Chinese Central Bank to Use Blockchain, Competition with Alibaba?

Earlier this week, CCN reported that the People’s Bank of China (PBoC) announced its plans of utilizing blockchain technology to develop a blockchain-based national currency called “RMBCoin,” By using a technology which underpins bitcoin, the PBoC is allocating its resources and capital to potentially launch a digital currency based on the Chinese yuan, similar to Alibaba.

There exists several major differences between legitimate cryptocurrencies like bitcoin & monero that are based on genuine cryptographic work and the PBoC’s project. The total supply of RMBCoin is manipulable by the government, the blockchain of the digital currency will not be made public, and private keys of users will be kept by the government or administrators in charge.

Another institution is also actively looking into the implementation of blockchain technology. Alibaba, the US$257 billion e-commerce and internet company, is experimenting with blockchain technology to potentially use it to underpin its financial services.

Alipay, a financial application developed by Ant Financial, a financial company operated by Alibaba, is the most widely used payment platform in all of China with over 900 million accounts and 350 registered and active users. With a market cap of $60 billion, Alipay has taken over the fintech industry of China and is rapidly penetrating the consumer base of traditional financial and banking markets with its more efficient, secure and cheaper alternatives to bank services.

Recently, Ant Financial CEO Eric Jing told CNBC in an interview that the company and its popular application Alipay is ready to expand globally. Considering its dominance over the Chinese fintech industry with over 70% of the market share in China and the rapidly growing global fintech market, Jing and the rest of the company believe that Ant Financial has the capacity of expanding its user base from China to the US, Europe and other regions.

During the interview, Jing revealed his ambitious vision of building Ant Financial into a financial company which serves 2 billion people in the next ten years, with unique and efficient fintech services like Aliipay.

“We have an ambition to be a global company. So my vision (is) that we want to serve 2 billion people in the next 10 years by using technology, by working together with partners … to serve those underserved,” Jing said.

The PBoC’s strategy to adopt blockchain technology in creating a digital currency used by the Chinese people nationwide will run in conflict with Ant Financial’s much larger project of creating a blockchain-based financial network used by billions of users around the world as well as within China.

Already, Ant Financial has begun to take over the financial industry as a rapidly increasing number of people are moving from traditional forms of payments to Alipay, a cashless alternative. Local residents, experts and analysts including Mofei Chen, founder and CEO of Money Bazaar, stated in an interview that it is very difficult to find people using credit cards or cash to settle any financial activity, from receiving salaries, paying for goods in local stores or buying a cup of coffee in a cafe. The vast majority of users use applications like Alipay with their mobiles to pay for goods.
“I can hardly remember the last time I used my wallet. Few foreigners realize how fast and advanced the development actually is in new payment features and mobile financial services in China,” Chen told Asia Times.

Malware Discovered Sending Fake Emails to Steal Bitcoin and Passwords

A new malware that steals passwords and bitcoin from cryptocurrency wallets has been discovered by Cyren, an Internet security service provider, according to the company’s blog. The malware targets banking customers, and according to Cyren, is carrying out a massive campaign.
The emails inform the recipient of a deposit. The emails originate mainly from bots in the United States and Singapore, and are branded as being from various banks, including Emirates, NDB and DBS.
The malware is a keylogger that is carried as an attachment to emails for fake bank transfers. Once the victim opens the attachment, the malware can record everything the victim types on their keyboard and every place they place their mouse.

How It Works

The malware queries the victim’s registry for passwords and other information related to various types of software. The subject line usually has financial details like an online wire transfer payment notification. The attachments have a SWIFT variation, making the emails look legitimate. SWIFT codes identify financial institutions for fund transfers.
Files that appear to be PDF are really executable files, according to Cyren. Once executed, the file deletes itself and opens a new one called “filename.vbs” in the Windows startup folder. When the computer boots, the software executes itself.
The malware collects passwords and other information, focusing on web browsing software and FTP software. It gathers usernames, passwords, cookies, browsing history and more.
Also read: malware turns servers into cryptocurrency mining engines

Cryptocurrencies Targeted

 

The malware looks for cryptocurrency wallets and targets a long list of currencies, including bitcoin, Namecoin, Litecoin, Anoncoin, BBQcoin, Bytecoin, Craftcoin, Devcoin, Digitalcoin, Fastcoin, Feathercoin, Florincoin, Freicoin, I0coin, Infinitecoin, Ixcoin, Junkcoin, Litecoin, Luckycoin, Megacoin, Mincoin, Phoenixcoin, Primecoin, Quarkcoin, Tagcoin, Terracoin, Worldcoin, Yacoin and Zetacoin.

Blockhain Considered in Proposal to Improve Regulating Russia’s National Payment System

Russia’s Association Financial Innovation (AFI) released a “roadmap” for improving the regulation of the National Payment System that includes using blockchain technology, according to Plusworld, a Russian news source.
Following discussion, the proposal is to be submitted to the Bank of Russia, the Ministry of Finance, the Federal Financial Monitoring Service and the State Duma.

First Provision Includes Blockchain

The development of a unique identifier, possibly using blockchain technology, is noted as the first of nine provisions, along with expanding short-term opportunities of transactions under a simplified customer identification.
The proposal emphasizes strengthening measures to prevent illegal transactions and facilitating non-cash instruments
The proposal reflects the country’s gradual embrace of blockchain technology despite initially scorning bitcoin and cryptocurrencies. The Internet Development Institute (IRI) of Russia in December of 2015 prepared a roadmap titled “Economics and Finance” which included a proposal for legalizing blockchain technology by 2017. That roadmap is a supplement under the wider proposal called “Internet Program 2025,” an initiative that puts together proposals for the development of Internet and communication as a whole in Russia.

Additional provisions of the new proposal are:
2) Expansion of the list of transactions for bank payment agents and payment aggregators to reduce risks and remove regulatory arbitrage.
3) Development of a concept model of the functioning of financial experiments as they relate to necessary legislative changes, including new laws with participation from relevant market participants, risk managers and self-regulatory organizations.
4) Extending the list of professional standards to maintain the role of payment industry experts.
5) Forming the infrastructure and protecting the rights of payment service users, in addition to information on persons carrying out illegal cash transactions. The provision includes creating a central database of persons involved in illegal transactions.
6) Developing measures to increase payment service opportunities without the involvement of credit institution stakeholders, such as operators of mobile radio communications or persons holding a significant position in the Spaces public network that provides data transmission services.
7) Creation of proposals on payment services in price control, including the development of sectors used by the payment industry.
8) Improving the availability of non-cash payment instruments.
9) Developing standardization activities for payment service providers.

Government Adjusts Positions

A document by the federal tax authority in Russia in December revealed its first official stance on the legal status of cryptocurrencies. Bitcoin cannot be blocked or banned as it can be deemed foreign currency transactions according to Russian laws.
The Bank of Russia has developed a technical prototype called “Masterchain”. The prototype is based on distributed ledger or blockchain technology for the Russian financial market.
The blockchain platform prototype was developed for financial messaging between banks in the Russian financial system and was tested. The “Masterchain” a networking tool for participating members using blockchain technology, including Sberbank, Alfa Bank and Tinkoff Bank and Russian payments operator, Qiwi Group. The platform enables for “prompt confirmation of data actuality” to a transacting customer. The innovation also makes instant communication possible between counterparties among the platform, while assuring confidence in financial transactions.
Russian banks and financial services firms in July formed the country’s first financial blockchain consortium in an effort to explore and implement blockchain solutions in the banking and financial services industries, CCN reported. The group consists of the Qiwi Group; a handful of banks, namely, B&N Bank (BINBANK), MDM Bank (Moscow Business World Bank), Otkritie Bank , Tinkoff Bank; and services & consultancy giant Accenture.
In November, the head of the country’s largest bank, Herman Gref, CEO and chairman of Sberbank, espoused the benefits of cryptocurrencies. Sberbank and the Federal Antimonopoly Service of the Russian Federation in October announced a blockchain pilot for the encrypted exchange of documents.

The Deputy Finance Minister of the Russian Federation stated in October that the spread of bitcoin in Russia does not represent a threat the country’s financial ecosystem at its current rate of adoption. As such, an earlier announced plan to ban the cryptocurrency was put on hold.
The Ministry of Finance proposed a 4-year prison sentence for bitcoin users late last year in an effort to enforce a new amendment to the criminal code. In what could be seen as a move to bring brief respite, the Ministry then proposed a 2-year “corrective labor” sentence – a combination of penal detention and forced labor – for bitcoin adopters, earlier this year.

Austrian Luxury Hotel Pays Bitcoin Ransom to Regain Access to Rooms

A luxury hotel in Austria paid a bitcoin ransom to unlock the rooms of hundreds of guests who could not get in or get out, according to The Local. The hotel was unable to reprogram new electronic key cards until the hackers restored the system.
The hackers restored the system in exchange for 1,500 EUR worth of bitcoin.
While the hotel has since replaced its computers and installed new security standards, it plans to install old-fashioned door locks with keys in the future to prevent such incidents.
Managers at the Seehotel Jaegerwirt, a four-star hotel on the Alpine Turracher Hoehe Pass, wanted to publicize the incident to warn others of the possibility. The managers also want more done to prevent cybercrime before the problem worsens. The hotel has a modern IT system with electronic room key cards.

The management said it was the third time cybercriminals attacked the hotel. This was the first time they were able to immobilize the entire system.
The hotel was fully booked, with 180 guests, said Christoph Brandstaetter, hotel managing director. He said they had no choice but to pay the ransom. Neither the police nor insurance can help in such a situation, he said. There was no reimbursement from insurance because the responsible party could not be found.
Also read: U.S. government: Ransomware attacks have quadrupled this year

No Option But To Pay Ransom

Paying the bitcoin was the least expensive and fastest way to resolve the problem.
Every Euro paid to blackmailers hurts, Brandstaetter said. He said other colleagues have faced the same situation and reacted the same way.
Once the hackers get the money, they unlock the registry system and all other computers, allowing the hotel to function normally.
The hackers left a back door open in the system and attempted to reattack. But they could not attack again since the computers had been replaced and new standards implemented. Some of the networks were decoupled.
Brandstaetter said the hotel will install old-fashioned door locks with keys the next time it refurbishes rooms.

Thailand’s Industry to Adopt Blockchain Tech by 2018

Thailand is bound to see a sweeping adoption of blockchain technology in a number of areas including finance by the year 2018, according to a report in regional English daily Bangkok Post.
The news daily cites a blockchain specialist who sees businesses in Thailand adopting blockchain technology by the year 2018. Beyond its core features in transferring value with transparency and security while maintaining trust, the inexpensive ease in which it can be implemented will encourage businesses to switch over, opines Bhume Bhumiratana, a blockchain tech expert.
The cost of development will also be smaller compared to the maintenance of existing traditional systems infrastructure, according to the expert.

Call for Regulation

The tide of disruption brought forward by Financial technology will also mean that policymakers and regulators are required to quickly understand and then implement new regulations to foster a flourishing sector.
For instance, the Thailand Fintech Association’s chairman recently issued a public call urging the government to introduce regulations in the country to keep abreast with sweeping technological changes in an effort to encourage and support the local Fintech space.
As things stand, the Bank of Thailand – the country’s central bank – does not oversee or enforce any regulations for cross-border trade in the financial services sector. The lack of regulation has left Thailand’s doors open to the likes of Chinese giant Alibaba to gain a presence in over 9,000 7-Eleven outlets in the country.
Outdated laws will need to be revamped to catch up to new innovations like blockchain technology, according to Dhiraphol Suwanprateep, partner at law firm Baker McKenzie Thailand.

Intriguingly, the report also reveals that the Electronic Transactions Development Agency, a Thai legal authority in the payments space, is amending the existing Electronic Transaction Act from 2001 to include the use of smart contracts via blockchain technology adoption.
Bangkok has notably seen a few blockchain projects take shape in recent times. A successful remittance pilot saw over 100 migrant workers send money to their homeland, Myanmar, using the Ethereum blockchain.
A partnership between Thai lender Kasikornbank and Chinese fintech firm IBS established a baht-yuan cross-country remittance platform for the corridor.
Featured image of Bangkok from Shutterstock.