Michael Bodley

Ukraine, already receptive to crypto, has one more reason to be bullish on blockchain — thanks to Stellar.



A Thursday report unpacking a two-year study on the feasibility of tapping the Stellar crypto ecosystem to move money around the war-torn country detailed a number of reasons for optimism when it comes to digital assets.



One of Ukraine’s oldest and largest banks, TASCOMBANK, led the pilot behind the study. It came about at the 2021 bequest of several of the eastern European nation&#8217;s top financial regulators and legislators. 



The TASCOMBANK study, commissioned in part by Ukraine’s influential Ministry of Digital Transformation, found a number of use cases (versus its TradFi banking system) for moving around “electronic money” via Stellar — the blockchain launched by Ripple co-founder Jed McCaleb in 2014 following his exit from Ripple Labs.



The study found Stellar improved security and confidentiality of customer data, boasted far quicker and far cheaper transactions with “high throughput.”



And it’s especially relevant now, given Ukraine’s national bank has blocked local commercial banks from rolling out new forms of “electronic money” — crypto, basically — since “the first days” of Russia’s “full-scale invasion of Ukraine.”&nbsp;



<h3>Ukraine sees real crypto use-cases via Stellar blockchain</h3>



Ukraine’s national legislature rolled out a number of significant changes to its regulations around digital assets in 2021, around the same time the study started.&nbsp;



The study — parsing payments between individuals and businesses, as well as their payrolls —&nbsp;appears to validate a number of the cryptocurrency initiatives that were introduced at the time.&nbsp;&nbsp;



Deputy Minister of Digital Transformation Oleksandr Bornyakov said the Stellar study highlighted a number of Ukraine-specific “key advantages” of the real world use cases for blockchain tech. Ukraine regulators are considering the possibility, according to Bornyakov, of introducing additional permissions for digital assets as a result



“The results of the [pilot] proved the key advantages of blockchain,” Bornyakov said in a statement. “In particular, fast processing and cost-effectiveness of transactions, accountability and transparency of the system, and also simplified access to financial services.”&nbsp;



But <a href="https://sites.google.com/view/stellar-analysis?pli=1" target="_blank" rel="noreferrer noopener">debate</a> over <a href="http://www.scs.stanford.edu/~dm/blog/safety-vs-liveness.html" target="_blank" rel="noreferrer noopener">whether</a> Stellar is sufficiently decentralized has persisted since the network went <a href="https://cointelegraph.com/news/stellars-blockchain-briefly-goes-offline-confirming-the-project-lacks-decentralization" target="_blank" rel="noreferrer noopener">down for two hours</a> in 2019. Then, in 2021, a string of crypto exchanges halted withdrawals after <a href="https://www.coindesk.com/markets/2021/04/06/several-stellar-nodes-go-offline-team-says-network-still-functioning-though-some-transactions-fail/" target="_blank" rel="noreferrer noopener">transactions</a> began failing during a node outage.



<a href="https://dashboard.stellar.org/" target="_blank" rel="noreferrer noopener">Stellarbeat</a> currently shows the blockchain is maintained by only 36 fully validating nodes with 13 lesser validator nodes in support — Stellar’s main rival (and McCaleb’s previous project) Ripple is <a href="https://xrpscan.com/validators" target="_blank" rel="noreferrer noopener">supported</a> by around 150 while Ethereum <a href="https://beaconscan.com/statistics" target="_blank" rel="noreferrer noopener">boasts</a> hundreds of thousands <a href="https://www.nodewatch.io/" target="_blank" rel="noreferrer noopener">anchored</a> by almost 11,500 physical nodes.



A lower validator count puts pressure on a small group of machines to keep the network running smoothly, while higher counts allow more of the network to go offline before service is interrupted.



<figure class="wp-block-embed is-type-wp-embed is-provider-flourish wp-block-embed-flourish"><div class="wp-block-embed__wrapper">
<iframe class="wp-embedded-content" sandbox="allow-scripts" security="restricted" title="Interactive or visual content" src="https://flo.uri.sh/visualisation/12420082/embed#?secret=UIDiPl5uvN" data-secret="UIDiPl5uvN" frameborder="0" scrolling="no" height="575" width="700"></iframe>
</div><figcaption class="wp-element-caption">Stellar’s native token XLM has underperformed against bitcoin and ether, on par with XRP</figcaption></figure>



Still, Stellar’s showing in the study is good news for the developing crypto dealings of TASCOMBANK. With the blessing of regulators, the bank has opened up a number of new units focused on emerging TradFi applications for distributed ledger technology (DLT).&nbsp;



“[The research] confirmed the readiness of the bank&#8217;s infrastructure to integrate with blockchain solutions and provide an appropriate level of financial services using virtual assets, taking into account all regulatory requirements,” the study said.&nbsp;



An executive for the Ukrainian financial entity went as far as to dub the resulting use cases as “drivers of the transformation of the financial landscape in Ukraine.”



It’s set to provide a new, core means for disseminating state-supplied financial assistance to Ukraine citizens.&nbsp;



The resulting digital payments outlook isn’t all rosy, though. There are scores of outstanding questions to tackle for both regulators and financial facilitators, both said.&nbsp;



One prominent one pertains to CBDCs: Who would be responsible for overseeing onboarding for its users, including know your customer (KYC) measures?



Oleksii Shaban, deputy chairman of the National Bank of Ukraine, said in TASCOMBANK’s research that the “question remains unanswered today and is closely related to another:&nbsp;“Whether the demand for CBDCs in a wallet opened in a commercial bank (the so-called two-level model) will be sufficient compared to that envisaged in the concept of &#8220;digital cash&#8221; — digital money as a direct claim to a central bank (the one-level model).”



The outcome demonstrates the proven potential of “real world” use cases built on the consensus-driven blockchain and “sets the foundation for greater adoption of virtual assets in Ukraine,” according to Denelle Dixon, chief executive of the Stellar Development Foundation.&nbsp;



Largely positive in its assessment of the current role and future potential of cryptocurrencies countrywise, the results ought to bolster a growing number of developing digital asset initiatives pioneered by Ukrainians.&nbsp;



Plus up-and-coming related pushes pioneered by outside players, such as the UN’s significant move to <a href="https://blockworks.co/news/un-stablecoins-revolutionize-foreign-aid">utilize the stablecoin USDC</a> to act as the rails for disseminating humanitarian aid packages to those in need of money fast: Ukrainian refugees.&nbsp;



Crypto exchange Binance earlier this month struck a deal with a prominent pharmacy in the country to enable crypto-driven payments for medical products, including medicine. The rationale is to bolster <a href="https://blockworks.co/tag/ukraine">Ukraine’s</a> battered infrastructure via digital assets



David Canellis contributed reporting.



Updated Jan. 13, 2022 at 4:18 am ET: Added context about nodes.



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Ukraine Bank Finds Stellar Blockchain Brings ‘Key Advantages’

Jacquelyn Melinek

<div id="highlights-block_615f2f4413ddc" class="highlights">
 <ul>
 <li>“We were very excited to partner with them because there’s a lot of opportunities in the German market,” Michael Shaulov, CEO of Fireblocks said to Blockworks</li>
 <li>While Bankhaus von der Heydt is Fireblocks’ latest client, it said it has supported a handful of traditional banks in the past including BNY Mellon, Signature Bank and Siam Commercial Bank</li>
 </ul>
 
</div>



One of the oldest banks in Germany, Bankhaus von der Heydt, is using digital asset custody provider Fireblocks to expand its offerings of digital asset banking, securitization and fund services. 



Fireblocks will be supporting the traditional and privately-owned Bankhaus von der Heydt to leverage its custody services alongside the Fireblocks Network to expand digital asset and crypto products to its customers, the company said Thursday.&nbsp;



Bankhaus von der Heydt was founded in 1754 and is 267 years old, making it one of the oldest banks in Germany to offer crypto custody and trading services. In December 2020, Bankhaus von der Heydt partnered with Bitbond to <a href="https://www.financemagnates.com/cryptocurrency/news/german-bank-introduces-first-euro-stablecoin/" target="_blank" rel="noreferrer noopener">issue</a> the first euro stablecoin (EURB) on the Stellar network. 



“Although the crypto assets are held in trust by Bankhaus von der Heydt, they are not subject to any explicit insurance. In particular, there is no protection by the deposit insurance,” the bank said on their <a href="https://www.1754.eu/faq" target="_blank" rel="noreferrer noopener">website</a>.



Since launching in June 2020, the Fireblocks Network has amassed over 500 liquidity partners who actively move assets across 30 of the world’s largest digital asset exchanges, such as Binance, Bitfinex, Coinbase, FTX and more, Blockworks <a href="https://cms.blockworks.co/former-sec-chairman-jay-clayton-joins-crypto-platform-fireblocks/" target="_blank" rel="noreferrer noopener">reported</a>. 



“We were very excited to partner with [Bankhaus von der Heydt] because there’s a lot of opportunities in the German market,” Michael Shaulov, CEO of Fireblocks, told Blockworks.&nbsp;



Fireblocks has seen strong demand and fast growth in Europe and operates with people in the United Kingdom, Nordics, France, Germany and Switzerland, Shaulov said.



<blockquote class="wp-block-quote">“It&#8217;s a pretty important market for us. The European market is quite dynamic, you have a lot of challenger banks that we had the opportunity to partner with and FinTechs over there are very active, so it allows us to find very interesting clients that have meaningful activity that extend our reach and services to a large population of consumers,” Shaulov said. </blockquote>



While Bankhaus von der Heydt is Fireblocks’ latest client, it said it has supported a handful of traditional banks in the past including BNY Mellon, Signature Bank and Siam Commercial Bank. Siam Commercial Bank, BNY Mellon and SVB Capital have all invested in Fireblocks previously. With that said, Shaulov said banks are realizing they need to be a part of the transformation of digital assets.&nbsp;



“At the end of the day [banks] weren’t as prepared as they thought they were and at this moment in time, people always say change happens very slowly then suddenly and that’s what happened there,” Shaulov said. “It moved from no one will ever touch [crypto], it’ll die, to this,” he said.&nbsp;



In August, former US Securities and Exchange Commissioner Chairman Jay Clayton joined Fireblocks’ advisory board to help guide Fireblocks “on navigating requirements for the support, development and deployment of solutions for the emerging digital asset infrastructure,” the company <a href="https://cms.blockworks.co/former-sec-chairman-jay-clayton-joins-crypto-platform-fireblocks/" target="_blank" rel="noreferrer noopener">said</a> at the time.



In late July, Fireblocks <a href="https://cms.blockworks.co/funding-news-fireblocks-eco-and-saber-labs-all-raise-millions/" target="_blank" rel="noreferrer noopener">raised $310 million</a> in Series D funding, just four months after its last $133 million Series C round, the company said in a statement. Sequoia Capital, Stripes, Spark Capital, Coatue, DRW VC and SCB 10X co-led the round alongside Siam Commercial Bank, Thailand’s oldest bank. 



Going forward, Fireblocks plans to expand its client base and focus on DeFi, Shaulov said.



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Bankhaus von der Heydt Will Custody Crypto with Fireblocks

<div id="highlights-block_615e020884506" class="highlights">
 <ul>
 <li>As of Wednesday, USDC has a market capitalization of $32.4 billion, up 1110% from $2.68 billion on the year-ago date, according to CoinMarketCap data</li>
 <li>The partnership is expected to roll out in select markets in 2021 and hit international markets for 2022</li>
 </ul>
 
</div>



Financial payments service company MoneyGram is partnering with the Stellar Development Foundation (SDF) to integrate its network with the Stellar blockchain and Circle’s USD Coin (USDC), the company said.&nbsp;



The partnership will provide customers with the ability to convert cash to USDC and vice versa. Additionally, the conversion of cash into Circle’s USDC will increase utility and liquidity of digital assets while helping more consumers participate in the digital economy, the company said.&nbsp;



&#8220;[This partnership] highlights how much more opportunity there is to improve interoperability between traditional and digital financial rails. We believe blockchain on and off ramps offer the right solution,” said Denelle Dixon, CEO and executive director of SDF in an email to Blockworks. “Together, we&#8217;re showing how blockchain and innovations like stablecoins can connect to traditional rails to provide new economic opportunities for previously underserved groups,” she added.&nbsp;



The USDC is a digital dollar stablecoin issued by regulated financial institutions, backed by fully reserved assets and redeemable at a ratio of 1:1 for US dollars, according to Circle’s <a href="https://www.circle.com/en/usdc" target="_blank" rel="noreferrer noopener">website</a>. 



As of Wednesday, USDC has a market capitalization of $32.4 billion, up 1110% from $2.68 billion on the year-ago date, according to CoinMarketCap <a href="https://coinmarketcap.com/currencies/usd-coin/" target="_blank" rel="noreferrer noopener">data</a>.



MoneyGram has helped around 150 million people transfer money to others in the past five years across over 400,000 locations. Stellar’s network has increased to over 5 million accounts since it launched in 2014, according to its website.



In regards to the partnership, Dallas-based United Texas Bank will serve as a settlement bank between Circle and MoneyGram, it said. The partnership is expected to roll out in select markets in 2021 and hit international markets for 2022, the company said.&nbsp;



Businesses like MoneyGram and Western Union are <a href="https://cms.blockworks.co/el-salvador-bitcoin-wallet-could-disrupt-traditional-remittance-markets/" target="_blank" rel="noreferrer noopener">facing</a> competition from Bitcoin technology-based payment services like Strike, which offers instant payments globally at close to no cost. While MoneyGram’s transfers start at no cost, or $0, a transfer fee and currency exchange rate can apply, according to its website. 



This partnership is the latest effort by a traditional financial service company to adapt to the ever-changing world of digital assets. But, some think that these money transfer companies should stick to their traditional industries, rather than competing in new digital asset spaces.



“If I was the CEO of those companies I would stay focused on doing what they do well and try to optimize it. Crypto is an entirely new industry and they will have difficulty adapting,” said Charlie Silver, CEO of Permission.io.&nbsp;



In general, there are many industries that have little to no growth but are still successful like book stores, print magazines, network and cable TV and so on, Silver said. “Although they have a shrinking market, they can still be successful,” Silver added.&nbsp;



Separately, in mid-July, Asia-based cryptocurrency exchange platform Liquid Group, Inc. also announced a joint venture with SDF to provide USDC with Stellar’s network, Blockworks previously <a href="https://cms.blockworks.co/asias-liquid-exchange-adds-usdc-on-stellar-as-global-stablecoin-demand-jumps/" target="_blank" rel="noreferrer noopener">reported</a>. Similar to MoneyGram, Liquid Group said that providing USDC would give users faster and cheaper transactions.



Stablecoin usage is especially high in East Asia due to the Chinese government’s ban in 2017 of direct exchanges of Chinese yuan for cryptocurrency. About 33% of trading activity in 2020 was attributed to stablecoin transactions, according to a <a href="https://cms.blockworks.co/asias-liquid-exchange-adds-usdc-on-stellar-as-global-stablecoin-demand-jumps/" target="_blank" rel="noreferrer noopener">report</a> by Chainalysis.



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Are you a UK or EU reader that can’t get enough investor-focused content on digital assets? <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Join us</a> in London on November 15th and 16th for the Digital Asset Summit (DAS) London. Use code ARTICLE for £75 off your ticket. <a target="_blank" href="https://cms.blockworks.co/events/das-london/" rel="noreferrer noopener">Buy it now</a>.



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