China’s Top Retailer Launches Startup Incubator To Lure Foreign Blockchain Projects

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China’s largest online and brick and mortar retailer JD.com announced the first four startups for its Al Catapult Blockchain incubation program in a press release[1] published Tuesday, Feb. 27.

The Beijing-based program, which has seen candidates from as far afield as Australia[2] and the UK, aims to use the company’s vast Chinese[3] infrastructure to arrive at new applications of Blockchain[4] and artificial intelligence[5] (AI), according to the press release.

JD highlights its plans to “partner with innovative blockchain startups to build new businesses and create and test real-world applications of their technologies at scale.”

“JD is in a unique position to explore the potential of AI and blockchain in global commerce,” Bowen Zhou, vice president of the company’s AI Platform and Research Division commented as part of the release.

“We are excited to work with some of the world’s most innovative startups to explore ways we can scale these cutting edge technologies for the future of retail and other industries, as well.”

The startups on board include Australia’s Blockchain-powered services marketplace CanYa and UK payments and ID platform Nuggets.

The opening of Al Catapult marks not only JD’s newest foray into Blockchain following partnerships from its various subsidiaries such as JD Finance[6], but also the increasing competition for its ultimate application in the Chinese domestic market[7].

Fellow Chinese conglomerates Tencent[8] and Baidu[9] have similarly established firm interaction with the emerging technology.

Taiwanese Central Bank Sees Future In Blockchain For Payment Systems

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Yang Chin-long, the new governor of Taiwan’s[1] central bank, indicated in a speech[2] yesterday, Feb. 26, that the bank would be open to exploring Blockchain[3] technologies.

At the end of January, Taiwanese capital Taipei had announced that they intended to turn into a ”smart city[4],” utilizing Blockchain for providing technological advances[5] like pollution sensors and health history tracking to citizens by partnering with IOTA[6].

During his speech at the presidential handover ceremony, Yang Chin-long said that the central bank will be open to “[adopting] artificial intelligence technologies and big data analysis to better predict and analyze global economic conditions:”

“In addition, the bank will also try to explore the feasibility of enhancing the security and efficiency of payment systems using decentralized ledger technology [Blockchain].”

In October of 2017, Taiwan’s Financial Supervisory Commission (FSC) publicly announced its support[7] for Initial Coin Offerings[8] (ICO), cryptocurrencies, and Blockchain in the country in a move to counter the strict crypto regulations in China[9] and South Korea[10].

Blockchain-based Artificial Neural Networks To Save Thousands Of Lives From Medical Errors

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When we consider quite how far medicine has developed worldwide in the past century, it could be easy to become complacent and assume that we have advanced our treatment methods and capabilities as far as possible. However, a 2016 study[1] revealed some quite shocking statistics regarding healthcare mistakes; namely, that 250,000 US citizens were killed every year from medical errors, such as misdiagnosis or incorrect dosage administration by healthcare professionals. This technically puts it at the third largest killer in the US, behind heart disease and cancer. Estimates[2] of the economic costs of these mistakes reach up to $20.8 bln annually. With human error being one of the main causes[3] of medical mistakes, the healthcare industry is now able to turn to artificial intelligence (AI) for help.

A key player in advancing the use of AI in healthcare is Skychain[4], a project which aims to use Blockchain to train and use AI systems in medical care. Their white paper[5] states that they aim to control 70 percent of the projected $200 bln medical AI market (estimated by IBM), through their ‘distributed open network’ system of artificial neural networks (ANNs), which can diagnose patients and prescribe the relevant treatments. They aim to “provide an opportunity to engineer, teach and host neural networks and provide paid access for independent specialists and organizations.” By using smart contracts, they hope to unite many individual parties (healthcare big data providers, independent AI developers, crypto miners and the consumers– doctors and patients) to create one effective solution.

Developers can submit ready-made ANN templates for doctors to choose from when diagnosing a patient. Once the networks have analyzed the data and returned the diagnosis information to the doctor, the developers and miners who provided the computing power will receive financial remuneration.

Setting up these symbiotic relationships will involve medical[6] institution laboratories with large datasets, looking to set up and train their own neural networks (which can then also be used by others). They can offer these datasets for ANN training by developers. These developers can use a ‘SkyConstructor’ interface, and using a ready-made ANN template can edit it to meet the requirements of the institution once uploaded into Skychain. Once the ANN has completed the learning process, it can be published. Skychain uses the analogy of the wildly popular Uber taxi[7] service: ANN developers are the drivers, doctors and patients the passengers, and the computer and servers of miners the cars.

Token sale

The ICO will begin on Feb. 26 2018, with a total sale of 36 mln Skychain tokens (SCH) available, at one SCH = $1. They will be continuing their roadshow by exhibiting at various conferences around the world, including Blockchain conferences in India and Russia. According to their roadmap, by June 2018 “the Skychain infrastructure is fully built, and early participants connect to it: healthcare data providers, medical AI developers, and hospitals.” They aim to be fully established by June 2019 and become “the leader in the medical AI market.”

The team behind Skychain boast an impressive display of experience. Founder Genendy Popov has over a decade of experience in programming and extensive education in computing, and Chief Technology Officer Ivan Svistunov has vast experience as a software architect within Blockchain.

Human doctors vs. machines

Skychain claims their mission is to save 10 mln lives from error-related deaths within a decade. Ahead of the full launch, the Skychain team has created a prototype of the system, along with its source code. There is also a video[8] demonstrating the system, for those who wish to learn more.

Skychain also ran a demonstration of their AI diagnostics system on Feb. 20th, comparing it to face-to-face doctors. Both attempted to diagnose melanoma, breast cancer and heart disease, and the team claims that there were instances of higher accuracy with the AI system. The team has provided a video of the demonstration. If the results can be verified this will be an extremely exciting step forward in healthcare diagnostics.

 

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

Japanese E-Commerce Giant Rakuten To Launch Its Own Cryptocurrency

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Japan’s largest e-commerce company Rakuten[1], with a market capitalization of over $12.5 bln[2], is planning to launch its own cryptocurrency called Rakuten Coin based on Blockchain technology and the existing Rakuten Super Points[3] loyalty program.

The announcement was made by Rakuten CEO and founder Hiroshi Mikitani during his speech[4] at Mobile World Congress in Barcelona on Feb. 27.

Mikitani described the newly announced asset as ‎a “borderless currency,” underlining Rakuten’s vision of differentiating itself from its online retail rivals, like Amazon[5], Alibaba[6] or eBay[7] and “recreating” the relationship between retailers and merchants.

“Basically, our concept is to recreate the network of retailers and merchants. We do not want to disconnect [them from their customers] but function as a catalyst. That is our philosophy, how to empower society not just provide more convenience,” Mikitani said.

Rakuten Super Points loyalty system was launched 15 years ago and has seen significant success since then, resulting in a total issuance of over 1 trillion Super Points to Rakuten’s customers, roughly equal to $9.1 bln.

The points are obtained every time a customer makes a purchase on the marketplace and can be used to discount future purchases or buy certain products or services on the shopping platform.

The company intends to implement the Blockchain-based loyalty program to attract and engage customers, and use the growing interest in cryptocurrencies to recruit new loyalty members on a global scale.

Rakuten, however, hasn’t released any details about the launch date for the service.

The latest announcement comes almost two years after the Japanese Rakuten acquired[8] the intellectual property assets of Bitcoin payment processor, BitNet, and opened the Rakuten Blockchain Lab[9] to explore applications for Blockchain in e-commerce and fintech.

Bill Gates, “Cryptocurrencies… Caused Deaths In a Fairly Direct Way” In Reddit AMA, Community Reacts

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Bill Gates, principal founder of the Microsoft Corporation[1], has caused a furor among Reddit users, stating that cryptocurrencies are “a rare technology that has caused deaths in a fairly direct way”, during an “Ask Me Anything”[2] session on Reddit on Feb. 27.

Gates wrote[3]:

“The main feature of crypto currencies is their anonymity. I don’t think this is a good thing. The Government’s ability to find money laundering and tax evasion and terrorist funding is a good thing. Right now crypto currencies are used for buying fentanyl and other drugs so it is a rare technology that has caused deaths in a fairly direct way. I think the speculative wave around ICOs and crypto currencies is super risky for those who go long.”

While drug purchases online have been increasing[4], the vast majority of drug users still purchase illicit substances via more ‘traditional’ methods. According to a 2017 Global Drug Survey[5], regardless of country, less than half of drug users purchase substances via the dark web in any one country. The global median for percentage of drug users who use the dark net is 10.1 percent.

Global Drug Survey

Gates’ remarks resulted in harsh criticism from Redditors participating in the discussion. While some advised[6] Gates to re-read the Bitcoin white paper, others reproached[7] him for what was perceived to be an attempt to influence the cryptomarket with his celebrity status:

“… [I]f Bill Gates says he doesn’t like crypto because of how well shaded the flow of money is…a lot of ears are perking up,” said a user calling themself Hoticewater.

When one of the users pointed out[8] that fiat currencies can also be used for illegal activities such as money laundering, tax evasion, terrorist funding, and drug purchases, Gates said that the necessity of a physical presence makes illicit activities and transfers more difficult:

“Yes – anonymous cash is used for these kinds of things but you have to be physically present to transfer it which makes things like kidnapping payments more difficult.”

Back in 2015, the Microsoft founder’s position towards cryptocurrencies was far more optimistic. In an interview with Erik Schatzker on Bloomberg TV’s Smart Street show, Gates put it baldly[9] that, “bitcoin is better than currency…”.

Moreover, as part of the “Financial Services for the Poor” initiative, the Bill & Melinda Gates Foundation has sponsored the development[10] of Blockchain infrastructure for merchants in Kenya to accept cryptocurrencies.

While Gates remains skeptical of cryptocurrencies, the underlying blockchain technology also remains an area of interest of the Microsoft Corporation, which has gone ahead without his direction as CEO. Over the past year, Microsoft participated in several business initiatives related to blockchain technology, like Microsoft Azure[11] or Coco Framework[12].

The company recently announced it was looking to integrate[13] Blockchain-based decentralized IDs into its Microsoft Authenticator app. Microsoft decided that Blockchain technology and protocols were well suited to the task of their project; creating a secure and decentralized form of digital identity.  

Durov Brothers File Telegram And TON With SEC, Report $850 Million Already Raised

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Telegram creators Pavel and Nikolai Durov have filed a “Notice of Exempt Offering of Securities” with the US Securities and Exchange Commission (SEC) Feb. 13, reporting $850 mln raised under the SEC exemption Rule 506(c) from 81 investors for “the development of the TON Blockchain, the development and maintenance of Telegram Messenger.”[1][2]

The type of securities offered in the SEC filing are described as “Purchase Agreements for Cryptocurrency”, and are filed under the Rule 506(c) exemption that means that US citizens who invest must be accredited investors — those worth more than $1 mln or that have an annual income of $200,000 — in order for the tokens to not have to be registered with the SEC as securities.

The Eastman Kodak Company, which had announced the launch[3] of their own ICO under the same exemption in early January, 2018, has postponed their ICO[4] to take more time to verify their investors’ accredited status.

The date of the first sale for the Durovs’ ICO is noted as Jan. 29 of this year. By filing with the SEC, the Durovs are preparing to allow for US citizens to legally invest in their project, and implying that US citizens may in fact be some of the 81 investors.

Although the SEC filing did not contain the names of any investors in the Durov’s securities offering, Russian news outlet Vedomosti[5] revealed today the names of some of the largest alleged investors, citing inside sources.

Russian billionaire Roman Abramovich, who purportedly has already invested[6] in cryptocurrencies, reportedly was one of the first Russian citizens to be approved to invest in the project. One source allegedly close to the billionaire told Vedomosti that Abramovich had invested as much as $300 mln, however another source claimed the sum was closer to $20 mln.

Sergei Solonin, CEO of Russian payment service provider QIWI[7], invested $17 mln, Vedomosti writes. David Yakobashvili, co-founder of Russian-based dairy product company Wimm-Bill-Dann, told the publication that invested $10 mln in the project.

A Telegram ICO has been rumored[8] to be in the making since December 2017, when a former Telegram employee wrote online that Telegram would be launching their own Blockchain platform and cryptocurrency, called either “The Open Network” or “Telegram Open Network” (TON).

A white paper, alleging to be for TON, was leaked in mid-January[9], but its authenticity has yet to be confirmed publicly by the Durov brothers.

The Durov’s SEC filing notes two issuers of securities, TON Issuers Inc. and Telegram Group Inc., both located in the British Virgin Islands. Under the “Related persons” section of the filing, Pavel Durov is listed as Executive Officer and Director, while his brother Nikolai is just listed as Executive Officer.

A source familiar with the TON funding told Vedomosti that the funding process was not conducted as an ICO in the “usual sense”,  in which a project’s tokens are purchased for other cryptocurrency, usually either Bitcoin (BTC) or Ethereum (ETH).  Instead, the source claims, it was more like a “closed allocation of securities in ordinary [fiat[12]] currency –dollars and euros.”  [10][11]

According to the same source, and in line with the brothers’ SEC filing, investors bought rights to the internal cryptocurrency of TON, called “Grams”, which will be distributed to them once the platform is launched.

SEC Suspends Trading In 3 Companies Due To ‘Questions’ Around Cryptocurrency Ties

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The Securities and Exchange Commission[1] (SEC) published[2] a report Thursday, Feb. 15 explaining the temporary suspension of trading in three companies that had made statements about acquiring cryptocurrency[3] and “Blockchain technology-related assets”.

All three companies, Cherubim Interests[4] (CHIT), PDX Partners[5] (PDXP), and Victura Construction Group[6] (VICT) have been suspended starting Feb. 16 for two weeks for investor protection purposes. The SEC trading suspension orders state that all three companies issued press releases that claim that:

“[T]he companies acquired AAA-rated assets from a subsidiary of a private equity investor in cryptocurrency and blockchain technology, among other things. According to the SEC order regarding CHIT, it also announced the execution of a financing commitment to launch an initial coin offering [ICO],”

The SEC orders also state “there are questions regarding the nature of the companies’ business operations and the value of their assets”.

In late August, 2017, the SEC issued a warning to investors[7] regarding ICOs and the potential for scams, including reasons it might suspend trading of a company “to protect investors and the public interest”. On Jan. 22, 2018 SEC Chairman Jay Clayton warned[8] that companies that shift their business models “on the promise” of Blockchain technology will face closer scrutiny from regulators.

Why Switzerland is Becoming a “Crypto Nation” with a Flourishing ICO Market: Expert Take

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In our Expert Takes, opinion leaders from inside and outside the crypto industry express their views, share their experience and give professional advice. Expert Takes cover everything from Blockchain technology and ICO funding to taxation, regulation, and cryptocurrency adoption by different sectors of the economy.

If you would like to contribute an Expert Take, please email your ideas and CV to a.mcqueen@cointelegraph.com[1].

Switzerland has long been a global center for the wealth management industry, housing around $2 trillion, or 27 percent, of global offshore wealth.  Since 1934, Swiss bankers and regulators have resisted the efforts of foreign tax regulators, including the Internal Revenue Service (IRS) in the US, to obtain information about secret Swiss bank accounts. They claimed compliance with Swiss law and the need to protect the privacy of their customers, as Swiss private bankers smuggled US taxpayer wealth from the US to Switzerland in all sorts of creative ways. From bundles of cash hidden inside rolls of newspaper to setting up shell companies, to jamming diamonds into toothpaste tubes, Swiss bankers aided tens of thousands of wealthy American clients to evade US taxes through secret offshore bank accounts.

After giving up on their famous banking secrecy laws with a little nudging from the US Department of Justice (DOJ) and the IRS Criminal Investigations Division (IRS-CI) which shut down the oldest private bank and slapped the largest and most prominent Swiss banks with billions in fines for aiding in US tax evasion, Switzerland was on the verge of losing its competitive edge over rival financial markets.  

But don’t count Switzerland out just yet.  By establishing a global hub for virtual currencies known as the “Crypto Valley” in Zug, and the implementation of forward-looking regulation by the Swiss Financial Market Supervisory Authority (FINMA), Switzerland is emerging as one of “the world’s leading ecosystems for crypto, Blockchain, and distributed ledger technologies” according to Oliver Bussmann, the founder of the Crypto Valley Association[2]. Johann Schneider-Ammann, the head of the Swiss Department of Economic Affairs, points out that the country is becoming a “crypto nation”[3] for the digital revolution with a flourishing initial coin offerings (ICO) market.

ICO is a new way of raising capital funds enabled by digital currencies and Blockchain technology where participants invest fiat currencies and receive ‘tokens’ or digital assets in return. A person, project or company in need of capital creates a new kind of digital coin and sells a tranche[4] of them for fiat currencies on a digital trading platform or exchange.

During 2017, Swiss-based ICOs raised about $550 million in funding, which was about 14 percent of the global ICO market, worth around $4 billion. The Zug-based Tezos ICO alone raised $232 million in July 2017. The Tezos foundation is facing at least half a dozen class-action lawsuits[5] in the US from those who say they were misled and defrauded. “Many Swiss ICO’s are structured as foundations that applied for non-profit tax status and the money raised in these ICOs are treated as a donation that may not be returned to ICO investors” explained Dr, Luka Muller[6], legal partner of Swiss law firm MME, which helped set up the Tezos foundation as well as some other big ICOs.

FINMA outlines a regulatory approach to ICOs

In response to the sharp increase in the number of Swiss ICOs, on February 16 2018 FINMA published guidelines on ICOs under the Swiss anti-money-laundering and securities laws[7].  Under regulatory guidelines issued, many ICOs will be treated as securities in Switzerland.

There are some exceptions, for example tokens used to access a platform that is already up and running, or for cryptocurrencies that function only as a means of payment. Neither will be considered securities, FINMA said, while the latter would be subject to anti money laundering regulation.

“Our balanced approach to handling ICO projects and enquiries allows legitimate innovators to navigate the regulatory landscape and so launch their projects in a way consistent with our laws protecting investors and the integrity of the financial system,” FINMA CEO Mark Branson commented.

Switzerland is “unofficially” a cryptocurrency tax haven

Undoubtedly Switzerland is an attractive place for ICOs both for investors and issuers due to the favorable Swiss tax laws[8].

Cryptocurrencies are neither money nor a foreign currency, nor a financial supply for goods and services tax (GST) purposes.  

Transacting in tokens that qualify as securities may give rise to securities transfer tax duties for domestic instruments at a rate of 0.15 percent (or 0.30 percent for non-domestic instruments) in cases where a Swiss securities dealer was involved in the transaction.

Cryptocurrencies are an asset for capital gains tax (CGT) purposes, which only applies to someone who qualifies as a professional trader.  Holders or investors of cryptocurrencies are subject to a wealth tax at the rate determined by the tax authorities on December 31 of the fiscal year.

An equity token, issued by an ICO, may be subject to a one-time capital duty of 1 percent, unlike a debt token. Any distribution of profits on equity tokens or payments on debt tokens is subject to Swiss withholding tax at a rate of 35 percent.

US Swiss ICO investors beware of the IRS-CI

The US Swiss ICO token investors not involved in class actions lawsuits should be aware that fresh off its success in uncovering US assets hidden in Swiss banks, the IRS-CI has assigned a special team of agents to investigate whether cryptocurrencies are being used to cheat the tax authority. “It’s possible to use cryptocurrencies in the same fashion as Swiss bank accounts to facilitate tax evasion,” Don Fort, chief of the IRS-CI, explained to Bloomberg News.

The views and interpretations in this article are those of the author and do not necessarily represent the views of Cointelegraph.

Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for TaxNotes, Bloomberg BNA, other publications and the OECD.

New Platform For Social Media Influencers to Increase Views and Save Earnings

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PATRON, a Japanese Blockchain-based platform, intends to transform the social influencer market by eliminating intermediaries taking a large share of profits. The company has partnered[1] with Orlando’s Switchboard Live, allowing users to publish a single live stream on different platforms and grow the audience.

Broadcast all at once

The company is developing a sharing economy system[2] which could work similar to Airbnb, with ‘hosts’ purchasing influential posts, Cointelegraph previously reported. Additionally, PATRON’s smartphone application allows social media influencers to stream live videos simultaneously to more than ten different platforms including the leading social media[3] such as Facebook Live, Periscope, YouTube. This system could give PATRON users a way to increase views and grow their audience.

Getting listed

According to PATRON[4], the company is celebrating the fact they are now going to be listed on HitBTC, one of the leading cryptocurrency exchanges. This means they will have increased publicity and also will be able to charge a liquidity premium for their token. A liquidity premium is the price markup that results from a security being more easily traded. Illiquid goods like real estate and physical assets are valued as less because of the increased risk that comes from their liquidity.

HitBTC[5] is a European-based cryptocurrency exchange that has been in operation since 2014. They boast a significant amount of currency pairs and are now delving more into dealing with altcoins. The listing of Pat coin on their service could help PATRON’s reach spread and increase the amount of money they raise in their Pre-ICO and ICO.

Long-term goal

On Feb. 14, 2018, PATRON began their Pre-ICO, and on March 1, 2018, they will open up their public sale. This part of the fundraising stage is all about raising the money necessary to achieve their long-term goals.

With the rise of companies like Instagram, Snapchat and Youtube, personalities can reach more people than ever. And with reach comes an ability to sell things. The whole influencer market is based on these personalities helping companies advertise their products in exchange for compensation.

According to PATRON, the market is currently quite opaque – it is not easy for influencers to find clients. This created the business of being an agent and connecting these two parties, but with this comes fees that can add up.

PATRON aims to become the company that disintermediates agents and provides a new means for the influencer market. The company intends to use the money from their ICO to hire the developers necessary to build the application and protocols that will be used on their platform. Additionally, they want to build a San Francisco presence so they can benefit from the network effects that occur there.

Will Bartlett

Disclaimer. Cointelegraph does not endorse any content or product on this page. While we aim at providing you all important information that we could obtain, readers should do their own research before taking any actions related to the company and carry full responsibility for their decisions, nor this article can be considered as an investment advice.

Lenovo Explores Blockchain For Document Validation With US Patent

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Chinese multinational PC company Lenovo has filed a patent[1] with the U.S. Patent and Trademark Office (USPTO) for a system to “verify integrity of physical documents,” using a “security Blockchain[2].”

The patent application was submitted in August 2016, but was published late last week on Feb. 15.

The use of digital signatures encoded into documents, as opposed to physical signatures printed with physical ink, provides assurance that the document was not modified after the signing.

The patent’s “Brief Summary” explains that a processor will identify an “integrity symbol” within the document, convert it into an “integrity map,” and then compare the map to the physical document to ensure the document’s integrity.

The security Blockchain, Lenovo writes, would allow one to ensure “that they have the current authentic physical document even if multiple paper copies exist and multiple people have made entries in the chain of modification.” If multiple, fake copies of a physical document came into existence, they would “show up as orphaned blocks in the chain.”

In December 2017, Swiss banking giant UBS[3] filed a similar patent with USPTO for a Blockchain-based system for client IP and user validation.

Although Chinese firm Lenovo’s patent application wasn’t submitted recently, its online release comes as China[4] is in the midst of a general crackdown on all things crypto within the country. China banned all foreign cryptocurrency exchanges[5] in early February, following a September 2017 ban[6] of Initial Coin Offerings[7] (ICO).

However, even with the crypto bans in place, Chinese companies have not stopped looking into the crypto sphere. On Feb. 7, Chinese-based payment service provider LianLian partnered with RippleNet[8] to facilitate faster and less expensive cross-border payments in Europe, the US, and China.