In sum, the blockchain back end shouldn’t matter to users – just like the Internet’s DNS or TCP/IP protocols don’t matter to web users. All web users care about is their web-based applications. All Blockchain users need to care about is their decentralized applications.Make no mistake: The days of seamless blockchain interoperability at the ‘atomic’ level are not here yet. Nor are the days of cross chain functionality where a single smart contract can update multiple blockchain platforms using a single process. We won’t see these needed functions go mainstream for at least two years.But the good news is we are seeing some very promising developments that will help move us closer to this end state, as highlighted in our recently published Hype Cycle for Blockchain Technology 2019.source: Hype Cycle for Blockchain Technology, 2019
When Prince Harry posted a photograph of himself and his future wife Meghan Markle in Botswana, placing a satellite collar on an elephant to track it and protect it from poachers, the royal was demonstrating new ways of combating the illegal wildlife trade.The couple’s post sought to highlight that more than 100 African elephants a day are killed for their ivory. Now, the war against poaching has another potential weapon: artificial intelligence.AI is capable of analysing different kinds of data sets and spotting significant patterns. The results can be used for the wider public good, such as improving planning in healthcare and public transport — or fighting wildlife poachers.“Audio data can be used to train algorithms to distinguish gunshots [of] those poaching wild animals [from] the gunshots [of] hunters,” says Chris Martin, a partner at law firm Pinsent Masons. Using big data, real-time alerts could be pinged to rangers to tell them which areas to focus on.Data trusts — which are separate legal entities designed to help organisations extract value from anonymised data without falling foul of privacy regulations — are being mooted as a way to allay concerns about how sensitive data is held by third parties.A pilot study on whether data trusts should be set up to share information to tackle the illegal wildlife trade was one of three initiatives by the Open Data Institute earlier this year (the ODI is a UK non-profit body that works with companies and governments “to build an open, trustworthy data ecosystem”).The study looked at whether data trusts could hold photographs from camera traps and acoustic information from a range of sources, which could be used by algorithms to create real-time alerts on poachers in protected areas.There are, however, legal questions about how to share anonymised data from governments and companies in a safe, ethical way against a backdrop of public mistrust. In the biggest scandal to date, consultancy Cambridge Analytica illicitly harvested personal data from Facebook to influence elections. In July, the US Federal Trade Commission approved a $5bn fine for the social media platform for privacy violations. Data trusts are being mooted as a way to allay concerns about how sensitive data is held by third partiesIn Los Angeles, residents have expressed concerns about the use of personal data collected from electric scooters, which is intended to help urban planning.Companies and governments tread a fine line between extracting information from data and ensuring they do not break laws such as the EU’s General Data Protection Regulation (GDPR) which forces any company holding personal data of an EU citizen to seek consent and delete the data on request. Individuals should not be identifiable from the data sets.These legal problems on privacy and governance were what law firm Pinsent Masons with BPE Solicitors had to contend with when advising the ODI on data trusts.The project to combat poaching looked at whether a data trust could improve the sharing of information and invoice data from researchers and governments, by monitoring documents given to border staff about species being transported across borders that can be falsified by smugglers. The data could be used to train algorithms to help border staff identify illegally traded animals.Mr Martin says setting up such a data trust could enable border officials to take photographs of a live animal and use software to check whether it is a species on which there are export restrictions.One advantage of a data trust is that it enables individuals to become trustees and have a say in how their anonymised data is used. It would allow citizens to be represented if the data trust held traffic information collected about their locality, for example.Data trusts might also encourage companies to put in data to enable them to work on projects where they have a common goal. “The big supermarkets could decide to set up a data trust to share data on, for example, tackling food waste or climate change,” Mr Martin says.Chris Reed, professor of electronic commerce at Queen Mary University of London, says data trusts are useful when multiple organisations put in data. “The sharing of data might have been subject to agreements between parties, but when you might have 100 companies putting in data you cannot have agreements covering them all. Having a data trust is a fair and safe way of doing this,” he says.Only a handful of data trusts exist. Credit card company Mastercard and IBM has formed an independent Dublin-based data trust called Truata. Connor Manning, a partner at law firm Arthur Cox, handled the corporate and trust structure documentation. He says that part of the legal complexity was designing the structure so that Mastercard was a beneficiary of the trust but the structure was not a standard company. “It is a corporate structure with a trust structure on top,” he explains.A data trust may not be the answer to every situation. Othe
David Marcus, the Facebook executive in charge of the project, told the press last week that the problems of banking the unbanked were technical — that banks were unable to move money fast enough without a blockchain. This is completely backward. Experts know how to move numbers on a computer. The slow part is settlement and compliance: making sure that money transmitters are solvent, honest, and not fronting for drug runners. Banking the unbanked is a slow, one-on-one social process. Libra’s public relations material describes this as if it were entirely a technical problem — and none of it is.The real motivation for the project seems to be ideological. Marcus was formerly at PayPal, and he understands payments and regulation. But he’s been a bitcoin fan since 2012 and was on the board of the cryptocurrency exchange Coinbase in 2017.Marcus had been thinking about something like Libra for several years and had discussed the project with Facebook CEO Mark Zuckerberg since January 2018. Zuckerberg was interested in the project and the ideas—“a high-quality medium of exchange for the world, on a blockchain that could scale,” as Marcus described it in a press conference on June 17.Facebook is under increasingly close attention from governments deeply suspicious of its track record on privacy, election manipulation, and fake information and its repeated defiance of calls to appear before elected representatives. Yet Facebook and its closest partners seem to think that they are large and powerful enough to swing a coup against the concept of government control of money. Libra directly states that its intent is “to shape a regulatory environment” —not to comply with the existing regulatory environment. Regulators will need to bend to Libra.The Libra token is a foreign exchange derivative, synthesized from a basket of national currencies. Libra wants to operate as a shadow bank, issuing Libra-denominated liabilities that are explicitly intended to function as money. Libra “will create a mirror banking system using your money,” said Carlos Maslatón, the head of treasury at the bitcoin payments provider Xapo, explaining the service in a private WhatsApp chat group.Libra seems to be particularly targeting countries with lots of Facebook users and unstable currencies—the other meaning of banking the unbanked. There are obvious money-laundering hazards. “Know your customer” (KYC) rules require anyone dealing in currency substitutes to track the sources of funds so as to cut off funding for criminals and terrorists. Libra says it will keep to the highest of KYC standards—but a Libra partner in a bad economy risks compromising the compliance of the whole Libra system, given that its intent is to move money around the world at the speed of cryptocurrencies. Libra will need to keep this tight and assure developed-world regulators that it has done so, or it will place the entire Libra system at risk.
he briefing was fascinating. The lead representative, the head of policy for Libra, kicked it off by admitting that the whole endeavor required a “suspension of disbelief.” They were asked about the timeline, and said they hoped to have Libra operational in about a year, which they kept suggesting was a prolonged timeline, but didn’t seem lengthy to anyone in the room.They kept selling Libra as a means of providing banking services to 1.7 billion unbanked people around the world. When challenged on how they were going to do that, and asked directly whether they’d figure out how exactly a digital currency would be an answer for people who can’t access credit currently, they said, “The short answer is no.” The phrase “the miracle of blockchain” was used at one point.Facebook said that they assumed the FTC (Federal Trade Commission) or the CFPB (Consumer Financial Protection Bureau) would regulate Libra. Questions were asked about what basket of currency would be used and other practicalities, and the answers were fairly vague. Gemini, another cryptocurrency, was referred to as a “regulated exchange” because I guess there are 43 states that have some form of protections on it (with the implication being that that is adequate).We were assured that even if a Libra user used WhatsApp or Messenger, WhatsApp/Facebook would not access specific information about their transactions beyond that they were interested in or using Libra. That would of course be enough information to know a lot more about users.Another question asked was what protections were in place to prevent collusion between Libra’s 27 partners. The answer was that the partners were well aware of the “reputational risks” they might incur should they violate privacy laws, etc. It was also pointed out that some of the partners are direct competitors, as if that has ever prevented them from colluding in the past.Ultimately we need more than a briefing. Currency backed by reserves is coinage. Because Facebook is proposing to take over a role traditionally under the purview of central banks, not private companies, we should expect the skepticism we heard in the room from staffers to be publicly aired by House Financial Services Committee members on July 17.
ARTICLE 19 has issued a warning about the promotion of blockchain technology as a solution to censorship. In a report published today, the freedom of expression organisation identifies some of the risks that arise from the use of blockchain technology. It also identifies steps that states, public organisations and tech companies should take to ensure that human rights are protected when this technology is used.
Areas of law covered include:
1 Government attitude and definition
2 Virtual currency regulation
3 Sales regulation
5 Money transmission laws and anti-money laundering requirements
6 Promotion and testing
7 Ownership and licensing requirements
9 Border restrictions and declaration
10 Reporting requirements
11 Estate planning and testamentary succession
The GLI to: Blockchain & Cryptocurrency Regulation 2019 covers government attitude and definition, cryptocurrency regulation, sales regulation, taxation, money transmission laws and anti-money laundering requirements, promotion and testing, ownership and licensing requirements, mining, border restrictions and more
Banks steer clear of Facebook’s Libra project Traditional lenders are working on their own faster, cheaper payments projects Facebook’s Libra threatens to break down banks’ role as gatekeepers of the global financial system © FT montage Share on Twitter (opens new window) Share on Facebook (opens new window) Share on LinkedIn (opens new window) Save Save to myFT Laura Noonan and Robert Armstrong in New York, Nicholas Megaw and Stephen Morris in London 12 HOURS AGO Print this page41 US and European banks are steering clear of Libra, Facebook’s project for a new cryptocurrency, for fear of antagonising regulators and cannibalising their own digital currency projects In the two weeks since Facebook announced its plans for a new digital currency, there has been silence from the banks about a project that threatens to break down their role as gatekeepers of the global financial system. “We’re still learning what it is and trying to work out where we stand on it; are we an opponent, partner or do we ignore?,” said a person familiar with the approach to the project of one of the world’s biggest banks. Up and down Wall Street, the City of London and Europe’s financial centres, senior industry executives reel off a litany of hurdles to participation, while some also criticise the way Facebook has approached the project so far. No banks were on the initial list of 27 other partners for the Libra Association, which will oversee the currency, though David Marcus, who is leading the project at Facebook, said he wanted to “absolutely and strongly deny the fact that we’ve approached banks and banks have said no”. “We have had conversations with banks. We still have conversations with banks. And my expectation is that by the time this thing launches next year you will have banks that are going to be members of this,” he told the Information. Senior executives at banks, however, tell a different story. At least one bank, the Netherland’s ING, responded to Facebook’s initial contact with a polite “no thank you”. Several other senior executives said there would be big hurdles for their future involvement, either as active members of the Libra Association or by helping people to convert traditional money in and out of Libra coins. Mike Corbat, head of Citigroup, recently said that even though he was a “true believer” in cryptocurrencies and their underlying blockchain technology, Citi’s capacity to participate is constrained, “The challenge with cryptocurrencies is the opaqueness as to the sources of the money,” he said, referencing anti-money-laundering standards banks are held to. “It would be outside our ability to take or send those monies on behalf [of people who hold them].” Facebook’s Libra coin: the truth behind the hype Meanwhile, several banks are pushing ahead with projects to speed up payments, which some said would overtake the Libra initiative. Mastercard, which is part of the Libra project, is working with six Nordic banks to build a payments system that would allow real-time transfers, and be used across multiple currencies in multiple countries. Paul Stoddart, Mastercard’s president of new payment platforms, said he expected to see “more initiatives like this around the world where there are groups of countries or regions that are economically more tightly integrated”. In the US, The Clearing House, a payments company backed by a coalition of 25 large banks including JPMorgan Chase, Bank of America and Citigroup, offers domestic real-time payments on a network, launched in 2017, that already connects half of the country’s deposit accounts. And on June, 13 of the world’s biggest banks including UBS, Lloyds Banking Group and MUFG, announced plans to launch their own digital coin for use in wholesale banking. Recommended Libra: Facebook’s digital currency Will Facebook’s Libra currency shake up financial services? A senior executive at one of the banks involved said: “Facebook is right that cross-border payments are clunky and convoluted and you have to go through far too many counterparties, but banks are getting involved and will solve this problem and solve it pretty quickly.” The banks expect that the first institutional transaction with the “universal settlement coin” will take place within a year, and could be a cross-border trade. Meanwhile, the head of innovation at another US bank said the industry needed to understand a lot more, including the purpose of the Libra coin, the regulatory environment and the system’s technical underpinning before they could commit to the project. “We will be talking to them [Libra] very soon,” he said. “There’s a huge amount of scepticism but there’s some enormous names who have put up $10m a pop; there’s enough names of enough reputable organisations that have put up $10m to be a part of it to say there’s something there.” A senior executive at a third large US bank said he did not believe banks would have to lobby very hard to ensure that Libra attracts the same know-your-customer and anti-money-laundering scrutiny as traditional payments networks, which will heap costs on the project. “If this thing has the scale of 2bn people who can move money around outside of the financial system (without AML/KYC), it makes a mockery of the system,” he said. “We won’t have to persuade them in Washington . . . regulators are at it, they’ll make them lift to the same standards as everyone else.” The executive added that Facebook, which recently hired a prominent lobbyist from Standard Chartered, had already mishandled the regulatory piece by announcing their plans without having first brought regulators onside. Who is backing Libra so far? Payments Mastercard, PayPal, PayU, Stripe, Visa Tech and consumer Booking Holdings, eBay, Facebook, Farfetch, Lyft, Mercado Pago, Spotify, Uber Telecoms Iliad, Vodafone Blockchain Anchorage, Bison Trails, Coinbase, Xapo Holdings Venture Capital Andreessen Horowitz, Breakthrough Initiatives, Ribbit Capital, Thrive Capital, Union Square Ventures NGOs Creative Destruction Lab, Kiva, Mercy Corps, Women’s World Banking When JPMorgan Chase drew up plans for a much more limited digital coin, they had extensive conversations with regulators before going public, asking them for informal guidance on what would be acceptable to them, a person close to that process said. The Trump administration’s financial regulation regime is much more amenable to those iterative conversations than the Obama administration, which “saw banks as the enemy”, he added. The head of innovation of a large European bank said its participation was hampered by the fact that “regulations don’t allow us to be very entrepreneurial in this area”. Mr Marcus acknowledged the regulatory concerns in a blog post on Wednesday. He promised a “collaborative process” with regulators, and said replacing cash with a digital network “with regulated on and off ramps with proper know-your-customer practices” could help limit financial crime. A senior executive at a fourth large US bank said his company might still participate but there was a long road ahead. “The money [initial $10m investment] over here wouldn’t be the most material hurdles, they [the sums] are not big among in the scheme of things,” he said. The test would be whether it is “regulated, and is it really solving a problem or just ticking a quasi-innovation box, we’d need to be comfortable with the use cases, what they would do beyond regulation, regulation is like a minimum bar”. For some banks, even ticking all those boxes will not go far enough. “You could argue it’s a competitor to our competitive advantage . . . the ability to move money around the world for customers within our network. So it would be rather unusual to go outside that, to compete against yourself, in many ways.”
This article presents the top ten obstacles towards the adoption of distributed ledgers, ranging from identifying the right ledger to use for the right use case to developing scalable consensus protocols that provide some meaningful notion of public verifiability.
The US Congress has asked Facebook to pause development on its Libra cryptocurrency until lawmakers have had more time to investigate the ramifications of the company’s actions.In a letter from the Democratic heads of the house committee on financial services and its subcommittees, the legislators ask the company to “immediately cease implementation plans”.“Because Facebook is already in the hands of over a quarter of the world’s population, it is imperative that Facebook and its partners immediately cease implementation plans until regulators and Congress have an opportunity to examine these issues and take action,” the letter says.“During this moratorium, we intend to hold public hearings on the risks and benefits of cryptocurrency-based activities and explore legislative solutions. Failure to cease implementation before we can do so risks a new Swiss-based financial system that is too big to fail.”