. The FATF runs the tests to define the jurisdiction’s risks, deficiencies, specific threats.

If a jurisdiction shows low marks during the risk assessment, it earns a place on the list and is required to make an action plan to remove its deficiencies. The country can leave the list once all or almost all of the points of the action plan are met. The removal procedures also include on-site control. However, after the exclusion, the country still should continue on collaborating with the FATF.

Are you looking for a consultation in the field of AML compliance? Contact our AML specialists to receive the tailor-made advice for your case.

All over the world many businesses and economies were negatively influenced by the global pandemic. The supply chains of all kinds were also damaged: the cases of non-compliance with contractual obligations grew in numbers immensely. This caused a high demand for more effective alternative dispute resolution (ADR) methods in many jurisdictions including Singapore.

Filing a lawsuit was always an expensive and time-consuming option that became even more complicated after many governments put in place strict quarantine measures. That is why the newly opening businesses in Singapore and other countries should keep in mind that mediation might be the best mechanism for settling commercial disputes, especially since the pandemic is still not over.

SIMC Protocol

In search of an expedited, economical, and effective for resolving disputes during COVID-19 times, Singapore has come up with the SIMC (Singapore International Mediation Centre) Protocol. Originally, it was designed to become an addition to the existing legislation. Mainly, the Protocol is focused on mediating international commercial disputes without the need to spend big funds on legal proceedings since the economic uncertainty is still growing.

The local lawmakers stated that settlement agreements are enforceable under the Singapore Convention on Mediation. The Protocol would be in force till the end of June 2021. The goal of SIMC Protocol is to mediate disputes caused by the pandemic itself or by legislation implied because of the pandemic.

It is also important to mention the key features of the Protocol:

  • Mediation is conducted online;
  • Filing for mediation goes through a request form and includes a filing fee S$250;
  • SIMC organizes the mediation within 10 days, finds a fitting mediator;
  • The fees for mediation are calculated on the basis of the dispute values.

Do you need additional advice on settling a dispute in Singapore? Contact COREDO to receive quality recommendations on this topic.

In one of our previous posts, we have discussed the tendency of using the risk-based approach for effective AML compliance. But what is it exactly? Originally, it was introduced in 2000 by the Final Conduct Authority in the UK. The anti-money laundering industry adopted the principle and has been using it since. As to define this principle, the risk-based approach means conducting AML compliance activities while taking into account the risk perception, the customers’ and the organizations’ risk levels.

Why is it important?

Since each company and each client has a different risk appetite, it is not possible to apply the same processes of AML control for each case: this will not bring quality results. In fact, even institutions working in the same sector but coming from different countries do not have the same risk appetite. The reason being the unique economic structures and local AML legislation. Thus, the risk-based approach is necessary to use. Such an approach allows countries and companies to invent a tailor-made AML Control program suiting their needs perfectly while making sure to minimize risks effectively. It is no wonder that many local and global AML regulators keep recommending the risk-based approach.

The key principles

The first important aspect of the risk-based approach is the ability to accept the existing risk. In the beginning, a risk assessment must be made, then it should be examined to become the basis of the new compliance processes.

The risk-based approach tells us not to use the same Know Your Customer procedures for all clients since customers with high risk and customers with normal risk levels do not belong to the same category. To illustrate, Political Exposed People are considered high-risk. That is why Customer Due Diligence procedures are not sufficient for them. Cases like these demand Enhanced Due Diligence procedures.

Generally, companies need to analyze and monitor their data regarding AML compliance all the time. Yes, it might sound overwhelming, but AML solutions with AI support facilitate these tasks.

The main elements

Let’s observe the main measures recommended by the AML regulators:

  • Know Your Customer / Customer Due Diligence

KYC and CDD procedures are needed to be familiar with the true identity and intentions of the customer. These two measures can be truly called the crucial steps of effective AML compliance management. These procedures allow the financial institution to determine risks right in the first contact with the customer and then decide on the actions needed to be taken based on these risks. Risk analyses cannot be considered complete without customer due diligence.

  • Adverse media screening

It is necessary to search the customer’s name on different lists such as Sanctions or Watchlist to make sure there is no negative feedback about them. However, if there is any negative news on the customer, a company should reconsider cooperating with this client.

  • AML compliance officer

The AML compliance officer is a vital position in companies. Their task is to define money laundering threats and to be responsible for reporting suspicious cases to the authorities.

  • AML transaction monitoring

Once the client’s money laundering risk rating is determined, it serves as a basis for setting up the monitoring and restricting of real-time transactions. It is important to remember that the organization’s risk characterizations must be combined with the numbers of transactions to function adequately. Also, as large companies might have thousands of transactions daily, it becomes unrealistic to control all of them manually. Therefore, a perfect solution seems to be the AML Transaction Monitoring tool. The system monitors the transactions instantly and warns about any doubtful cases.

COREDO is here to develop AML compliance solutions that would be exactly perfect for your business. Obviously, we do not miss out on the effective risk-based approach.

So, why does one obtain an Authorized Electronic Money Institution or Authorized Payment Institution license in Europe? Well, if someone is seeking to provide payment services, money transfer services, electronic wallets, prepaid cards, or merchant service, it is necessary for them to apply for a license. The application needs to be submitted to a relevant regulator (for example, the Financial Conduct Authority in the United Kingdom).

The directive PSD2

The second Payment Service Directive (the EU Directive 2015/2366) governs the conditions of providing payment services that should be obeyed by businesses such as building societies, banks, payment institutions, e-money institutions, their clients. Mainly, the Directive aims at protecting customers and ensuring the safety and security of the payments. In addition, its application is supposed to encourage a competitive payments landscape.

Electronic money

According to another EU Directive 2009/110/EC, e-money is “electronically, including magnetically, stored monetary value as represented by a claim on the issuer which is issued on receipt of funds for the purpose of making payment transaction, and which is accepted by a natural or legal person other than the electronic money issuer”. To illustrate, we can take electronic wallets or prepaid cards as examples of e-money.

Payment services

The e-money EMI license provides an opportunity to offer the following services:

  1. Payment accounts

Debit cards or payment cards can be a great example of this type of service. Thanks to these accounts consumers can place funds or withdraw cash, use the account card for payment transactions. Moreover, customers can set up direct debits standing orders and transfer funds.

  1. Money remittance

Thanks to this service offered by the payment institutions, clients are able to transfer their funds internationally.

  1. Merchant services

This service type implies that the payment institutions can act as a master merchant and make merchants able to accept payments by card.

  1. Account information services

After receiving special permission from the user, a payment service provider can provide them access to the user’s account which is a place where customers can observe consolidated information about their accounts conveniently in one place.

  1. Payment initiation services

After receiving the user’s consent, the payment for goods and services can be initiated directly from the user’s account and does need to go through Visa or Mastercard networks.

Preparing for the license application

During this process, a company must demonstrate that its management, operational setup, and physical office are present in the European country where they are applying for the license. Also, it is necessary to have adequate resources such as sufficient financial funds for managing and operating the business. Additionally, the firm needs to demonstrate that its management and employees are suitable for conducting such activities. In order to ensure the safety of payments and prevent fraud, the firm must also show that it has proper IT systems and internal controls.

When it comes to the business plan, it must describe the payment activities and the market plan. Moreover, companies are required to make sure that their business lines of income, capital requirements, and other financial forecasts are calculated adequately.

COREDO is an experienced international consulting firm. We specialize in helping our clients obtain different kinds of financial licenses including EMI.

 

What is an amalgamation? It is defined as a process when two or more companies become a new entity. It is however different from a merger: in this case none of those firms survive as a legal entity. Amalgamation implies that the assets and liabilities of combined firms now belong to a totally new entity. It needs to be noted that this term, amalgamation, is coming out of use in some countries such as USA but is still commonly used in others like India.

Basics of amalgamation

Typically, amalgamations take place between several companies that share similar operations or the same business line. This also can be a tool to diversify and expand the range of services and activities conducted by a company.

The final result of amalgamation is a bigger company than the two or more companies were independently. Normally, the stronger transferee company absorbs a weaker transferor company to create a completely new entity. It is common for amalgamations to happen both between smaller and larger entities and between comparably big companies. The benefits coming from such a venture are a more solid and bigger base of customers and more assets in the ownership of a new company. It helps reduce operational costs thanks to operational synergy.

Advantages and disadvantages

The benefits of amalgamation include:

  • Acquiring cash resources;
  • Saving on taxes;
  • Eliminating competition;
  • Influencing the economies of large-scale operations;
  • Increasing shareholder value;
  • Improving managerial efficiency;
  • Achieving company growth and financial gain;
  • Reducing risk by diversification.

Nonetheless, we also need to take a look at the coin from the other side. Consumers and the marketplace, in general, can be harmed if an amalgamation cuts out too much competition and becomes a monopoly. In addition, sometimes amalgamation required the reduction of the workforce: after two companies become one some jobs are duplicated and therefore become not needed. Lastly, it is not only assets that become merged but also the liabilities which is generally looked at as increased debt.

Steps of amalgamation

The terms of amalgamation are decided among the boards of directors of each company entering the equation. At first, the plan is prepared and submitted in order to achieve approval. Usually, it is the local financial regulator of the country that approves such plans. Once the plan is approved, the new firm is allowed to create a new legal entity. Shares of the new entity are formed in this process and then they are given to the shareholders of the existing entities.

Key differences: amalgamation vs merger

The difference between these two processes is extremely fine since both of them imply a consolidation of multiple companies. Basically, amalgamations always result in an entirely new company as a rule. Therefore, all amalgamations can be considered mergers, yet not all mergers are amalgamations. Mergers can result in a new company or an existing one. Amalgamations are usually driven by all involved companies, while mergers are mostly pushed by the absorbing firm.

Specialists from COREDO are ready to answer any of your questions related to the topic of mergers and acquisitions. To arrange a personal consultation, please contact us by office telephone number or our email.

During the last seven years, the People’s Republic of China has been working on the creation of a blockchain-backed digital currency project. Now it is completed; the currency received the name Digital Yuan.

Defining Digital Yuan

This currency is supported by the state and is designed for tracking all movements of the currency. The currency was created in a specific way so that the state could watch closely all personal finance movements and purchase details. We still yet have to explore how Digital Yuan differentiates from other cryptocurrencies.

The Digital Yuan project

The project of the Digital Yuan has two phases: distribution and expenditure. At first, the People’s Bank of China (PBOC) will distribute the Digital Yuans to commercial banks whose task will be to pass the currency to consumers. In addition, a special service is to be made available for customers to exchange coins for Digital Yuan. Overall, millions of dollars in the form of digital currency were provided by the Chinese government to many cities. The process of the Digital Yuan distribution was performed via an app.

Differentiaing Digital Yuan and other cryptos

There is one main distinguishing feature when comparing Digital Yuan and other cryptocurrencies – its legal status. As it was stated, customers can use Digital Yuan as a payment method or position it as a legal tender.

Moreover, while usual cryptocurrencies do not have a centralized structure, Digital Yuan has one and it is state-formed. The Digital Yuan is controlled strictly and exclusively by the local government.

And lastly, standard cryptocurrencies are based on the principle of anonymity. Meanwhile, with Digital Yuan, the Chinese government will have access to monitoring all crypto activities in the country.

Benefits of Digital Yuan for China

  • Digital transformation

Companies and applications as WeChat are the best examples of digital transformation. Digital Yuan though does not need to transform as it initially enters the market in this status. This feature is helpful for the government to track the financial system which is easier than monitoring cash.

  • The participation of the unbanked population

Some members of the population do not have access to any banks. By using Digital Yuan they will obtain access to participating in the leading economy.

  • The higher status in the global economy

In addition to other benefits, the Digital Yuan will help the Chinese currency to have a better position globally. It will put the Renminbi into international reserve status. Although the US dollar now has an 88% share in the international economic network and the Renminbi only 4%, the situation may change as the new digital currency becomes popular among international traders.

Would you like to learn more about different types of cryptocurrencies or manage them? Contact COREDO for more details.

 

 

The importance of Know Your Client is truly undeniable for the financial sector. The control mechanism called Know Your Client (KYC) enables financial institutions to identify their client, check their financial and residency information, and then perform customer due diligence searches. Only after undergoing these procedures, the client can open an account. The main goal of KYC is to prevent money laundering and terrorist financing.

Just as many other sectors, the global pandemic became a trigger of digitalization in the field of finance, too. Nevertheless, the money laundering technics have also found new ways during the epidemic. This is why Financial Action Task Force (FATF) does not cease to emphasize the importance of Customer Due Diligence and Know Your Customer processes to stop criminal activities in the sector of finance. In addition, FATF is encouraging financial institutions to use a risk-based approach while taking those measures.

Let’s take a look at the manner of performing KYC and CCD activities advised by FATF and other financial supervisory organizations.

Simplified due diligence processes in low and medium-risk situations

In modern days, conducting financial activities has become significantly easier. No one needs to wait long lines at the bank anymore. What is more, the pandemic has us locked in our homes from where we process all our payments and numerous other transactions. Nevertheless, this convenience of the digital space brings many financial risks.

Due to these reasons, all companies and businesses digitize their processes and update their digital infrastructures. Meanwhile, they should not forget about implementing anti-money laundering measures such as KYC and CDD. What is key: due diligence does not only refers to high-risk activities but also to the ones that belong to the medium and low-risk categories.

Guiding clients through risk situations

As the popular belief has it, Customer Due Diligence is only performed before the customer opens a new account. However, this process should be carried out until the point when the client disconnects from the institution.

It is important to keep in mind the current world set up though: some clients can fail to provide the requested information due to sickness or lockdown. This is when the company should offer possible measures or postponements to the client and not end the relationship with them immediately.

COVID-19 regulations from FATF

In May of 2020, Financial Action Task Force introduced a Money Laundering and Terrorist Financing Law. The law encouraged businesses to inspire and support their clients while using digital identity and other innovative mechanisms more. This would be helpful with identifying customers more easily when they perform transactions. Also, the law stated that reporting organizations should store digital document copies temporarily.

Do you need assistance in performing KYC or CDD measures? Do you struggle with understanding AML conditions in your legislation? Contact COREDO to go through these challenges.

Not too long ago, in the end of 2020, a company OSL LTD has successfully received a license authorizing digital asset trade in Hong Kong. This is the first case ever a license of this kind was granted. The license gives the company the right to trade in virtual securities and also provide services that are completely automated. Moreover, OSL LTD will be able to start a platform for trading in digital assets in HK.

How Hong Kong regulates crypto activities

Thanks to the license, entities who hold it would be allowed to issue investment tokens and provide other services related to digital asset trading in Hong Kong. In 2019 the Securities and Futures Commission (SFC) introduced the new approach towards the licensing of digital asset platforms and also presented the new requirements.

The newly announced conditions mainly concerned the e-wallet insurance, stricter AML regulations, higher levels of customer awareness, asset segregation in customers’ ownership, and other controls. Although there were no novelties introduced that would be related to conventional asset trading itself, platforms that were trading in digital securities in Hong Kong encountered some new regulations.

Regulatory requirements for license holders

In order to be allowed to be a Licensed Operator, the platform must:

  • Receive written approval from the SFC to offer new products and services such as securities and non-securities tokens;
  • Send business reports to the SFC by the end of the second week of every month (additional information upon request must be provided, too);
  • Invite an independent company for conducting a review of the platform’s business operations and submit a report to the SFC every year.

More requirements exist that are aimed directly on platforms’ activities:

  • Financial resources – an operator with a license is required to keep liquid assets of the equivalent of minimum 12 months of its operating expenses;
  • Due diligence – a Licensed Operator must conduct due diligence on every virtual asset before it is admitted to the platform for trading;
  • Prevention of money misconduct – a Licensed Operator needs to monitor, prevent, and report abusive or manipulative financial activities, and many other conditions.

Overall, the regulation in the crypto space has a positive influence on the industry in Hong Kong since it provides confidence and certainty to the investors. Thanks to the new opt-in licensing mechanism introduced by the SFC, investors are able to choose between regulated and non-regulated platforms. Resultingly, Hong Kong is becoming one of the leaders in regulating crypto platforms in Asia.

Are you planning to obtain a license and become a Licensed Operator? Contact us in COREDO to receive advice and assistance during the application process.

In Malta, the MFSA decided to conduct mystery shopping on local banks in 2018. The goal of the exercise was to collect the original experiences from a personal visit to a bank aimed at opening an account. The exercise was supposed to allow the supervisors who posed as real customers to test bank processes and services in real-life situations. In fact, the experiment showed that many of the banks’ operations in Malta and Gozo did not respond to the EU regulations related to the process of account opening. The main point that was in breach of the rules was the fact that the clients did not receive sufficient information about the variety of services offered by a banking institution. The outcome of the exercise was the MFSA’s decision to repeat the operation to see whether any improvements took place.

After the experiment in 2019, the MFSA acknowledged significant improvements in the level of services compared to earlier findings, yet the regulator introduced more enhancements that needed to be implemented.

Improvements

The latest exercise conducted showed that the option of Payment Account with Basic Features (PABF) was offered to the customers in addition to other available account types when a client arrived to open a new bank account. The aspect of bank services was considered a big improvement compared to the findings of 2018. The supervisors also noted that they had noticed the MFSA promotional information in visible places of the branches, a helpful detail for both clients and bank representatives.

The 2019 exercise demonstrated that branch representatives were in a better form when it comes to informing customers about PABF. This showed that the additional training and the introduction of supporting materials took place. Some credit institutions actually took the initiative to create their specific tools dedicated to providing clients with sufficient information thanks to additional leaflets about different accounts, tariffs, charges. Nevertheless, the regulator had found some weaker spots that needed to be improved.

Weaknesses

Although the exercise was considered a positive experience in general, some weaknesses from the 2018 experiment reoccurred the next year, as well. Let us present a summary of them.

Knowledge and training level of branch representatives

Some cases during the exercise demonstrated an insufficient level of knowledge shown by the branch representatives. Some employees responsible for the distribution of products offered by the credit institution failed to explain the basic aspects of banking functions such as works or transfers while communicating with a customer. This point is viewed as a key one in the circular published by the MFSA.

Charged tariffs

Most of the representatives did not offer written information considering the fees applied by the credit institution. The tariff information on the bank’s products and services was only provided upon the client’s request. In addition, the MFSA pointed out that the Tariff of Charges must at clients’ disposal on the bank’s website.

Information on the PBAF

The latest experiment showed that the payment account with basic features was presented much more clearer in many branches, still, some of the credit institutions only offered it after it was mentioned by a client and in some cases failed to provide correct information about the PBAF, for example, some representatives could not correctly inform customers about the minimum / maximum balance requirements or the time of processing.

Does your business or financial institution seem not to run smoothly? COREDO helps firms to debug and improve internal processes to make them the most suitable and also in accordance with local legislation.

In finance, risk management is an activity conducted to analyze, identify and afterward accept or mitigate the uncertainties that come inseparably with investments. The key task of risk management is to analyze the investment decision and attempt to quantify the potential losses. After that, the investor can take appropriate action or stay passive based on the investment objectives.

Return and risk cannot be separated. The higher risk level can be for example seen when investing in real estate in highly inflationary markets or emerging-market equity. By the way, we can quantify risk both as an absolute or a relative value. Overall, investors become capable of understanding the opportunities, the costs, and the trade-offs once they have a proper understanding of risk.

Risk management explanation

The world of finance is full of risks. Thus, every activity then is accompanied by risk management. It occurs when money managers choose portfolio diversification strategies when banks perform credit checks prior to issuing a credit when stockbrokers use different financial instruments such as futures or options. In all these and many other cases, risk management is aimed at handling a risk effectively.

When risk management is performed inadequately, the situation can become dangerous for those engaged in it whether it comes to companies, economies, or individuals. As an example, we can take the subprime meltdown of 2007 which put the start to the Global Recession. This situation was a result of bad risk management.

As human beings, we have a tendency to look at risk from a negative point of view. Yet in the field of investments, the desired performance is always out of reach if one is not prepared to take a risk. The general meaning of risk is any kind of deviation from what is expected. This deviation can be represented by a relative value or an absolute number.  

Although the deviation could be positive or negative, most investing experts agree that it means a degree of the desired result for the investments. Therefore, it is generally accepted that higher returns are connected with higher risks that in their turn come within increased volatility. Every investor accepts different levels of volatility based on their risk tolerance and investment objectives.

Measuring risk

Standard deviation belongs among the most common absolute risk metrics and expresses a statistical measure of dispersion around a central tendency. It is calculated by looking at the average investment return and finding its average standard deviation after the same time period. This metric is important because it enables investors to quantify the risk numerically. At last, if the investors decide that they tolerate the evaluated risk, they invest.

Another metric is focused on behavioral tendencies and aims at measuring a drawdown which can be defined as a period when an asset’s return tends to be lower compared to the previous level. When a drawdown is measured, investors should pay attention to:

  • How bad the negative period is;
  • How long it lasts for;
  • How often such periods take place.

This metric is called beta. It helps measure the volatility on the market or systemic risk of a certain stock in relation to the whole market.

However, market or systematic risks are not the only factors that impact a portfolio’s return. Returns are additionally influenced by many other factors, not related to market risk, so it is not enough to adjust the returns by the beta results. Some investors employ active strategies seeking excess returns. Going for excess returns, managers become exposed to alpha risks. That said, alpha can be defined as a measure of excess return.

It is useful to seek assistance while conducting highly important investment decisions. COREDO experts are here to perform risk management activities for you.

Some merchants tend to be hesitant about accepting payment in digital currencies and they have their reasons. Mainly, the reason for this attitude is the fact that today many coins become popular in a short time but then disappear as quickly. Therefore, merchants do not have any guarantees that customers would be still using that particular coin in some period of time. Secondly, the field of cryptocurrency is known to be volatile; this applies even to the biggest crypto representatives.

However, customers of the modern era are willing to use cryptocurrencies for their shopping. That is why it can be expected that the shops will lastly respond to this demand. The disputes around this topic keep appearing. They mainly discuss whether and how could traditional businesses incorporate the new digital currency way of payment into their payment systems. Businesses also need to decide which coins would work the best for them.

Why accept cryptocurrencies

Firstly, allowing the customers to choose the method of payment that is convenient to them is just smart business. It surely would be an investment into the future as the popularity of digital currencies does not seem to cease.

Secondly, big credit card companies such as Mastercard or American Express charge transaction fees that usually vary between 1,55% and 3,5%. When it comes to cryptocurrencies, they also charge transaction fees in many cases, yet those are rarely higher than 0,5% or 1%.

By the way, cryptocurrency transactions have almost instant speed. Faster processing time helps merchants control cash flow better and avoid the need of waiting to get paid.

Bitcoin

Bitcoin holds several leading positions. First of all, it is undoubtfully the leader of digital currencies and has the most known name. Also, it has got the largest market cap. But what is important for this post in particular, bitcoin is becoming the leader in traditional shops.

Probably the most important reason why bitcoin would be a good option for a store to choose is that it is the most popular digital token available. Thanks to that shops could be sure that a large pool of clients owns this coin. This is given by the momentum of bitcoin and its brand recognition.

Altcoins

Compared to bitcoin, this large group of cryptocurrencies often flies under the radar. Nonetheless, altcoins have compelling reasons to be adopted, too. Altcoins provide cheaper and faster transactions than bitcoin for customers who do not want to risk spending more than they need to for mall purchases. The thing is that bitcoin has the highest transaction fees, and altcoins tend to process the transaction for a fraction of what BTC offers. The speed of transactions provided by altcoins also tends to be faster. Yet it should be taken into account that these numbers change often.

To sum up, accepting digital coins by stores gradually becomes a necessity rather than a specialty. Customers show interest in using this payment method for many reasons, and the businesses basically have no choice but to adapt to this demand. The answer to the dilemma of choosing which types of cryptocurrency businesses should adopt seems to be simple: if possible accept as many types as possible; it will most probably turn out to be a useful investment.

Do you own a business and start thinking about adopting the cryptocurrency payment method into your payment system? COREDO provides professional consultations on this topic.

 

Accretion can be defined as a gradual growth of assets and earnings which can be given by several reasons: mergers or acquisitions, business expansion, company’s internal growth. From the financial point of view, accretion is the collection of the additional income that an investor is planning to receive after they have bought a bond at a discount and are holding it until maturity. Zero-coupon bonds and cumulative preferred stock are the most common examples of financial accretion.

In corporate finance, thanks to the accretion additional value are created through a transaction or organic growth. To illustrate, accretion happens when after the transaction acquiring assets are expected to grow in value. It also occurs when assets are purchased at a discount or when their price does not reach the perceived current market value (CMV).

Buying at a discount means acquiring bonds below their face or par value. Respectively, buying at a premium refers to acquiring bonds above their face value. In finance, the cost base is adjusted from the purchase price (discount) to the expected redemption price at maturity by accretion. When a bond is bought for an amount of 70% of the face amount, the accretion makes 30%.

Bond accounting factorization

When it comes to bonds, the following principle applies: the higher the interest rates, the lower the value of existing bonds. This means that as the interest rates increase, bonds on the market are losing value. Since all bonds expire at the face value, an investor who buys a bond at a discount earns more money, which is recognized by accretion.

Bond accretion in finance

Divide the discount by the number of years in the definition you would get the rate of accretion. The interest earned on zero-coupon bonds would not accumulate with time. Although the bond’s value rises at the agreed-upon interest rate, it must be kept for the agreed-upon period to be cashed out.

Let’s consider a situation when an investor buys a bond on $1,000 for $800 that matures in 5 years. We see an additional income of $200 that must be recognized by the investor between the date of the bond’s purchase and its maturity date. The $200 is applied as a credit on the bond portfolio when the bond is bought. During the next 5 years, gradually every year a part of $200 is reclassified to the bond income account. By the maturity date, the whole $200 is moved to the income.

Earnings accretion in accounting

Earnings available to common owners measured by average common stock outstanding is the earnings-per-share (EPS) ratio. In this case, the accretion corresponds to a rise in a company’s EPS when an acquisition occurs.

Are you looking for quality advice in the field of corporate finance? Experts from COREDO are prepared to help you determine whether your next venture could be potentially profitable and viable.

 

Just as many other sectors, finance has been immensely impacted by the pandemic. In order to reduce the financial consequences of pandemic processes and working from home, banks took action which resulted in compliance teams caring even more responsibility than before.

The financial pressure came over the compliance teams that were still stuck in the traditional technology. During the period of COVID-19, it was difficult for them to keep pace with the new developments. Resultingly, the compliance teams of this kind showed numerous delays while implementing effective customer due diligence conditions.

This situation demonstrated the need to build the strategies for 2021 strictly by using current information and a risk-based approach. While taking into account this attitude, let’s discuss the 2021 trends that are crucial for banks and other financial institutions.

More transparency with UBO laws

The overall effort for the culture of transparency also makes Ultimate Beneficial Owner laws clearer. Thanks to this transparent momentum money laundering victims can be aware of the fraud flows. The updated laws will provide clearer visibility into financial transactions. Banks, regulators, or governments could now implement better customer due-diligence checks and, therefore, reduce money laundering.

Yet not all countries are willing to implement the new concept. It is fair to say that we are about to observe tension rising between the countries that adopt UBO laws and the ones that do not. Countries that choose to decline UBO registrations, such as Switzerland, are anticipated to have growing rates of financial crimes.

2021 and AI

The pandemic obliges compliance officers to manage the remote compliance team and many other people. During these times, it is important to create a remote and cohesive digital infrastructure to pass the security and compliance conditions successfully.

Businesses must start taking necessary action steps to reconsider their compliance solutions and policies for them to respond to the company’s current needs. One of the crucial aspects is the update of the applications that would take into account the remote working.

Artificial intelligence is the answer to these updates. Even though it could probably never replace human beings, AI reduces the need for human approval and accelerates multiple aspects of AML.

Financial crimes in digitalization

Without a doubt, the global pandemic had a hugely negative impact on so many industries. However, it has actually promoted digital banking services. Meanwhile, the criminals have also been adapting to the news of the digital world.

At this moment, financial criminals are using a new method to access the financial system. They focus on virtual currencies since the interest in crypto money and other digital currencies has been significantly increasing. Accordingly, stricter restrictions need to be created for preventing money laundering in this sector. Therefore, in 2021 all financial institutions including virtual asset providers will be required to adopt KYC requirements.

COREDO offers complete AML and due diligence services to its clients. We will help you ensure the full compliance of your business with AML / KYC requirements in accordance with your local legislation.

When starting a business, opening a business bank account should be one of the first steps to take, because keeping separate records is just not enough. Business owners may choose then whether to keep their business and personal accounts in separate banks or to opt for one bank with competitive accounts for both areas of finances.

While today’s post might be a more relevant topic for smaller businesses and start-ups, its key ideas apply to every company. The key idea is that it is crucial to keep personal and business finances separate. Let’s define why it is so.

Accurate bookkeeping

It can seem like an opportunity to save money when you start a business and not open a business bank account. However, it is important to take into account the time and energy it takes to keep track of which pile each transaction belongs to – your personal or business transactions. The number of entries of regular personal accounts can be overwhelming, so what happens then once the volume grows with the business transactions.

During tax season you must be prepared to separate and document all the transactions in great detail. While once you have a separate business account, you are able to just forward a clean record to your accountant. Keeping all the invoices and receipts in line with the bank statement entries brings you in perfect shape for the tax time.

Clear audit

Usually, the government revenue services do not inspect personal finances unless there is a specific premise. Yet they do audit businesses of all sizes. The process becomes much smoother as long as you can provide a clean record through a separate business account and all invoices and expense receipts for a backup. Instead, the audit by the revenue services can become a nightmare with mixed personal and business finances.  

The requirement for business incorporates

If your business is incorporated, it is officially required that you need to open a separate business bank account. This rule applies for example in the US and the UK. No matter if it is a partnership, a corporation, once a business becomes a legal structure, it needs a business account. Moreover, in many countries, all legal types of businesses are required to have a business bank account in order to apply for a business loan.

Professionalism

Does your business need to accept bank card transactions or you have a retail business? You need a business bank account then. Likewise, when you write your check to suppliers, they and also the revenue services see that the checks are coming from a business. From this point of view, keeping your personal and business finances separate gives your organization a professional edge. Moreover, when personal and business expenses are not separated into two accounts, you can be personally liable for the actions of the business.

Of course, if you are freshly starting your business, opening a business bank account can be unfamiliar and overwhelming. Do not worry! COREDO supports opening various types of bank accounts at European banks.