‘Already Live’: Signature Bank Is Moving Millions on a JPMorgan-Like Private, Dollar-Backed Cryptocurrency

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‘Already Live’: Signature Bank Is Moving Millions on a JPMorgan-Like Private, Dollar-Backed Cryptocurrency

While crypto-land is abuzz about JPMorgan’s plan to move U.S. dollars around via blockchain, a smaller New York bank has already been doing this for nearly two months.

Since launching at the start of the year, Signature Bank’s blockchain-based Signet system has on-boarded more than 100 clients who are using it to send each other millions of dollars a day, 24/7, bank executives said.

Joseph J. DePaolo, president and CEO at Signature Bank, told CoinDesk:

“We can say there are trades going on in the millions some days and tens of millions other days and I would say the number of clients we have is in the triple digits.”

Signature is one of the few banks in the U.S. that will provide deposit accounts to cryptocurrency startups, a group that also includes fellow New Yorkers at Metropolitan Bank and Silvergate Bank in San Diego.

But while these clients were the first group to adopt Signet, the bank says non-crypto businesses are signing up as well.

In addition to the previously announced American PowerNet, an independent electrical power trading firm that made Signet the payments platform for its renewable energy customers, DePaolo said Signature is bringing on two other “ecosystems” where rapid movement of money and property is important.

“We will shortly onboard a substantial cargo ecosystem and wholesale diamonds,” he said, declining to name either organization.

He also said Signature is in talks with a title insurance company. Explaining why such an entity would be interested in real-time payments, he said:

“If you’ve ever been involved in a commercial real estate closing, usually all the lawyers are sitting around eating lunch waiting for the wire transfer.”    

Signet vs. JPM Coin

With $45 billion in assets, Signature Bank is less than 2% the size of JPMorgan, the largest bank in the U.S. So it’s perhaps understandable that DePaolo and Signature chairman Scott Shay clearly took some pride in pointing out that JPM Coin, announced Thursday, is remarkably similar to what they already have.

A rather subtle similarity between Signature’s blockchain system and JPM Coin is that both run on private variants of ethereum technology.

In the case of JPM this is Quorum, a data privacy-oriented fork of the ethereum public blockchain code. The Signet platform, built in conjunction with trueDigital, is a proprietary blockchain which also uses ethereum as its base.

Another commonality is that both involve stablecoins, with real-world dollars deposited at the bank in exchange for tokens that clients can send each other via a distributed ledger, then redeem again 1-to-1 with the institution.

The goal of replacing wire transfers with a blockchain is also reminiscent of crypto-friendly rival Silvergate Bank’s SEN system that instantly connects to its clients 24/7.

But Signature chairman Scott Shay claimed the broad uses of Signet sets it apart.

“If you happen to be an exchange [SEN] is useful, but we developed Signet to be tailored to a wide variety of industries. It’s not crypto exchange-focused,” he said.

Returning to JPM Coin, Shay pointed out that Signet has already received approval from the New York State Department of Financial Services (NYDFS). By contrast, JPMorgan said in its announcement that as it gets ready to launch the new product, “we will actively engage our regulators to explain its design and solicit their feedback and any necessary approvals.”

Shay concluded:

“The difference is we are actually out there doing this.”   

Scott A. Shay image via Signature Bank

Ripple Offered Multimillion-Dollar XRP Bonuses to Lure Top Tech Talent

Silicon Valley fintech startup Ripple goes out of its way to say it didn’t create the cryptocurrency XRP. But that doesn’t mean the company doesn’t rely on its vast reserves of the token when courting prospective hires.

One engineer who asked to remain anonymous showed CoinDesk a recruiting email from late 2018 that promised an XRP package from Ripple of worth up to $3 million, in addition to a generous salary offer.

According to the company’s LinkedIn, Ripple is looking to hire more than a dozen engineers and technical experts, including a new head of engineering for its xCurrent project, which aims to rival the legacy messaging network SWIFT at the center of the current global payments infrastructure.

Salaries may vary according to seniority, but based on conversations with two prospective recruits, XRP bonuses for engineers generally range in value from $1 million to $6 million, according to the company’s own evaluation. As of press time, XRP is trading at roughly $0.30 per token.

(Ripple declined to comment on bonus packages, including whether they are still being offered in 2019.)

One former Ripple employee, who asked to stay anonymous for fear of legal retribution, told CoinDesk he never heard of such XRP bonus packages before 2017. However, he also noted generous equity deals are standard in Silicon Valley.

In September 2018, one prospective engineering recruit, who asked to remain anonymous because he works at a company that might someday collaborate with Ripple, told CoinDesk that he also received an email from Ripple that stood out because it offered lucrative XRP packages, supposedly worth $3 million to $6 million. Both engineers currently work at top-tier tech companies in Silicon Valley, albeit the second programmer at a crypto company (thus the higher offer).

Additionally, the email claimed the global market cap of “its [Ripple’s] coin” was worth $48 billion. According to CoinMarketCap, on the day the email was sent XRP’s global market cap was closer to $13.3 billion. The prospective engineer recruit told CoinDesk he found this discrepancy alarming.

Speaking to the unusual bonus offering that caught his eye, the anonymous engineer said Ripple is “a very unpopular entity in the crypto sphere among technologists,” so he believes the company is “forced to go above and beyond to attract engineers” during the bear market.

Bear recruiting

A Ripple representative told CoinDesk the company currently employs roughly 90 engineers and technology experts, with plans to hire “aggressively” in order to expand its software as a service offering plus support RippleNet mobile wallets and payout processes.

This is part of an ongoing hiring spree. The company representative said that Ripple added 100 new employees across the company in 2018, adding:

“We move fast to acquire the best talent out there – especially considering the highly competitive nature of other startups who want to hire similar candidates.”

Former Ripple community liaison Jon Holmquist told CoinDesk that developer salaries and compensation are ballooning across Silicon Valley. As such, Holmquist said any hiring challenges might be related to the broader market downturn, not Ripple in particular.

“No one wants to join crypto for the first time during a bear market. I think that’s more of an industry-wide problem,” Holmquist said. “There’s always a shortage of talent.”

The anonymous engineer disagreed, considering the other types of recruiting emails he routinely receives.

“This is for a devops role, which is generally harder to find, but these are really big numbers,” the anonymous engineer said, referring to both the salary and XRP bonus package. “It comes across a little bit desperate.”

Serial entrepreneur Dave Schukin tweeted last June that the company offered him more than $175,000 as a base salary, which appears consistent with the other offer shared with CoinDesk.

In terms of what Ripple is looking for, the company representative said they are recruiting software experts with Java or C++ language expertise and an ample dose of teachability.

“We are not necessarily looking for blockchain experts – we can always teach domain-specific expertise,” she said. “We also think it’s important that our engineers carry themselves with humility and are able to think creatively about how to solve hard problems.”

Ripple image via Shutterstock

East to West: Huobi Launches US Dollar Gateway for Global Crypto Traders

In 2019, the Singapore-based exchange conglomerate Huobi Group is prioritizing Wall Street partnerships for the first time.

Since it was founded six years ago, Huobi Group has come to dominate several global crypto exchange markets, thanks in part to its popularity among deep-pocketed Chinese traders. According to company officials, Huobi Group has managed $1 trillion in accumulative turnover, or annual net sales.

Now the U.S.-based sister exchange HBUS – a separate entity primarily funded by Huobi Global CEO Leon Li – is leveraging its global network for an unprecedented push into North America that’s beginning with a partnership with Prime Trust, a Nevada trust company, that will provide fiat deposit and withdrawal services for its exchange users.

As part of the effort, Huobi.com will now allow USD-to-crypto trading for bitcoin, ethereum and the dollar-pegged stablecoin tether, with a $100 minimum.

“Huobi’s launch is very exciting,” Prime Trust CEO Scott Purcell told CoinDesk. “They are a great company and we are thrilled to work with them.”

HBUS CEO Frank Fu told CoinDesk this is only the beginning of HBUS’s U.S. partnerships, with others in the works. Fu said:

“Once we establish partnerships with our institutional clients and put in place the required regulatory and compliance structure, we should be able to offer innovative products and financial services to larger audiences, such as … potential ETFs and derivatives.”

Even if those partnerships don’t pan out, diverse crypto options with fiat liquidity could be a game-changer for HBUS, which Fu said has roughly 60,000 U.S.-based account holders, in addition to a few dozen Chinese users on-boarded through a partnership with Huobi Global.

Speaking to the dozens of cryptocurrencies under consideration beyond the current offerings, which include bitcoin, litecoin, ethereum, ethereum classic, bitcoin cash and tether, HBUS’s U.S.-based chief compliance officer, Megan Monroe-Coleman, told CoinDesk:

“We developed a comprehensive due-diligence process to review new token projects. … We’re really excited to increase both the volume of tokens and the uniqueness of those assets.”

Monroe-Coleman says the company documents the process thoroughly to avoid listing “any token projects that could possibly be classified as a security under U.S. securities laws.”

As it gears up to add new trading pairs, HBUS is also busy updating its onboarding process for Chinese users, with features like Chinese-language know-your-customer (KYC) procedures.

“We could be a distribution channel, the gateway connecting the West to the East,” Fu told CoinDesk. “A lot of the U.S. financial products and services are highly regarded, so we want to be able to be able to offer those products and services to our investors globally as we’re able to set up the right compliance processes.”

Compliance challenges

Huobi’s new global asset flows could indirectly give Chinese traders the ability to convert yuan for cryptocurrency through Huobi Global’s OTC desk, then send the cryptocurrency to the U.S.-based exchange to cash out in USD.

Lester Li, Huobi Global’s head of London operations, told CoinDesk he estimates between 50 and 200 of the global platform’s institutional clients are companies run by Chinese founders but based abroad in order to avoid China’s stringent compliance standards and capital controls.

According to Canadian attorney Christine Duhaime, who specializes in anti-money-laundering law and blockchain technologies, China’s regulations forbid its citizens from moving more than $50,000 annually per person, without seeking special permission. She told CoinDesk:

“If you’re a company trying to take out bitcoin, you can take out no amount without getting permission from the government.”

In order to navigate this complex regulatory landscape, HBUS plans to triple its employee count to around 150 in 2019, with an emphasis on compliance and teams focused on institutional partnerships.

Huobi Global already has a banking partner in Australia, Goldfields Money. Fred Schebesta, a major shareholder in Goldfields, told CoinDesk that the institution deals with such China-specific compliance issues by only serving Chinese expats, not current residents subject to Chinese capital controls.

Plus, HBUS’s Monroe-Coleman told CoinDesk that institutional accounts undergo rigorous KYC checks, including all individuals who own more than 25 percent of that entity, in accordance with the Bank Secrecy Act.

HBUS’s partner, Prime Trust, is not itself a bank, but it has previously said it has relationships with FDIC-insured institutions such as U.S. Bank and Pacific Mercantile Bank. (This is clearly a sector Prime Trust intends to expand, given how the trust recently eliminated custody fees for digital assets.)

Separately, Huobi’s OTC desk works with Signature Bank in New York, but the relationship is strictly at the wholesale level, as the institution did not want to handle the exchange’s retail customers, a person familiar with the situation said.

Beyond Chinese users, the U.S.-based exchange aims to be a compliance-centric portal for Huobi Global’s estimated 13 million users worldwide.

“We will start from the U.S. but our vision is to provide a global services platform,” Fu said. “A lot of the U.S. financial products and services are highly regarded, so we want to be able to be able to offer those products and services to our investors globally as we’re able to set up the right compliance processes.”

Ian Allison contributed reporting.

HBUS team in San Francisco image courtesy of Huobi