Good news for users of cryptos. There are plans by thirteen of the world’s largest banks, including UBS, Barclays, and Santander, to launch crypto versions of major global currencies in 2020, according to the Financial Times. The banks would be led by UBS and they have been working on crypto, nicknamed Utility Settlement Coin (USC) since 2015 to determine if blockchain can help optimize processes in wholesale banking.
Here Is What This Means
To make this a reality, the 13 banks, in addition to Nasdaq, have also invested £50 million ($63 million) in a new venture, Fnality, to run the USC project.
The USC will make it possible for users to get digital cash instruments to settle their transactions.
The system will be denominated in major global currencies including the US dollar, yen, euro, and sterling.
Each unit of the crypto denominated in a specific currency will be backed by the corresponding unit of traditional currency, so as to keep the price of the coin stable.
At the outset, the project will focus on creating niche applications. That is, Fnality will initially focus on creating the necessary market infrastructure that will make the crypto to work.
These initial applications will include meeting margin requirements in derivatives trades. A derivative is referred to as the security or financial instrument that depends or derives its value from an underlying asset or group of assets.
They are simply contracts between two or more parties. The value of such a contract is determined by changes or fluctuations in the asset where it derives its value from.
Currently, that process takes at least a day to be satisfied, but it would become almost instantaneous with the USC, according to Fnality CEO Rhomaios Ram cited by the Financial Times.
Beyond that, the USC could soon make it possible to clear and settle trades immediately. This could prove to be transformational, according to Hyder Jaffrey, head of strategic investments at UBS’ investment bank.
This May Suggest That More Banks Are Finding Blockchain and Cryptos Acceptable
Although this is not assured, USC suggests that banks are gradually finding confidence in blockchain and cryptos. However, these 13 banks will most likely still have to scale some legal and regulatory challenges in their efforts to adopt the technology and will need to prove that the scalability issues that hamstrung early experiments in crypto have been resolved.
The journey may be a tougher one though. This is because to develop an ecosystem that will be enough to convince the majority of banks and financial institutions (FIs) across the world to throw away existing processes for transaction settling will take time.
Indeed, the USC is a major step towards sealing a major approval for the technology but the end of the road is still far. The weight of the banks backing the USC should help the project secure traction — but this won’t guarantee success.
It appears blockchain technology is gradually gaining momentum. Facebook is seriously ready to launch its own crypto solution. The social media network has been busy pushing out efforts to enter financial services via a crypto solution. The solution will aim to provide payment options for its 2 billion users. A 2020 launch date is expected any moment from now.
A group of banks in Japan is also considering a 2020 calendar date for the launch of the group’s own cryptos. For sure, 2020 is going to be a year of blockchain technology. When these happen, blockchain tech may be signaling that it has become accepted into the mainstream system as a legitimate way of transacting, a hope that has since been hanging unfulfilled.
Combine all of these with USC, you get to find that cryptos are beginning to gain traction both within retail and institutional settings.
However, blockchain’s potential would still need to convince more of its believers. The head of Germany’s central bank said, for instance, that its trial of using blockchain to transfer and settle securities didn’t prove to be faster or cheaper than existing processes. Bank of America’s (BofA’s) tech and operations chief, Cathy Bessant, also echoed that she has yet to see a genuine use case that can scale to meet enterprise needs — despite the bank holding or having applied for the most blockchain-related patents among US FIs.
Should the USC finally work as desired, it would be an end to all these speculations and fear. Repeated over and over again without much concern, blockchain would finally come to stay.
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
When Mr. Tola Fadugbagbe relocated back to Lagos, Nigeria’s largest city for the second time in his young life, there was nothing yet like cryptocurrency or bitcoins or tokens or Blockchain technology. He could only be fused into one of the over 17.5 million people living in the city. And it appeared he was merely making up the population because it seemed the city looked too overwhelming to fit in. It didn’t take long before several months of homelessness hit him hard in the face.
‘‘For several months, I stayed in an uncompleted building. Life was nothing but hell. I was running around struggling to get funds to complete my education to university level,’’ he tells Afrikan Heroes.
Then a job stint at a highly successful real estate development company. A break-away to start up a local block making factory, and a sudden bankruptcy and closure of the facility because clients who promised to pay took delivery of his blocks but never cared to pay back, Mr. Fadugbagbe says he is still banking on his integrity, determination, cryptocurrency and blockchain technology to take him farther than he has ever thought.
‘‘ One thing I always prove to people about myself wherever I go is integrity. Anywhere I am, people always get to know me as someone with integrity. That was why I stayed longer than expected at the real estate company,’’ he said.
Mr. Tola said he learned his lessons about running his first startup the hard way:
While I was working in the real estate company, I discovered that there was a problem that needed to be solved: the quality of concrete blocks being delivered to this site. You know, the blocks they usually supplied the real estate company were not strong enough. So I thought that if I ventured into this business, I could make some future from it. So after I left the real estate company, I set up a block making factory.
When the factory was up and running, I was so happy that I was progressing. I was generous and selling on credit. But before I knew what was happening, people were withholding my money and they were telling me stories. As I’m talking to you now, these people are still owing me. I was back to square one after that nightmare: I could not even produce even though my equipment was on ground.
‘‘Till Date, It Has Been Marvelous Getting Involved in Cryptocurrency.’’
While reading about cryptocurrency and blockchain technology sometime in 2016 from two of his Facebook friends ‘who were not usually detailed about the terms and the philosophy behind the concept’, Mr. Tola got interested and began extensive studies and inquiries into what cryptocurrencies are, only to discover that cryptocurrencies suited his philosophy. Since then, he says it has been ‘‘marvelous getting involved in cryptocurrency.’’
Today, he is part of a local network in Lagos and Nigeria that hosts conferences, seminars, boot-camps, and workshops training people on what cryptocurrency is and how they can trade in it.
I believe that cryptocurrency is a big deal. Big corporations can’t stop talking about cryptocurrency. They can’t stop implementing cryptocurrency in one way or the other. Look at the CEO of JP. Morgan, Jamie Dimon, who once told his workers that if they ever got involved in bitcoin they would be fired. He called Bitcoin a fraud, a scam and an evil. Few weeks later he bought bitcoins on Poloniex. Right now, J.P Morgan is using fragments of JPM Coin, the native coin of JP Morgan Bank. I mean JP Morgan is a US banking giant that move trillions of dollars across the globe daily. Right now they want to use their own token to scale payment protocols and remittances,’’ he says.
Mr. Fadugbagbe is not far from the truth. Earlier in February 2019, J.P. Morgan became the first major U.S. bank to create its own cryptocurrency with the launch of “JPM Coin.” The digital token was designed to settle transactions between clients of its wholesale payments business, specifically for international payments and securities transactions that migrate to the blockchain.
Mr. Fadugbagbe remembers one incident about how cryptocurrency has been more than a helpful innovation in the payment system.
‘‘Someone in the US sent bitcoins to me today. I sent Naira equivalent to the person’s beneficiary in Nigeria. If they are to rely on Western Union, the fees, the delay and all that would be too much,’’ he said.
‘‘I believe that cryptocurrency has come to stay. You know, there are some people in Diaspora that find it difficult to send money back home. Now, crytopcurrency has made it a lot more easier for them because they could just create crypto accounts over there and using those accounts, they can now send bitcoins to me, and I, in turn pay off their beneficiaries in Nigeria the Naira equivalent of the bitcoins sent to me. These things happen within a space of few minutes.
He says that unlike fiat currency that government can only print more, borrow more and yet remain heavily in debt, cryptocurrency always has an edge.
‘‘You can’t inflate it. Instead you can only reduce it. This means that, with time, crypto can always gain value. The only downside of it that it that it is highly volatile. That is why people should be cautious about the type of crytocurrrency they get involved in. In fact, the crypto market is highly competitive right now. So if you lay your hands on a token doing similar things to other similar tokens in the similar same crypto market, and if the token is not highly innovative, then it would not scale,’’ he says.
‘‘Whether You Like It or Not, Everybody Will Get Involved In Cryptocurrency’’
Mr. Fadugbagbe said the only thing remaining for cryptocurrency to become widely accepted is for governments to give their nod to it. For that, he sees a huge opportunity for early investors.
”So if you look at the future of cryptocurrency, you can’t but be part of it at this early stage. Many people see Bitcoins, ethereum and cryptocurrency as the dark part of the internet because some governments are yet to approve it. Whether we like it or not government plays a major part in controlling the mindset of the citizens. Just take a look at the stories of MTN and DSTV before they became big players in their industries. We all know are they were first rejected by governments,” he says.
Why Africa is Lagging Behind In Cryptocurrency and Blockchain Technology?
Mr. Fadugbagbe says Africa is lagging behind because of the continent’s low rate of adoption of the innovation. He says anything revolutionary will be adopted quickly in any continent or any country when the government welcomes it wholeheartedly. Although he says African governments are usually ‘‘just slow in adopting something as disruptive as cryptocurrencies,’’ he has hope that Africa would get there someday.
”This is one of the reasons why we’ve been hosting seminars, workshop, bootcamps. We still need to engage the government.We just have to keep talking about this. We hope that one day, we would get the attention of the government to approve the necessary framework for cryptocurrency and blockchain technology. Just take, for instance: if you can now travel to all West African countries using Bitcoins. It would really mean that more people would get interested in bitcoins. If the government also says you can now pay your tax with bitcoins, many people would be eager to pay tax,” he says.
Mr. Fadugbagbe also finds a big problem with the way international communities see cryptocurrencies coming out of Africa.
”International communities believe that an average Nigerian or African is a scammer,’’ he says. ‘‘ Once cryptocurrencies are coming out from Africa or Nigeria, the international community doesn’t usually trust them, even when the intention is good,’’he says.
How Startups Can Leverage Crypto To Boost Their Businesses
Mr. Tola says smart startups can leverage cryptocurrencies to boost their business even without any formal partnerships with any blockchain organizations or blockchain platforms. To do this, he says African startups may consider accepting cryptocurrencies such as bitcoins, bitcoin ethereum or any other viable coins. Doing this not only boosts startups’ businesses but also gives their businesses free advert.
”Free advert because cryptocurrencies guys everywhere in the world will begin to refer your business. Take for instance, the impact of having a barbershop somewhere in Nigeria where you can now have hair cut and pay with bitcoins. In trying to convince your folks about the existence of such barbershop, you may begin to refer to such words as ‘‘look at the barbershop here. Look at its office phone number.’ The same way, you may refer to a hotel in Cameroon where you can now check into, pay with bitcoin and get discount. Or somewhere in Zambia where you can vacation to and pay with cryptocurrency. This will give startup owners free adverts. Just imagine a consumer in Nigeria, Cameroon, Senegal, South Africa, Uganda talking about your business.”
”This is why celebrities keep progressing because we keep talking about them. Who knows? But Reginal Daniels has so much been in the news and may be landing brand ambassador deals even. So this will give startups free adverts, thereby generating more leads for their businesses.”
‘’Governments Can Use Blockchain Technology To Keep Records Of The Number Of Books Received By Each Student’’
Mr. Fadugbagbe tells prospective blockchain technology investors in Africa to start submitting proposals to the government because there is a huge opportunity in that regard.
‘‘Africa needs blockchain tech the most. We can use blockchain to curtail the inefficiencies in the system. In most education ministries in Africa, for instance, books are distributed from time to time. Government can use blockchain tech to keep records of the number of these books received by each student. For every book the students receive, they can thrown in a token from their backends, using a smartphone. This is the smartest way to get feedback from Africa’s cluttered data management system. So let’s begin by sending in proposals,’’ he said.
Mr. Fadugbagbe says blockchain technology makes for more accountability and efficiency in the system, and unlike humans, data stored in blockchains cannot be tampered with.
‘‘You look at blockchain as a record that cannot be edited,” he said. ‘‘For instance, a list of items or names, or a football team. When humans are involved, they can add or remove the names at will, but with blockchain technology, the list cannot be padded. So once added, the information cannot be altered.”
For a business model that was worth over $700 billion as of January 2018, the global cryptocurrency market is booming and is not relenting. Mr. Tola Fadugbagbe does not see this ending too. No longer homeless and frustrated by bad debt, at least not in the category he once fitted in at his former startup, he has since moved on.
‘‘Right now,’’ he says, ‘‘I am living in a good and comfortable apartment. I have been reinvesting into large scale agriculture — a cocoa farm and and poultry — from the proceeds of my blockchain business. My aim is to grow them into the biggest phase they could ever be in. I like my life so simple because of what I have experienced in the past. I’m not going back to that nightmare.’’
Charles Rapulu Udoh
Charles Rapulu Udoh is a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organizations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution, and data analytics both in Nigeria and across the world.
The Genome Group has just released its 2019 edition of the global startup ecosystem performance. The fastest growing startup sectors were listed as:
Advanced Manufacturing & Robotics, which grew to a five year high of 107.9% and accounts for about 1.8% of the share of global startups.
Blockchain, which grew to a five year high of 101.5% and accounts for about 2.7% of the share of global startups.
Agtech & New Food which also saw a five year growth rate of 88.8% and also accounts for 0.8% of the share of global startups
AI, Big Data, & Analytics, which saw a five year growth of 64.5% and has a highest growing share of global startups of 7.1%.
Below Are Key Insights From The Report
The Fastest Growing Startup Areas
The average growth of Advanced Manufacturing and Robotics,Blockchain, Agtech & New Food, and AI, Big Data & Analytics over the last five years is 90.7% while their average exit success over the same period is 110.5%.
Among Growth-Phase sub-sectors AI, Big Data, & Analytics is the largest one, comprising 7.1% of all global startups. It is also the sub-sector that is growing the slowest among its Growth-Phase peers.
Nonetheless, if we separate AI by itself, excluding Big Data & Analytics startups from the cohort, we see that a standalone AI-sub-sector is growing about twice as fast as the AI, Big Data, & Analytics sub-sector as a whole.
*Genome Startup Ecosystem Report
Startup Areas That Are Fully Mature, Although Their Growth Is Slow
The four startup sub-sectors in the Mature Phase are :
Cybersecurity — with an 87.3% growth rate over the last five years and 0.9% share of global startups;
Cleantech — with a 26.2% growth rate over the last five years and 2.9% share of global startups;
Life Sciences — with a 15.0% growth rate over the last five years and 2.6% share of global startups;
Fintech — with an 105.8% growth rate over the last five years and 8.7% share of global startups;
Reasons:
These mature startup areas collectively still grew a respectable 15.9% in early-stage funding and 58.6% in exits during the past five years.
While this level of growth is sufficient to make them mature in terms of startup sub-sectors, these are figures most traditional industries would be envious of.
Fintech, an important startup sub-sector, shows two major signs of approaching a successful late Maturity: first, it has grown massively, and now nearly one of every 10 global startups is working in this sub-sector.
Second, it still shows very strong performance and growth in terms of exits. This shows that while not as much money is coming for early-stage startups (later stage and mega rounds are another story), founders and investors are able to still exit in impressive numbers.
Interestingly, Life Sciences and Cybersecurity are the only two startup sub-sectors in the Mature Phase that have grown in the latest period. This could be a sign of renewed vigor for startups in these spaces.
*Genome Startup Ecosystem Report
Four Startup Areas Are Fast Declining
They are:
Edtech (educational technology)— with an early stage deal concluded by the startup sector declining by 15.8%, the sector still maintains a share of global startups of 3.1%;
Digital Media —with an early stage deal concluded by the startup sector declining by 38.9%, the sector still maintains a share of global startups of 20.7% ;
Gaming — with an early stage deal concluded by the startup sector declining by 40.4%, the sector still maintains a share of global startups of 4.5%;
Adtech ( advertising technology) — with an early stage deal concluded by the startup sector declining by 47.9%, the sector still maintains a share of global startups of 4.2% ;
Reasons:
Sub-sectors in the Decline Phase are shrinking in terms of early-stage funding deals, although mega rounds and later funding rounds might still be happening. In addition, each one of them is still experiencing growth in exits, although they are under-performing the typical startup sub-sector.
The main change to this group since last year when we published the Global Startup Ecosystem Report in 2018 is in Edtech — a sub-sector that was in Mature Phase that now has edged towards Decline Phase.
While exits Global Startup Ecosystem Report 2019 are still growing, early-stage funding deals — a key indicator of future potential from both founders and investors — are declining. While these sub-sectors are declining overall, they still have meaningful presence and size, and can be renewed by new technologies — for example with the potential for Virtual Reality and Augmented Reality to rejuvenate Gaming.
Why You Should Care About These Startup Areas and Their Performance
According to Startup Genome, these startup areas are the major part of their report for two main reasons:
1. It Will Enable Ecosystems Around The World To Focus on the Most Viable Startup Areas.
Identifying and building on local strengths is one of the main levers that policymakers and ecosystem builders can use to boost ecosystem performance. No small ecosystem can perform well and compete with places like Silicon Valley, London, Beijing, or New York across the board. But what they can do is be a hub of excellence in specific startup sub-sectors and use that advantage to build spillover effects that improve the ecosystem and the economy as a whole.
Take San Diego, the #3 ecosystem in the world for Life Sciences even though it is relatively small with only 1,000 to 1,400 tech startups — less than 10% the size of Silicon Valley and only 14% of the size of New York. That strength spilled over and helped San Diego become a top 30 global startup ecosystem despite its small size.
Frankfurt is a similar case. Although it is small, with only 300 to 500 startups, it is incredibly focused on Fintech. It has many Fintech accelerators and corporate startup innovation initiatives, about half of the VC funding in the ecosystem goes to the sub-sector, and the city is home to a very strong traditional financial industry with five Forbes 2000 companies in finance and the presence of the European Central Bank headquarters. That focus led to the largest German Fintech exit of all time taking place in the city (360T, for nearly $800 million) and high ecosystem performance across many Success Factors.
2.The Findings On These Startup Areas Would Provide Insights for Startup Founders
As a founder, knowing how your startup sub-sector of interest is growing — and which ecosystems have the biggest competitive advantage in them — can help you make better decisions. It tells you the places you should be considering networking or opening operations at (e.g., if you are Life Sciences founder in Europe, you would do well to make connections in London and Lausanne-Bern-Geneva) and it tells you about the funding and exit environment (e.g., if you need capital for a Gaming startup not overlapping with growth startup sub-sectors, be prepared for a tough funding environment and consider more bootstrapping).
Charles Rapulu Udoh
Charles Rapulu Udoh a Lagos-based Lawyer with special focus on Business Law, Intellectual Property Rights, Entertainment and Technology Law. He is also an award-winning writer. Working for notable organisations so far has exposed him to some of industry best practices in business, finance strategies, law, dispute resolution and data analytics both in Nigeria and across the world.
