Bitcoin and Beyond: Cryptocurrencies, Blockchains and Global Governance (RIPE Series in Global Political Economy)

Institutional investors are getting into the Bitcoin market via OTC trading platforms. Currently, the OTC trading market is said to be over two times the size of regulated exchanges with some desks handling over $100 million a day in transactions.

However, the entry of more institutional players is huge news for the crypto industry. According to many crypto pundits, institutionalized investors are the missing element needed to kick-start the cryptocurrency price recovery journey. This is after the spectacular price dip that occurred at the beginning of the year, which dragged down the market into a bearish stretch.

According to a report by Bloomberg, institutional investors have already started to invest in the industry, with some buyers currently buying over $100,000 worth of digital currencies through OTC trading platforms. This is as revealed by Bobby Cho, head of trading at Cumberland, which operates an OTC trading platform under DRW Holdings LLC.

In his view, the crypto industry has been waiting for big institutionalized investors to jump on the bandwagon, most likely following a bitcoin ETF, to help prop up the flagging market. But apparently, the big investors are already here, and many are using the OTC crypto industry to make huge buys.

Established crypto mining firms are reportedly also utilizing OTC trading platforms to sell digital coins to institutional investors at higher prices instead of waiting for the rates to go up, and many have their own liquidity desks. According to the Bloomberg report, coins from mining companies apparently command a price premium of up to 20 percent of their prevailing market value. This is because they are what many digital currency investors consider as ‘unadulterated’ crypto assets.

Because the coins are brand new and untainted by illegal activity, they easily meet regulatory requirements imposed by government bodies.

OTC Markets

OTC Markets Have Major Advantages for Investors over Crypto Exchanges

According to Cho, many investment firms are choosing to invest in the cryptocurrency industry at this time because of current market stability. It allows for better market prediction and risk evaluation.

Among the main advantages of using OTC trading platforms, especially for big investors, is that they generally have sufficient cryptocurrency liquidity to facilitate multi-million dollar digital coin orders. Moreover, buying millions of dollars worth of crypto on exchanges is hardly a straightforward process. Market movements arising from the huge transactions are also greatly subdued, and unlikely to sway prices by a significant margin.

Another noteworthy advantage is that cryptocurrency prices can be fixed beforehand by OTC trading entities, subsequently mollifying fears of sudden price slides and spikes, which could affect the final value of transactions.


This article by Elizabeth Gail was previously published on Coincentral.com

About the Author:

Elizabeth Gail is crypto-enthusiast and a blogger. Her specialties include cryptocurrency news and analysis. When not writing about crypto, she’s out taking part in humanitarian endeavors across the world. You can reach out and engage with her on Twitter and Google Plus.

Blockchain may not be a panacea to the all the world’s problems but there are many areas where it shows potential. Perhaps one of the most important is human rights. According to a 2014 report by Freedom House, only 40 percent of the world live in “free” countries. These are the nations that supposedly respect basic human rights. But a lot has changed since 2014, and not for the better.

A Snapshot of Human Rights Around the World

We often take basic human rights, such as freedom of speech or movement, for granted. Many of us forget that in some countries, simply speaking your mind can land you in jail–or even get you killed. While much of the world remains under the thumb of corrupt and oppressive governments, blockchain technology could provide at least the start of a solution.

The universal declaration of human rights from the United Nations covers a score of fundamental rights that all people deserve. Yet far too many citizens around the world do not receive them. Among the list of 30 articles are the rights to equality, freedom from slavery, discrimination or torture, and freedom of opinion and information.

An Amnesty report published this year revealed that many supposedly “free” countries are failing to comply with basic human rights. The humanitarian crisis in Venezuela is one of the worst in the country’s history. The ongoing state of war in Yemen shatters all basic human rights to food and shelter. Turkey’s continued clampdown on journalists and political activists and Russia’s curtailing of freedom of speech are all in direct conflict with the human rights agreement.

We often associate human rights violations with developing countries and oppressive regimes. But the US, EU, and Australia all earned a place among the worst human rights violators on Amnesty’s list.

The EU and Australia were called out for their “callous” treatment of refugees, and Trump’s controversial travel ban borderline violates the human right to freedom of movement while discriminating on religious grounds.

Blockchain and Human Rights

With blockchain technology, we could track human rights issues more easily. This could bring transparency and accountability to both developing and developed countries. Very often, though, speaking about blockchain involves hypothetical use cases for some faraway date in the future. Yet there are many practical use cases of blockchain and human rights right now. Let’s look at a few examples.

The Right to Adequate Living Standard

From Zimbabwe to Venezuela, Yemen to Syria, people all around the world are unable to access their right to an adequate living standard. This means having food to eat, water to drink and not being forced to live in a conflict zone or in fear of persecution.

In countries where hyperinflation is wiping out people’s life savings, blockchain and human rights are starting to team up. Cryptocurrency is beginning to make a dent in the deepening humanitarian crisis in Venezuela.

With a national currency devaluing by 95 percent from one day to the next, more and more Venezuelans are turning to cryptocurrencies like Bitcoin and Dash as a solution. In fact, there are now over 900 merchants that accept payment in Dash across the country. The founder of Dash Venezuela told Coin Central:

“Venezuelans have been using cryptocurrency for years now to protect their capital from inflation. But now with Dash, it has opened a new window as a means of payment. It is an easy way to receive something that is stronger than the Bolivar and is within the law.”

Cryptocurrency further allows for micro trade and microlending. Since you can assign a value to the most minute quantity, the size of trade that is economically viable becomes smaller. Blockchain and human rights make a more compelling case as people around the world can finally access the banking system, start their own business, and buy and sell smaller amounts.

The Right to Participate in Government and Free Elections

Another of the UN’s articles is the right to participate in government and free elections. Yet this is willfully denied to many people. Electoral fraud is common around the world. Even in countries like the United States, self-proclaimed as ‘the land of the free’, significant aspersions were cast over the 2016 presidential elections.

The Kenyan elections of 2017 thrust bloodshed, controversy, and chaos front and center. There was a widespread sentiment that the election was rigged, and many Kenyans were unable to take part due to voter intimidation.

So loud was the clamor of voices crying out against the election that it led to a second one. But that was boycotted by the main opponent and the incumbent won by a surreal landslide with 98 percent of the vote.

But rigged elections and voter fraud aren’t by any means limited to Africa. They’re widespread around the world and even common in private companies and public corporations. Blockchain and human rights projects in this area are showing positive results.

People can vote from the privacy of their own homes, free from intimidation. And all votes are tamper-proof on the immutable ledger, akin to anonymous voting in a ballot box.

There are still some issues to be ironed out when it comes to blockchain voting. Verifying voter identity and making sure the same people don’t vote twice, for example. But countries like Estonia are already proving that it is possible. In fact, all Estonians have their own ID cards they can use to vote on the blockchain securely and quickly.

Blockchain and human rights

The Right to Freedom of Opinion and Information

According to the Committee to Protect Journalists, in December of 2017, a record high number of journalists were imprisoned around the world. The largest concentrations being in China, Turkey, and Egypt. Freedom of opinion and information is a luxury to many in these parts of the world. If a government doesn’t like a certain website, they can shut it down or monitor it. Wikipedia, for example, is censored or banned in many countries, including Russia, Saudi Arabia, Iran, China, Turkey, and even France.

The very fact that blockchain provides us with a decentralized technology that is global and uncensored means that no one centralized entity or government can shut it down.

Privacy-focused messaging app Mainframe, and mesh networking startups Open Garden and RightMesh are working to provide censorship-resistant platforms to ensure continued, unbroken connectivity. Blockchain and human rights show endless possibilities when it comes to freedom of information.

Closing Thoughts

More and more blockchain and human rights use cases will develop over time. Of the 30 articles on the UN’s human rights list, blockchain technology has the potential to help with many.

With its correct use in identity management, we may be able to eradicate illicit slavery and human trafficking. And the ownership of land deeds recorded on a transparent ledger could put an end to the illegal seizure of land.

There are certainly many human rights problems to tackle. And it will be interesting to see how many cases blockchain technology is instrumental in.


This article by Christina Comben was previously published on Coincentral.com

About the Author:

Christina is a B2B writer and MBA, specializing in fintech, cybersecurity, blockchain, and other geeky areas. When she’s not at her computer, you’ll find her surfing, traveling, or relaxing with a glass of wine.

Well into the second half of 2018 and it’s been a white-knuckle roller coaster ride for most. With Ether shedding 44 percent of its value in just two weeks and the media speaking of a Bitcoin bubble, is it possible to lose faith in crypto but remain bullish on blockchain? Apparently; if continued corporate statements like the UBS blockchain endorsement are anything to go by. But can you really separate cryptocurrency and blockchain?

UBS Bullish on Blockchain, Bearish on Bitcoin

CEO of Swiss investment banking giant UBS, Sergio Ermotti, came out with a bold claim recently. He said that blockchain was “almost a must” for business. UBS blockchain support is nothing new, however. Neither is their stance that cryptocurrencies are risky and will probably never become mainstream currencies.

UBS CEO Sergio ErmottiYet, when it comes to blockchain, UBS changes their point of view. The bank believes that blockchain technology can help companies become more efficient and reduce their operating costs across the board, from healthcare to finance. This implies a separation between cryptocurrencies and the technology that they run on.

But is it possible to separate the two? Furthermore, since the original vision of Satoshi was to send peer-to-peer electronic payments without the need for a middleman, UBS blockchain support could be misplaced.

Disrupt or Be Disrupted

“While we are doubtful cryptocurrencies will ever become a mainstream means of exchange, the underlying technology, blockchain, is likely to have a significant impact in industries ranging from finance to manufacturing, health care, and utilities,” UBS wrote in October of 2017.

Adding that, “Just as [the] internet has transformed our lives with email, e-commerce, or smartphone apps, we believe blockchain as an infrastructure technology can power future disruptive technologies through distributive ledgers, smart contracts, tokens or identity management.”

So, what about cutting out the middleman? The centralized authority taking its fees? UBS blockchain research does acknowledge a certain level of risk, although they limit this to technological shortcomings and an uncertainty as to which application will benefit the industry most. They fail to mention whether digital currencies will threaten fiat ones, or if central authorities will be cut out of the loop.

In fact, within the financial sector, UBS predicts that blockchain technology will have irreversible and positive effects. And UBS blockchain support doesn’t stop at words. The bank is also investing in research into distributed ledgers and smart contracts in its business model.

UBS currently holds a number of blockchain patents. Yet, despite Ermotti’s bullish stance, their blockchain activities are dwarfed by other large banks and credit card companies. The list includes American Express, BBVA, Mizuho Financial Group, Goldman Sachs, BNP, and Bank of America (who’s buying up blockchain patents like they’re expecting a war). Is this a bid to disrupt or be disrupted? Or a defensive maneuver to protect themselves against blockchain innovation?

Blockchain and Bitcoin Are One and the Same

Plenty of people criticize Ermotti’s point of view, seeing it as a convenient way of taking a politically acceptable view and a safe position. Leaving the door open without scaring away existing clients. Others believe that more than just convenient, it misses the point completely. After all, blockchain and cryptocurrency are one and the same.

Consider the Bitcoin network for a moment. The way it was created requires miners to believe that the value of the Bitcoin they are rewarded will increase over time (or at least, not decrease in value). Otherwise, there is no incentive or rational reason to invest in expensive mining equipment, electricity, and time.

Bitcoin mining company, Bitmain would benefit from an IPO

So, for those like UBS that are skeptical on Bitcoin, but busy singing the praises of blockchain, they may not fully understand. In an interview with Malta’s Steve Tendon, a member of the country’s Blockchain Taskforce and author of Malta’s National Blockchain Strategy, he expressed his concern with viewpoints such as the UBS blockchain one.

He argued that many regulators and institutions tried to draw a distinction between blockchain and cryptocurrencies, viewing crypto as a bad thing because of its criminal associations and scams, but blockchain as a positive technology with infinite possibilities.

“There is no way you can have a smart contract platform that is as sophisticated as the one that Ethereum has implemented today (but there will be others in the future) unless you also have a cryptocurrency that is being used to “pay” for the computation. So the distinction between cryptocurrency and blockchains are really artificial: they are just two aspects of the same coin,” he said.

Final Thoughts

Ermotti and the UBS team may be making headlines with their views on the transformative technology. Calling blockchain “crucial and disruptive” is all well and good. But frowning on Bitcoin at the same time may just be missing a trick.


This article by Christina Comben was previously published on Coincentral.com

About the Author:

Christina is a B2B writer and MBA, specializing in fintech, cybersecurity, blockchain, and other geeky areas. When she’s not at her computer, you’ll find her surfing, traveling, or relaxing with a glass of wine.

Written by Gary Ross

This article was originally published on UpCounsel.

Cryptocurrency

The meteoric rise of cryptocurrencies has taken the world by storm. Innovators, investors, users, and governments are scrambling to wrap their heads around cryptocurrency and the blockchain technology that they rely upon. The emergence of a new market and business model has created great opportunities for participants, but it also carries significant risk.

Cryptocurrencies present an inherently unique challenge to governments because of their new technology, cross-jurisdictional nature, and frequent lack of transparency. Governments are struggling to develop new ways to regulate cryptocurrencies, adapt existing regulations, and identify fraudulent schemes. Cryptocurrencies and their regulations are evolving before our eyes, and this article will provide a brief background on cryptocurrencies and an overview of where cryptocurrency regulations currently stand.

What are cryptocurrencies?

Cryptocurrency is, by any other name, a currency—a medium of exchange used to purchase goods and services. Or, as some have suggested, cryptocurrency is a “peer-to-peer version of electronic cash.” However, this currency has two qualities that distinguish it from traditional bills and coins.

First, cryptocurrency is a virtual currency that is created through cryptography (i.e. coding) and developed by mathematical formulas through a process called hashing. Second, unlike traditional bills and coins that are printed and minted by governments around the world, cryptocurrency is not tied to any one government, and thus is not secured by any government entity. The fact that cryptocurrencies are not secured by a government authority has led to concerns from critics that this is the second coming of Tulipmania, because we are ascribing value to an otherwise valueless item. However, the potential for cryptocurrencies as a medium of exchange remains enormous.

What is blockchain?

Blockchain is the technology at the heart of most cryptocurrencies, and explaining the technology in detail would require a blog post of its own. What is important to know is that blockchain is a record of peer-to-peer transactions categorized into blocks on a distributed ledger. Despite the obtuse terminology, blockchain functions similarly to a local bank authorizing and recording a transaction, but instead of only one party holding the entire ledger book, the transactions are recorded communally by member nodes, with each node being a computer in a peer-to-peer distributed network.

The blockchain can confirm a transaction within minutes, removing errors that exist when trying to reconcile and audit separate ledgers and transactions. Whenever a transaction takes place, the miners on the blockchain develop a new hash and digital signature to update the ledger and create a new “block.” This block, or recorded transaction, is time-stamped and encrypted and will remain on the blockchain for life.

lockchain is the technology at the heart of most cryptocurrencies

Regulation in the US – Utility Tokens v. Investment Tokens

In the United States, there has been no federal regulation of cryptocurrencies. Instead, cryptocurrencies are often grouped into two non-binding categories: (1) investment tokens that fall under the purview of already existing U.S. securities laws like the Securities Act of 1933 and the Securities Exchange Act of 1934, and (2) utility tokens, which remain largely unregulated (for now).

Security Tokens

Whether the tokens being offered in connection with a particular cryptocurrency are security tokens is decided on a case-by-case basis that even experienced securities lawyers can disagree upon. Tokens are usually analyzed under the four-part Howey Test below to see if the token is in fact a security. Securities must meet the following criteria:

  1. An investment of money
  2. In a common enterprise
  3. With an expectation of profits
  4. Predominantly from the efforts of others

Each characteristic of the token is analyzed against this framework to see if the cryptocurrency is in reality functioning as a new-age security. If it is, then regulators treat it as such, and cryptocurrencies must then be registered and handled with all of the same disclosures and precautions as any other security sold in the United States or to U.S. investors.

Utility Tokens

Cryptocurrencies can also be categorized as non-security utility tokens. These tokens purport to offer intrinsic utility and value, and are typically instrumental in powering the blockchain technology. These tokens function more like commodities than securities, and while they may act like currency in a fully functional network, they also have other values.

However, having a utility token with a properly formed and functioning network does not preclude said token from being labeled a security by the SEC. In In the Matter of Munchee, Inc., a purported utility token with a non-functioning network was labeled a security by the SEC. While labeling a token without a functioning network as a security – as it has no present utility – is not unexpected, the SEC also concluded that: “even if [Munchee] tokens had a practical use at the time of the offering, it would not preclude the token from being a security.”

After analyzing the Munchee Tokens under the Howey test, the SEC concluded that they were investment contracts because purchasers of the tokens had an expectation of profits predominantly from the efforts of Munchee and its staff. The SEC further concluded that Munchee had primed such expectations through its marketing efforts.

While this new case does not eliminate the distinction between utility and security tokens, it does caution that, when deciding whether a given token is a security, the SEC will look beyond utility at the character of the instrument, and base their conclusion based on the terms of the offer, the plan of distribution, and the economic inducements held out by the token issuer.

State Regulation

So far only the state of New York has issued any kind of regulation specifically regarding cryptocurrencies: the BitLicense. The BitLicense is New York’s attempt to control cryptocurrencies within its borders by requiring cryptocurrency businesses to register and comply with several different disclosure and financial obligations. The regulation has been divisive, and many businesses have rallied against its high costs. While a few companies have applied for and received the license, most other companies have simply left the state or stopped offering services to its residents.

Regulation Abroad – The Ever-Shifting Jurisdictional Question

The United States is not the only country grappling with how best to regulate cryptocurrencies. Many cryptocurrency businesses face daunting questions regarding in which jurisdictions to form and to do business in. In the end, the question is quite difficult and fact-specific, requiring communication between legal counsel in different jurisdictions and taking into account nebulous and piecemeal country-by-country regulations. It is impossible to do a detailed analysis without knowing how a country’s existing securities laws, financial regulations, and banking regulations will operate (or will be adapted to operate) with cryptocurrencies. The fact that cryptocurrency-specific regulations are still developing does little to add clarity, and makes the analysis even more challenging. Yet a few global trends are noticeable:

Suspending Cryptocurrencies

Some notable countries, like China, and South Korea, have suspended cryptocurrencies. These countries have cited the risk of fraud and the lack of adequate oversight in suspending cryptocurrencies and their exchanges, forcing cryptocurrency companies and exchanges to relocate.

Regulating Cryptocurrencies

Other countries, like Japan and Australia, have adopted disclosure and regulatory measures, or have companies register with the applicable government authority. Several countries have also tried to implement disclosure or registration regulatory regimes when it comes to cryptocurrencies, but such regimes are cumbersome and expensive to fledging companies.

Cryptocurrencies as Commodities

On the other hand, Switzerland and Singapore, two of the countries at the forefront of the cryptocurrency market, have simply stated that cryptocurrencies are assets not currency, and that they will treat them as such under existing regulations.

Conclusion

Ultimately, cryptocurrency regulation remains in its infancy. Piecemeal regulation has already begun around the world as governments enact new regulations to control and legitimize cryptocurrencies, fold cryptocurrencies into existing regulations, or ban them outright. These splintered attempts at controlling a global phenomenon will keep the cryptocurrency market volatile, and pose a challenge to innovators, investors, and users. They will continue to work in the cryptocurrency space while pushing for legislation and regulation that will remove ambiguity and legitimize cryptocurrencies. At the same time, they must grapple with the possibility that new regulations may be confusing, detrimental, or have negative inadvertent effects.


This article was previously posted on Upcounsel.com

About the Author:

Experienced corporate & securities attorney eager to help you and your business reach its goals. My services range from fund formation and capital raising (e.g. Reg D offerings, crowdfunding) to contract negotiation and compliance with securities and other regulations. I have extensive experience with cryptocurrency and non-U.S. companies.

Prior to co-founding my firm, I worked in the law firms of Sidley Austin, Alston & Bird, and Holland & Knight. From 2009 to 2012, I served in the U.S. Department of the Treasury, where I oversaw financial agents engaged by Treasury to provide asset management and other services relating to the Troubled Asset Relief Program (TARP).

 

 

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The Blockchain: A Guide for Legal and Business Professionals provides professionals such as lawyers, accountants, consultants, and business executives, the information they need to know in order to understand more complex implementations and concepts associated with the technology and, more importantly, how it might be able to help their business. The book also provides knowledge and insight to those with a more in-depth understanding of blockchain technology by developing and emphasizing a legal and business perspective. Chapters include: The Fundamentals of Blockchain Technology Smart Contracts Blockchain Protocols Decentralized Autonomous Organizations Key Management for Business and Professional Firms Digital Identification on the Blockchain Related Technologies that Complement Blockchain Technology General Policy Considerations for Future Regulations Conclusions and Thoughts about the Future

  • Anarchast Ep. 190 Tone Vays: Bitcoin on Wall Street!
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  • GIST TechConnect: Fintech, the Future of Finance
  • State and private sector innovation and the future of US health care
  • Scott Carter Interview (2017)
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Since the launch of Bitcoin in 2009 several hundred different ‘Cryptocurrencies’ have been developed and are now accepted by eBay, AirBnB, Uber, and even for political donations. Yet Bitcoin has also garnered unwanted attention as its dollar value fluctuates wildly and it is implicated in money laundering, Ponzi schemes and trade in illicit goods and services. Central banks, finance ministries, and market regulators have outlined new legislation and started to implement various formal governance initiatives to address the challenges that Blockchain technologies pose. Critics have countered that digital cryptography and the decentralised nature of a distributed, peer-to-peer technology render ‘Cryptocurrencies’ resistant to centralised exercises of public authority.

What opportunities and challenges do Blockchain technologies pose for global governance? Who are empowered and disempowered by these technologies? This volume addresses these questions by integrating critical and constructivist perspectives with approaches from a range of disciplines. It enhances interdisciplinary conversations and mutual learning and provides academics, policymakers, the the general public with a critically informed understanding of the implications that Bitcoin, Cryptocurrencies, and Blockchain technologies pose for the governance of a rapidly changing global political economy.

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