In this Around The Block video, DTCC Chief Technology Architect Robert Palatnick discusses the clarity blockchain brings to financial integrity and its ability to create transparency benefiting the traditional financial industry, its regulators and the greater FinTech community.
Tag: policy
Around The Block: Member Viewpoints – Dave Uhryniak, Crowe LLP
Dave Uhryniak, Blockchain Competency Leader at Crowe LLP describes his reasons for joining the Chamber and Crowe’s belief that blockchain will transform the way business is conducted. In this Around the Block: Members Viewpoints, Uhryniak describes Crowe’s dedicated innovation practice and the blockchain industry’s emerging products and technology.
Blockchain Trade Mission to Israel
Blockchain Trade Mission to Israel
Blockchain Trade Mission to Israel
The Chamber of Digital Commerce and the U.S. Department of Commerce Commercial Service led a Blockchain Certified Trade Mission to Israel on April 1-3, 2019. The purpose of the mission was to promote greater collaboration and business activity between the US and Israel blockchain communities. Israel has the highest concentration of tech companies outside of Silicon Valley and its tech industry accounts for 15.7 percent of its GDP. The trip included Chamber members that have an interest in the Israeli tech community. We met with and heard from the key regulators about their activity in the blockchain space and connected with the leading Israeli blockchain startups.
Key Takeaways from the Trade Mission:
- The Israeli Government Has a Coordinated Blockchain Strategy
The Bank of Israel hosted the Trade Mission for a series of meetings with government offices, including the Israel Security Authority, Capital Markets Authority, Israel Money Laundering and Terror Financing Authority, Innovation Authority, Ministry of Finance, Israel Tax Authority and the National Cyber Directorate. Each provided a succinct overview of their learnings and activities regarding blockchain technology, as well as friction points they are working to address. There are a number of notable activities underway that demonstrate an advanced regulatory perspective from Israel.
The most important of these is the Bank of Israel’s inter-ministerial committee, which was formed in January 2018 for regulatory coordination of virtual assets. The committee is comprised of all financial services regulators. Their core activities include: 1. monitoring market developments in Israel and abroad; 2. examining the issues concerning the application of regulation to the various uses of the technology and their implication for economic activity, the financial markets and financial stability; and 3. gathering data and information for the purpose of creating a knowledge base on the issue for regulatory authorities and the public in order to formulate recommendations regarding the desired regulatory policy.
The committee recommended developing a sandbox to help companies bring their products to the financial services industry while addressing risk. It is their view innovation may serve as a protection measure to investors by increasing the quality of the market. The committee also stated that having a coordinated effort allows the regulators the opportunity to more fully assess risks of the technology.
- World’s Leading Cybersecurity Provider Sees Promise in Blockchain
Israel is a world leader in cybersecurity. In 2018, Israeli startups received nearly 20 percent of all venture capital invested in cybersecurity. The Israeli government has a number of programs to support the private sector development and innovation. And the Israeli military has developed some of the most advanced cybersecurity units in the world.
The Israel Innovation Authority (IIA), a government authority, works to stimulate the Israel industry by providing funding and grants. They estimate that there are 100-150 blockchain companies in Israel and about one-third of them have been vetted by the IIA for funding. About 10-15 blockchain companies have received funding from the IIA thus far.
The National Cyber Directorate (NCD) also sees promise in blockchain. Our group received an impressive presentation from the NCD on potential public sector blockchain use cases for the State of Israel. The NCD is interested in using blockchain as the backbone of a national time synchronization network (time-as -a-service), which is on schedule to go into production this year. Other potential blockchain applications they are looking at include a national mobile-ID and digital identity, electronic health records, and smart cities applications.
One of the most encouraging perspectives came from the Israel Security Authority (ISA). In October 2018, the ISA implemented a blockchain application and is using the technology to deliver communications to institutions it regulates. “Implementing blockchain technology in the ISA’s information systems makes it one of the global leading authorities in securing the information provided to the public and its credibility as one of the leaders in Israel’s public sector,” said Natan Hershkovitz, director of the ISA’s Information Systems Department. Representatives from ISA conveyed that they were interested in using the technology to better understand it. The ISA has issued numerous sets of guidance around digital assets and demonstrated a strong understanding of the friction points traditional securities law pose for blockchain technology.
- Israel’s Blockchain Community is Thriving
Throughout the week we had the opportunity to meet with many of Israel’s leading blockchain companies. Some of the most prestigious startups and academics are working on privacy-related projects and protocols (Enigma, Starkware, Hebrew University). And many companies catering towards the enterprise sector (Multichain, QEDit, supply chain, financial services). In addition, public-private networks are developing to allow people to transact in trustless environments.
For example, Orbs is a public blockchain infrastructure for mainstream businesses, crowned a Gartner ‘Cool Vendor’ in blockchain for 2018. Built to unlock the potential of blockchain as the next evolution of open-source, Orbs provides a platform where companies can give users and partners strong guarantees of auditability, governance and forkability that will make them more competitive and attractive to their ecosystem. To accommodate business needs, Orbs is pioneering a hybrid consensus architecture, keeping businesses in control of costs, governance and guaranteed performance, while still capturing the disruption of a truly decentralized Proof-of-Stake ecosystem with a permissionless validator pool.
One of the highlights of our trip was a site visit to Bancor, a decentralized liquidity network for tokens. Bringing the philosophy of Bernard Lietaer to life, Bancor’s vision is to support the development of “community currencies” or monetary systems that are developed for local communities that share a common set of values and interests. Since October 2017, Bancor Network has processed over $1.5 billion in coversions between over 9700 unique token pairs, due to its hub and spoke network architecture, utilizing the Bancor Protocol.
We also learned that Israel’s blockchain community is filled with former military coders. Many start-ups have former government agency heads of security as their CSOs. Since many citizens are required to serve (women two years, men three years and eight months), the military is part of an Israeli’s DNA and culture.
Many developed nations have taken proactive steps to create an inviting environment for businesses to innovate with blockchain technology within their jurisdictions. Will the Israeli tech scene flourish with blockchain at the helm? Israel has a unique set of resources that sets them apart from high skilled technology talent, to cutting edge cybersecurity capabilities, and robust government programs to support innovation. Israel is well positioned to be a leader in the development of blockchain technology and we are pleased to support global collaboration with the Israeli blockchain community.
To learn more about the Chamber of Digital Commerce’s Blockchain Certified Trade Missions and participate in future delegations, please contact our member services team.
The Certified Trade Mission delegation, guests, and members of the Department of Commerce with Ambassador David Melech Friedman after a dinner at the Ambassador’s residence.
The delegation meets with the Governor of the Bank of Israel in Jerusalem.
Delegates and guests dine with Ambassador David Melech Friedman at his residence.
We would like to thank the U.S. Department of Commerce Commercial Service for their support in leading the trade mission. We would also like to thank Ambassador David Friedman for hosting our delegation in Israel. Thank you Galia Benartzi, Emmanuel Benhamou, Shauli Renjwan, Yotam Avichay and all our Israeli friends who provided recommendations and introductions in making this a successful trip.
Member Experiences:
Caroline Abenante, Founder, President and Vice Chairperson, NYIAX – “The Trade Mission was extremely valuable to NYIAX and all technology companies who use or are seeking to implement blockchain. We discovered new potential partners and technology providers who can enhance our offering. Additionally, the ability to spend quality time with corporations large and small who use crypto and blockchain allowed us to have a better perspective of our offering. The trade mission was extremely valuable in understanding where we and others fit. I am personally very happy with its content, preparation and outcome.”
Jeff Brown, Chief Technology Analyst, Bonner & Partners – “The Chamber’s Trade Mission to Israel was a fantastic way to engage one of the most important technology markets in the world. It’s rare to get such well-balanced exposure to policy makers, diplomats, established projects, early-stage ventures, and prominent business leaders all within the span of one trip. The levels of engagement were high, we received great support from the U.S. Department of Commerce, and we left with new insights and an invaluable network in the Israeli blockchain community.”
Rune Christensen, Founder, MakerDAO – “It was inspiring to visit Israel and to experience first hand the pervasive startup culture, risk tolerance, and forward momentum of its blockchain community. We met and engaged with several potential partners during the trip and are leaving feeling very optimistic about the future of the industry.”
Eric Sibbitt, Partner, O’Melveny – “The trade mission was helpful in understanding the breadth and depth of the blockchain ecosystem in Israel. I was particularly impressed by the caliber of human talent and entrepreneurial spirit in Israel, which has helped empower Israel to have a disproportionate impact on global blockchain activity.”
Colleen Sullivan, CEO & Co-Founder, CMT Digital – “CMT Digital has participated in the Chamber’s and U.S. Department of Commerce’s trade missions to the UAE, Singapore and Israel. With each of these trade missions, we have been very impressed with the quality and substance of the meetings. These trips have been meaningful for CMT Digital from both a trading and venture investment standpoint. The crypto and blockchain space is truly global and through these trade missions, we have been able to expand our footprint and become aware of opportunities in regions that we may not have otherwise explored.”
Blockchain Has a Champion in Ontario
Blockchain Has a Champion in Ontario
“Ontario is well-positioned to lead blockchain innovation in Canada and on the world stage,” Minister of Finance for the Province of Ontario, Victor Fedeli
Blockchain Has a Champion in Ontario
Last week, the Chamber of Digital Commerce Canada hosted an event to celebrate the launch of the organization. The Honorable Victor Fedeli, Minister of Finance for the Province of Ontario, joined us for the occasion and provided strong statements of support for blockchain technology and the opportunity in for the sector to expand business in Ontario. The Minister is the first Canadian politician to openly state that he would like to support blockchain business.
“It’s been one and a half years since I uttered the word ‘blockchain’ in the Ontario legislature, where it was heard for the first time. Sadly, we haven’t heard ‘blockchain’ mentioned in the legislature again – but this group will help change that!,” Minister Fedeli said. “We want to look at ways to help Ontarians and businesses benefit directly from the data economy, while being confident that their privacy is protected.”
One of the most important blockchain policy initiatives currently underway for Canadians is the joint Consultation Paper 21-402 Proposed Framework for Crypto-Asset Trading Platforms issued by the Canada Securities Administrators (CSA) and the Investment Industry Regulatory Organization of Canada (IIROC) This document contemplates a comprehensive regime for regulating digital assets and exchanges and we are actively working with our members to prepare a response. Minister Fedeli acknowledged the Ontario Securities Commission (OSC’s) challenges in keeping pace with blockchain technology.
“In recent months, we have heard from a number of people in the blockchain industry about the concerns and challenges you face in navigating the Ontario Securities Commission, or OSC, and its Launchpad initiative. We have heard your concerns loud and clear, and we are working to ensure regulatory agencies balance their mandate to protect investors, while fostering innovation and fair, efficient capital markets,” he said.
We are encouraged that the OSC is revisiting its regulatory framework to take into account the unique attributes of blockchain technology and the potential benefits it may bring to the capital markets. This is an incredibly important moment for the future of Canada to ensure appropriate oversight, while encouraging innovation. If handled appropriately, we believe Canada will attract a new level of investment and economic activity. We are fortunate to have Minister Fedelli’s support during this important moment for blockchain in Canada.
Read the Minister’s full remarks here.
Follow @DigiChamberCDN and / or contact chamber@digitalchamber.org to learn more or get involved with the Chamber in Canada.
Reading the Security Tea Leaves – Statements from SEC Chair Clayton Provide Needed Comfort
Reading the Security Tea Leaves
“The Chamber’s assistance to me and my staff regarding my letter to Chair Clayton was invaluable. I believe that this positive response from the SEC helps stakeholders in the blockchain industry and look forward to working with industry to ensure regulatory clarity in financial services.” – U.S. Rep. Ted Budd
Reading the Security Tea Leaves
Statements from SEC Chair Clayton Provide Needed Comfort
By Amy Davine Kim, Chief Policy Officer
Chair Clayton’s March 7, 2019, letter response to Congressman Ted Budd (R-NC) and a number of bipartisan co-signers is an important development into the SEC’s thinking. It represents a further step in the evolution of policy considerations that is driving decision making at the SEC.
As we know, in February of 2018 Chair Clayton testified before the Senate Committee on Banking, Housing, and Urban Affairs that “every ICO [he’s] seen is a security.” Then in June 2018, Director of Corporation Finance Bill Hinman acknowledged in his speech, Digital Asset Transactions: When Howey Met Gary (Plastic), that both bitcoin and ether are not securities, and that the characteristic of a token, from security to something else, may change over time. These statements do not constitute binding agency guidance. Nevertheless, they are extremely helpful in reading the SEC tea leaves.
Chair Clayton’s March response to a letter from Congressman Budd is a new, significant addition to those tea leaves. Now, the Chair himself formally recognized the following:
Your letter also asks whether I agree with certain statements concerning digital tokens in Director Hinman’s June 2018 speech. I agree that the analysis of whether a digital asset is offered or sold as a security is not static and does not strictly inhere to the instrument. A digital asset may be offered and sold initially as a security because it meets the definition of an investment contract, but that designation may change over time if the digital asset later is offered and sold in such a way that it will no longer meet that definition. I agree with Director Hinman’s explanation of how a digital asset transaction may no longer represent an investment contract if, for example, purchasers would no longer reasonably expect a person or group to carry out the essential managerial or entrepreneurial efforts. Under those circumstances, the digital asset may not represent an investment contract under the Howey framework. (Emphasis added).
The mutability of the characteristics of a token is an important acknowledgment by the Chair of the SEC. It demonstrates a deepening understanding within the agency of the nuances of this industry and the digital assets of which it is comprised. From my questions to Valerie Szczepanik, Senior Advisor for Digital Assets and Innovation, Associate Director of Corporation Finance, and head of the SEC’s FinHub, during our panel last week, it appears the Commission continues to work on guidance to reflect this understanding. (Guidance related to matters specific to custody of digital assets remains elusive.)
We’d like to commend Congressman Budd’s commitment to eliciting answers to these questions that have plagued our industry for some time now, and likely for some time to come. His leadership on blockchain technology is influencing the dialogue and moving the needle forward in getting regulatory clarity necessary for the private sector to develop and innovate. We were fortunate to be able to work with him and his colleagues to craft a letter that would obtain a helpful response for our members.
“The Chamber’s assistance to me and my staff regarding my letter to Chair Clayton was invaluable. I believe that this positive response from the SEC helps stakeholders in the blockchain industry and look forward to working with industry to ensure regulatory clarity in financial services.” – U.S. Rep. Ted Budd
On another matter of “security,” this one of national security, I’d like to call your attention to comments made by Counselor to the Secretary of the Treasury Craig Phillips at the DC Blockchain Summit last week. He said:
“the government is unlikely to be at all compromising and it’s again kind of a show stopper where you can have 99 things go great and if there’s really serious incident involving national security, terrorism, or money laundering. It becomes kind of a show stopper for the evolution [of digital assets].”
The term “show stopper” was used three times in his remarks. It is unclear whether he meant virtual currency in particular, blockchain in general, or specific companies. Typically, Treasury’s enforcement in this regard stems from the Financial Crimes Enforcement Network (FinCEN) and the Office of Foreign Assets Control (OFAC), which generally sanction specific persons, companies, governments, regions, and in some cases, vessels (ships). They typically do not seek to restrict technology. When entering that realm, regulators will regulate the activity regarding the technology, not the technology itself. These comments are concerning as it indicates a deeper conversation that must be addressed if Treasury is exploring its role in the oversight of this industry.
Around the Block Member Viewpoints: Outlier Ventures
Rumi Morales, Partner, Outlier Ventures, describes in this Around The Block: Member Viewpoints why she became one of the original members of the Chamber of Digital Commerce and her belief in blockchain education, advocacy and proper regulation. Her dedication to the industry has led to the creation of her newest endeavor, Outier Ventures, an investment firm focused on the blockchain ecosystem.
Around the Block Member Viewpoints: Civic
Chris Smith, VP of Development at Civic, discusses the significance of blockchain technology, the importance of following regulation “in keeping the good actors in and bad actors out,” along with Civic’s development of digital identity management for a global consumer base. According to Chris, some consumers have up to 90 different passwords and explains how blockchain will become “extremely important in protecting and securing one’s identity.
Around the Block Member Viewpoints: Pillar Project
David Siegel, CEO, Pillar Project discusses his vision for blockchain changing the way equity is traded worldwide using the Pillar platform. He also showcases his belief in decentralization and blockchain’s ability to automate trust.
Around the Block Member Viewpoints: Chamber Advisory Board & Executive Committee Leaders Share Vision
The Chamber of Digital Commerce’s Board of Advisors and Executive Committee leadership gathered in 2018 to discuss the future of blockchain adoption, its regulation and its upcoming impact on our daily lives. They describe blockchain as “enabling,” “opportunity,” “innovation,” “transformative,” and “creativity.” Watch the video to learn what blockchain means to the thought leaders and innovators who are helping to advance the industry and shape the future of the blockchain ecosystem.
Around the Block Member Viewpoints: Matthew Roszak, Bloq
Matthew Roszak, CEO, Bloq and Chairman, Chamber of Digital Commerce discusses the early days of the blockchain industry and the foundation of the Chamber. He believes engagement and education with blockchain is needed in Congress to continue to foster growth of the industry. Through this engagement, the Chamber continues to build relationships with regulators and advocate for the adoption of blockchain technology.