Japanese Finance Giant Nomura Invests in Smart Contract Auditing Startup

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Japanese Finance Giant Nomura Invests in Smart Contract Auditing Startup

Japan financial group Nomura has invested in Y Combinator-backed smart contract auditing startup Quantstamp.

U.S.-based Quantstamp announced Wednesday that it is setting up a subsidiary in Japan following a “significant” investment from Nomura Holdings and Tokyo-listed internet group Digital Garage.

Chuzaburo Yagi, senior managing director in charge of innovations at Nomura Holdings, said:

“As blockchain technology is adopted in the financial world, smart contracts will play an increasingly important role. Security assurances through auditing and certification will become increasingly indispensable.”

Quantstamp’s new limited liability subsidiary in Japan aims to help the country’s startups and corporations in using “secure” blockchain technology. Smart contracts are self-executing pieces of code that can be implemented on blockchains to enforce specific sets of rules.

The market for smart contract-based applications is “strong” in Japan and will “only be growing,” said Quantstamp’s co-founder and CEO Richard Ma.

Founded in 2017, Quantstamp provides an automated tool for developers and users that helps “identify and secure vulnerabilities” in smart contracts, as well as auditing services for large-scale blockchain projects aimed to ensure security. It joined seed accelerator Y Combinator back in 2017.

Quantstamp said its services have so far been used to secure more than $500 million of transaction value.

Last May, Nomura partnered with cryptocurrency wallet startup Ledger and investment firm Global Advisors to explore building a digital asset custody solution.

While, in January 2018, Digital Garage subsidiary Crypto Garage announced that it is working with bitcoin infrastructure startup Blockstream to test the issuance of a Japanese yen-pegged stablecoin.

Nomura image via Shutterstock

Japan: BOJ’s Tankan shows large manufacturer DI improves less than expected – Nomura

Takashi Miwa, Research Analyst at Nomura, notes that BOJ’s March Tankan survey shows that improvement in large manufacturer business conditions DI was smaller than market consensus forecast.

Key Quotes

“The BOJ’s March 2017 Tankan showed the current business conditions DI for large manufacturers at +12 and the current business conditions DI for large non-manufacturers at +20, both up two points from the December 2016 survey. The improvement in the DI for large manufacturers was smaller than the median Bloomberg consensus forecast of a four-point improvement, while the improvement in the DI for large non-manufacturers slightly surpassed the consensus forecast of a one-point improvement. It appears that many large manufacturers are still cautious regarding the overall environment for exports, with the average forex assumption for FY17 set at a somewhat conservative USD/JPY 108.43, and we think this may have held back the improvement in the business conditions DI.” 

Results not inconsistent with an export-driven economic recovery

At the same time, business conditions DIs for medium-sized and small manufacturers showed comparatively sharp improvement, up five and four points respectively from the December 2016 survey, and we think these figures may reflect the improvement in exports and production activity more straightforwardly. We thus do not think the results of the Tankan overall are inconsistent with the view that the Japanese economy is headed toward a recovery driven by exports.”

Results suggest economic recovery could promote reacceleration in capex

Capex plans for FY17 (including land purchases, excluding software investment), came in at -1.3% y-y at companies of all sizes. While it is important to take into consideration the sharp downward revision to FY16 plans (-1.4ppt), this figure is slightly higher than the -4.8% reading for FY16 plans as of the March 2016 survey, so we think these can be viewed as relatively strong initial capex plans.” 

“While we think this Tankan shows lingering caution in the business condition assessments of large manufacturers, we see the results as consistent with our view that an export-driven economic recovery should promote a reacceleration in capex heading into FY17.”

(Why?)

E-Commerce Giant Rakuten Wins License for New Crypto Exchange

Japan’s top financial watchdog has granted a license to a cryptocurrency exchange being relaunched by e-commerce giant Rakuten.

The country’s Financial Service Agency (FSA) announced the news Monday, stating that the new exchange, Rakuten Wallet, is now registered with the Kanto Local Financial Bureau as a virtual currency exchange service provider under the country’s Payment Service Act. Rakuten also confirmed the news in a separate statement.

Rakuten Wallet is a wholly-owned subsidiary of Rakuten and replaces an exchange called Everybody’s Bitcoin Inc. that it acquired for $2.4 million last August.

The firm rebranded the exchange offering to Rakuten Wallet on March 1. In its announcement, Rakuten also said it is ceasing the older service at the end of this month and that users can sign up for the new Rakuten Wallet service from April.

The firm also said Everybody’s Bitcoin had been operating as a “deemed” cryptocurrency exchange provider since its launch in March 2017, having applied for a license at the time. The firm received a business improvement order from the Kanto bureau last spring, and has “officially restructured” its management system and upgraded internal systems in order to receive the license for the rebooted entity.

The FSA at the same time issued a license to another exchange called DeCurret, which says it will provide spot trading of four cryptocurrencies from April 16 in Japan. New accounts start opening from March 27. DeCurret’s shareholders include notable firms such as MUFG Bank, Nomura Holdings, Internet Initiative Japan Inc., Daiwa Securities Group and the Dai-ichi Life Insurance Company, among others.

In January, the FSA also granted license to Japanese crypto exchange Coincheck, which suffered a $530 million hack early last year. With the two new approvals, the number of licensed cryptocurrency exchanges in Japan now stands at 19, according to the FSA announcement.

Rakuten image via Shutterstock

IBM Quietly Enters Crypto Custody Market With Tech Designed for Banks

IBM is coming to the crypto custody space.

Later this month, Shuttle Holdings, a New York investment firm, will launch the beta version of a custody solution for digital assets built on IBM’s private cloud and encryption technologies. The companies won’t be storing cryptocurrencies and tokens themselves, but offering tools for others to do so.

Potential users include banks, brokers, custodians, funds, family offices and high net worth investors who want to do self-custody, as well as exchanges, Brad Chun, Shuttle’s chief investment officer, told CoinDesk.

“We have a list of selected clients that we are launching limited service with this month,” Chun said. The service is “not open to the public yet and there is a wait list to get into our beta.” 

IBM showcased the solution at its “Think 2019” conference last month in San Francisco, where Nataraj Nagaratnam, the tech giant’s CTO and director of cloud security, called storage of crypto a prime use case for Big Blue’s cloud. 

“What better example than taking a financial technology that is changing the world. Look at digital assets; how do you secure the data? … [This is] top of mind for a lot of people in the financial industry,” Nagaratnam said, before welcoming Chun onstage.

When contacted by CoinDesk, IBM referred most questions to Chun. But Rohit Badlaney, director of IBM’s “Z As a Service” cloud solution, talked up IBM’s involvement in the forthcoming Digital Asset Custody Service (DACS).

“For DACS, the on-premise pervasive encryption capabilities offered by IBM LinuxONE was a key differentiator in choosing IBM as the most secure platform for their offering,” Bedlaney told CoinDesk through a spokeswoman.

Slide from Brad Chun’s presentation at IBM’s Think conference in February

The move suggests IBM is wading deeper into the digital asset space, after developing the Hyperledger Fabric private blockchain for enterprises and more recently getting involved with cryptocurrency through its work with the Stellar Foundation.

While crypto custody was once the preserve of wallet providers and crypto exchanges, the promise of institutional investment entering the digital assets space has prompted a race to come up with safe, industrial-grade solutions that are also familiar in terms of usage to these large players.

Not cold storage

The custody service that Shuttle and IBM are offering differs greatly from the cold storage solutions used by most crypto custodians, where the private keys are held in a device not connected to a network.

While these air-gapped arrangements have traditionally been thought of as the best way to reduce attack vectors, “from a technology standpoint, it sounds a little oxymoronic,” Chun in his presentation.

Enterprises, he noted, want to be able to connect to their customers and to have data and assets held in a readily available, yet secure setting. (Getting assets out of cold storage can be something of a headache.)  

Instead, Chun said IBM Cloud has created some interesting features that enabled Shuttle to build a system that is “just as secure, if not more secure” than a simplistic cold storage wallet solution. 

As such, the solution is built on a hardware security module (HSM), a kind of lockbox that safeguards and manages digital keys in a tamper-proof environment.

He later elaborated to CoinDesk:

“There are always trade-offs between security and efficiency, but we do not utilize a traditional cold storage system. Instead, we keep keys at rest encrypted in multiple layers as data blobs so that an organization can store these backups using their pre-existing disaster recovery and backup processes and media.”

During his presentation, Chun said this combination of availability and security means the IBM Cloud solution is better equipped for a digital asset-laden future.

“Once we have this critical layer that’s highly available and secure, then all businesses can start custodying digital assets – not just cryptocurrencies; we mentioned real estate, we mentioned identity,” he said.

As far as what flavor of HSM Shuttle uses, Chun told CoinDesk the solution was HSM-agnostic.

We focus on the entire solution, not just the HSM. If the HSM offering from Gemalto is better than what we are using, I would be happy to talk to them and incorporate them into our plans. IBM has an HSM we are using but we can easily switch it based on customer needs and demands,” he said.

Cold storage vs. HSMs

Stepping back, opinions differ over HSMs versus traditional cold storage and the putative trade-offs between security and efficiency, in relation to managing crypto assets.

With cold storage solutions, a human has to be involved to access the assets, which can take anywhere from an hour or two to as long as 48 hours. HSMs, by contrast, rely on a purely electronic process and are therefore much faster.

IBM would not be alone in providing HSM solutions for digital assets. Last week, Switzerland’s Crypto Storage AG announced its customized HSM-solution would be rolled out to online bank Swissquote.

Other high-profile HSM initiatives include the Komainu partnership between hardware wallet provider Ledger, Gemalto and Japanese bank Nomura, slated for launch in early Q2. Demetrios Skalkotos, global head of Ledger Vault, pointed out that Komainu uniquely has been granted access to integrate its software directly into the Gemalto HSM blueprint.  

“Only banks and governments have that to my knowledge,” he said.

Trustology, backed by ethereum design studio Consensys, is also making strides with an HSM crypto custody solution. Alex Batlin, the CEO of Trustology, said people like the sound of cold storage because it’s offline, but it’s really just replacing a network with a human, who can still be influenced to behave in nefarious ways. 

“All cold storage does is give you a false sense of security and also very high latency for instruction execution,” Batlin said.

However, Mike Belshe, CEO of crypto custody pioneer BitGo, has argued that the latency and human involvement are a small price to pay for the security afforded by cold storage. He told CoinDesk last year:

“If you put the keys online, or if you put the keys so close to being online that you can move money within 15 minutes, that means you don’t have very tight control on it. The customers we talk to appreciate this point of view.”

IBM image from Construct 2017 via CoinDesk archives.

GBP/USD better bid, but capped by 1.2500 ahead of UK PMI

The GBP/USD pair is seen on a steady recovery path so far this session, with the bulls now trying hard to regain 1.25 handle amid moderate risk-aversion.

Cable peeks into the green amid subdued treasury yields, in the wake of lack-luster US manufacturing PMI reports released a day before. However, the recovery gains appear capped amid negative equities, as risk-off extends into Asia.

Moreover, the sentiment around the pound remains somewhat undermined, as yesterday’s poor UK manufacturing PMI report continues to weigh. The UK manufacturing PMI for March arrived at 54.2 versus 55.1 expectations and 54.6 last.

Focus now shifts towards the UK construction PMI data due later in the European session for fresh impetus on the spot. Also, the US trade and factory orders data will be closely eyed for next direction on the buck.

GBP/USD Levels to consider            

Valeria Bednarik, Chief Analyst at FXStreet notes, “The 4 hours chart supports additional declines, as the price is currently developing below its 20 SMA, whilst the Momentum indicator is crossing below the 100 level, and the RSI heading south around 46. Still the pair has a major support around 1.2430, which stands for the 38.2% retracement of the January rally. A break below this last should expose March 29th low of 1.2375, en route to 1.2330 a strong static support. The upside should remain capped by selling interest around 1.2540/60 for the bearish trend to remain in place.”

(Why?)