• Skip to primary navigation
  • Skip to main content
  • Skip to footer
  • Home
  • About us
  • Contact Us
  • Our Team

Blockchain Consultants

Blockchain Transformations Done Here

  • News
  • Subscribe
  • Cryptocurrency Exchange

lawyer

The need for a dialogue between crypto businesses and regulators

October 3, 2020 by Blockchain Consultants

This year has been a strong one for digital asset markets, highlighted by growing institutional inflows and a propitious shift in the regulatory environment. Witness the U.S. Securities Exchange Commission’s September letter that says crypto exchanges that comply with SEC Rule 15c3-3 (the Customer Protection Rule) are free to trade digital asset securities. 

With more than 50 million people around the world investing and trading in crypto in meaningful volumes, Goldman Sachs has recently appointed a new global head of digital assets, as did JPMorgan in February. Goldman’s move was a noted reversal following a May earnings call in which one of its analysts questioned the legitimacy of Bitcoin (BTC) as an asset class.

The timbre of digital asset markets is changing from primarily speculative in nature, driven by high-frequency individual traders riding waves of volatility, to longer-term buy-and-hold activity. For instance, Yale and Harvard have both made waves in recent months with SEC filings revealing multi-million-dollar investments in crypto funds as the asset class continues to gain momentum.

Related: Ivy League universities set to boost the crypto industry with an injection of institutional investment

Visa, Mastercard and PayPal have made recent announcements that they, too, are embracing the digital asset markets, with Visa recently writing on its blog:

“Digital currencies have the potential to extend the value of digital payments to a greater number of people and places.”

Indeed, a growing number of organizations and governments around the globe are embracing digital assets for trading, investing and non-intermediated payments. As proof of this momentum, the World Economic Forum established a consortium to govern digital currencies this year, including government-issued stablecoins, which central bankers have increasingly embraced.

As of mid-July 2020, according to the Bank for International Settlements report, at least 36 central banks have published retail or wholesale central bank digital currency work. At least nine countries have undertaken CBDC pilots; 18 central banks have published research on retail CBDCs; and another 13 have announced research or development work on a wholesale central bank digital currency.

Regulatory clarity has been slow to materialize as a major impediment to adoption by traditional investors and service providers, however, change is undeniably underway.

In addition to the recent SEC move, the Office of the Comptroller of the Currency recently announced that national banks can provide crypto services, including holding private keys for customers and other custody solutions. And crypto businesses enthuse at the prospect of a harmonized patchwork of state and federal money transmitter rules. Such developments are making markets more palatable for participants entering this space.

Related: US banks get crypto custody nod, but instant demand surge is unlikely

According to a new report by Fidelity Digital Assets head of research Ria Bhutoria:

“The OCC’s July 2020 interpretive letter represents a major step forward in increasing the comfort of traditional institutions with digital assets. To the extent that institutions regulated by the OCC actually provide digital asset custody services, a greater number of investors and users may also be more comfortable trading, holding and engaging with digital assets via intermediaries held to the strict regulatory standards of a federal agency in charge of administering the banking system in the United States.”

That being said, it’s a chicken-and-egg quandary: Progress with the regulatory and infrastructure development required to support digital asset markets has not kept pace with activity in these markets.

Does regulatory uncertainty remain?

As rules and regulations continue to be introduced and refined, a host of questions remain:

  1. Will banks store customers’ digital asset keys and facilitate transacting on crypto platforms, and, if so, how; or will they require customers to engage another provider to de-risk that function?
  2. Particularly given the increase in crypto block trading, what prime service offerings can reduce or eliminate the potential for broken trades and theft of assets?
  3. How can crypto businesses manage the fragmentation of instrument pricing and reporting?
  4. How can crypto businesses navigate the rapidly changing and complex regulatory landscape?

The extent to which banks will custody private keys and act as fiduciaries or lay off the risks to other qualified providers is unclear. A growing number of crypto prime service providers have emerged to provide essential trading, lending, clearing and settlement functions, and the battle to compete in this underserved segment has ramped up significantly in recent months. The emergence of credible and capable prime service providers in the crypto world is critical.

As the market for digital assets grows, the number of trade breaks and security breaches may rise if the infrastructure doesn’t mature, making security and compliance existential priorities for trading venues. For instance, there was also a massive Bitcoin selloff on the BitMEX exchange in March: Nearly $200 million was chaotically liquidated with overleveraged traders unable to move money between networks in time to unwind their positions. And according to the Fidelity Digital Assets report, there were 11 exchange hacks in 2019 resulting in $283 million in digital assets stolen. While the total amount stolen has declined year over year, which indicates security improvements, the number of hacks has increased.

In the eyes of U.S. regulators, crypto businesses are virtual asset service providers that will soon be required to collect the names of transaction senders and receivers. They also must have AML policies and procedures in place. Indeed, crypto businesses have their work cut out to reconcile the morass of changing state, federal and cross-border rules. As market oversight remains fragmented and in flux, counterparties can be left holding the bag if a transaction goes awry.

Related: Slow but steady: FATF review highlights crypto exchanges’ struggle to meet AML standards

Other industry-wide issues remain sticking points for institutions on the sidelines.

For one thing, digital asset identifiers aren’t consistent across platforms and exchanges, and there are often different tickers for the same instrument. In the absence of a central crypto market-data repository, trying to process transactions in downstream systems for valuations, pricing, accounting and reporting can create a host of problems. Indeed today, it is virtually impossible for investors and other stakeholders to consistently and reliably calculate true realized crypto gains and losses.

What are the industry needs now?

As this market segment grows and bigger blocks need to move between buyers and sellers, market participants need, more than ever, accurate market data and quality prime services such as lending, custody, margin, clearing and settlement to ensure customers have a safe environment in which to do business. More financial institutions will become active in this space once such concerns about regulatory uncertainty, market transparency, execution quality and capital efficiency are addressed. Fortunately, we are seeing evolutionary forces in crypto data management, rulemaking and reporting.

A host of new providers are creating systems so consumers of decentralized crypto data, such as banks and other institutions, can more easily and accurately reconcile accounting and reporting. Additionally, watchdogs are beginning to apply traditional market protections to the digital asset ecosystem. For its part, the recent OCC guidance is a blueprint that other agencies can follow to usher standards and safeguards that will enable these burgeoning markets to thrive in the months and years ahead.

Crypto businesses can navigate the rapidly changing business and regulatory landscapes by joining a number of highly active trade associations that are now shaping policy and industry change.

It behooves market participants to become as active as they can in these associations as policymakers define digital assets and how they should be regulated. There’s strength in numbers, so engaging with other crypto businesses in dialogue with regulators affords the opportunity to make a meaningful impact on this rapidly evolving segment before a policy is set in stone.

Keeping tabs on the nuance of change underway not only makes markets safer for all but can help financial services firms roll out potentially lucrative lines of business competitors may be pursuing, such as stablecoins for cross-border payments and crypto trading services. Eventually, today’s steep curve of market structure evolution will flatten, and digital assets will be commonly embraced. When that happens, those of us working diligently together now will be gratified to look back as agents of change.

The views, thoughts and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

Kristin Boggiano is the president and a co-founder of CrossTower and was formerly the chief legal officer of crypto exchange software provider AlphaPoint. Before that, she served as a structured products lawyer at Schulte Roth where she handled cases related to CDOs, CLOs and credit derivatives. Kristin has also worked as a regulatory lawyer on Dodd–Frank policymaking and rulemaking, as well as cases involving hedge funds and other institutions invested in digital assets. Kristin is the founder of the Digital Asset Regulatory Legal Alliance for general counsels.

The need for a dialogue between crypto businesses and regulators

Source

Filed Under: blockchain technology Tagged With: Adoption, Bank, Banking, Banks, Bitcoin, BITMEX, Business, CBDC, Central Bank, Central Bankers, chief, Co-founder, Compliance, crypto, crypto exchange, Cryptocurrencies, Currencies, Currency, Custody, data, decentralized, derivatives, Developments, digital currency, Earnings, Environment, exchange, FATF, financial services, founder, Goldman Sachs, government, hacks, head, Hedge Funds, Infrastructure, Investing, Investments, jpmorgan, lawyer, Market, Markets, mastercard, money, opinions, other, payments, PayPal, SEC, security, security breaches, Software, Space, Trading, u.s., United States, us, visa, vulnerabilities, world

Meet Turkey’s ‘unexpected winners’ of Uniswap’s UNI giveaway

September 22, 2020 by Blockchain Consultants

Students enrolled in the class “Introduction to Cryptocurrencies” at Turkey’s Kadir Has University were the unexpected winners of Uniswap’s UNI token distribution on Sept. 17. İsmail Hakkı Polat, one of two lecturers of the class, told Cointelegraph Turkey that all students who, as part of a class project, participated in listing and swapping a token on Uniswap received 400 UNI. In Turkey’s local currency, it was valued at roughly 12,000 liras, or around $1,570, which accounts for nearly half the yearly education fee for some students.

Taught by Polat and Tansel Kaya, two well-known names in Turkey’s cryptocurrency and blockchain ecosystem, Introduction to Cryptocurrencies has for the last two years been included as a compulsory course for students studying new media at Kadir Has University. Polat explained that there are also engineering, law, management information systems — or MIS — and business administration students who take it as an elective course.

Token hunt at the academy

According to a tweet by Kaya, as part of the course taught in fall 2019, an ERC-20 token called KHAS was issued to allow students to directly experience token trading. The students created a MetaMask wallet to purchase the token, which was listed on decentralized exchange Uniswap.

One of the possible use cases identified for KHAS was as a voting app for student president elections. However, due to the coronavirus pandemic in the spring, the studies were interrupted midway. The incident that reminded the course’s lecturers and students of KHAS was the Uniswap’s token distribution, during which thousands of wallet owners received 400 UNI. Polat stated that the class designed a real-world use case for the KHAS token, which was developed as part of the course. Noting that they gathered input from students on this topic, Polat said:

“We received ideas such as the school’s park, cafeteria, student president elections and the merchandise store. We put one of these use cases into practice in a week and provided it to the class in a quiz format.”

Students of the “Crypto 101” course learned how the KHAS tokens can serve eight use cases devised by the group. The lecturers set up a QR code for the university’s merchandise store to receive payments via KHAS, but they did not explain which campus store accepted the token. Instead, they created a “token hunt” game, where the first student to transact via KHAS tokens would be the winner and receive two additional points on their grade.

400 UNI, but no gas?

The winner of the token hunt was Barış Öztürk, a third-year MIS student who chose to take the class due to his interest in cryptocurrencies and blockchain. Calling Crypto 101 “the best class he ever took,” Öztürk elaborated to Cointelegraph that he normally gets bored during lectures, “But in Introduction to Cryptocurrencies, I never skipped a lesson. I even attended after-class discussions with lecturers.”

All of the students who attended the Introduction to Cryptocurrencies course in fall 2019 and transacted with KHAS tokens on Uniswap woke up on Sept. 17 with 400 UNI in their Ethereum wallets, thanks to Uniswap’s distribution of its tokens.

Öztürk claimed his 400 UNI tokens with the help of Kaya. Because he emptied all the Ether (ETH) in his wallet immediately after the project was completed last year, his MetaMask wallet was left unable to pay for the gas needed for the token transfer. Kaya sent him about $75 worth of ETH to pay the gas fee and guided him through the UNI reward claim steps.

After seven hours of nervous waiting in front of the computer screen due to congestion on the Ethereum network thanks to a “UNI reward claim rush,” Barış was able to get his 400 UNI and trade them for fiat. “I never imagined I would land over $1,500 for being a student in a classroom,” Barış said. “The next morning was the first time in my life that my dad sent me a text message saying ‘Good morning, my dear son.’”

Token-based election project sustained due to COVID-19

According to Kaya, Turkey needs to stop being just a consumer in the decentralized finance space and start making its own projects: “The blockchain and crypto industry desperately needs a qualified labor force. Providing education in this field enables access to many global projects for the young population.” Discussing the need for the youth to consider the cryptocurrency ecosystem as a career space instead of a way to make a fast buck, Polat said:

“Cryptocurrencies and blockchain stimulate a new profession in all occupational fields. In tomorrow’s world, a financier will have to know decentralized finance, and a lawyer will have to know smart contracts. While academic education is on the way to an interdisciplinary and interprofessional structure, blockchain serves as a palpable case study in this transition. That’s why it is critical, especially for the youth, to have a grasp of the new generation financial ecosystem rather than crypto trading.”

The first half of the 14-week Crypto 101 course is all about blockchain, and the second half teaches students cryptocurrency technologies. According to the information shared by Polat with Cointelegraph Turkey, Kadir Has University has also established a “Crypto 102” course in which issuance and coding processes of crypto tokens and smart contracts will be taught.

Meet Turkey’s ‘unexpected winners’ of Uniswap’s UNI giveaway

Source

Filed Under: blockchain technology Tagged With: altcoin, blockchain, Business, Career, coding, coronavirus, crypto, Cryptocurrencies, cryptocurrency, Currency, decentralized, Decentralized Finance, DEX, Education, Elections, ether, ethereum, exchange, fiat, finance, format, ideas, information, Law, lawyer, new media, payments, smart contracts, Space, text, Trading, Turkey, Uniswap, voting, world

Sagewise pitches a service to verify claims and arbitrate disputes over blockchain transactions

August 6, 2018 by Blockchain Consultants

Sometimes smart contracts can be pretty dumb.

All of the benefits of a cryptographically secured, publicly verified, anonymized transaction system can be erased by errant code, malicious actors or poorly defined parameters of an executable agreement.

Hoping to beat back the tide of bad contracts, bad code and bad actors, Sagewise, a new Los Angeles-based startup, has raised $1.25 million to bring to market a service that basically hits pause on the execution of a contract so it can be arbitrated in the event that something goes wrong.

Co-founded by a longtime lawyer, Amy Wan, whose experience runs the gamut from the U.S. Department of Commerce to serving as counsel for a peer-to-peer real estate investment platform in Los Angeles, and Dan Rice, a longtime entrepreneur working with blockchain, Sagewise works with both Ethereum and the Hedera Hashgraph (a newer distributed ledger technology, which purports to solve some of the issues around transaction processing speed and security which have bedeviled platforms like Ethereum and Bitcoin).

The company’s technology works as a middleware, including an SDK and a contract notification and monitoring service. “The SDK is analogous to an arbitration clause in code form — when the smart contract executes a function, that execution is delayed for a pre-set amount of time (i.e. 24 hours) and users receive a text/email notification regarding the execution,” Wan wrote to me in an email. “If the execution is not the intent of the parties, they can freeze execution of the smart contract, giving them the luxury of time to fix whatever is wrong.”

Sagewise approaches the contract resolution process as a marketplace where priority is given to larger deals. “Once frozen, parties can fix coding bugs, patch up security vulnerabilities, or amend/terminate the smart contract, or self-resolve a dispute. If a dispute cannot be self-resolved, parties then graduate to a dispute resolution marketplace of third party vendors,” Wan writes. “After all, a $5 bar bet would be resolved differently from a $5M enterprise dispute. Thus, we are dispute process agnostic.”

Wavemaker Genesis led the round, which also included strategic investments from affiliates of Ari Paul (Blocktower Capital), Miko Matsumura (Gumi Cryptos), Youbi Capital, Maja Vujinovic (Cipher Principles), Jordan Clifford (Scalar Capital), Terrence Yang (Yang Ventures) and James Sowers.

“Smart contracts are coded by developers and audited by security auditing firms, but the quality of smart contract coding and auditing varies drastically among service providers,” said Wan, the chief executive of Sagewise, in a statement. “Inevitably, this discrepancy becomes the basis for smart contract disputes, which is where Sagewise steps in to provide the infrastructure that allows the blockchain and smart contract industry to achieve transactional confidence.”

In an email, Wan elaborated on the thesis to me, writing that, “smart contracts may have coding errors, security vulnerabilities, or parties may need to amend or terminate their smart contracts due to changing situations.”

Contracts could also be disputed if their execution was triggered accidentally or due to the actions of attackers trying to hack a platform.

“Sagewise seeks to bring transactional confidence into the blockchain industry by building a smart contract safety net where smart contracts do not fulfill the original transactional intent,” Wan wrote.

Read more: https://techcrunch.com/2018/08/03/sagewise-pitches-a-service-to-verify-claims-and-arbitrate-disputes-over-blockchain-transactions/

Filed Under: smart contracts Tagged With: computing, Cryptocurrencies, distributed computing, Entrepreneur, ethereum, executive, lawyer, Los Angeles, managing partner, peer to peer, Sagewise, scalar capital, smart contract, U.S. Department of Commerce

Footer

Get the latest news delivered weekly. Simple as that.

  • Cryptocurrency Exchange
  • About us
  • ANTI-SPAM POLICY
  • Cookies Policy
  • Digital Millennium Copyright Act (DMCA) Notice
  • Earnings Disclaimer
  • Exchanges
  • Our Team
  • Terms of Use

Copyright © 2021 · Blockchain Consultants LLC · WordPress · Log in