The European Union Blockchain Observatory and Forum, on 21 April, published a report examining how blockchain can be combined with two other important emerging technologies – the Internet of Things (IoT) and artificial intelligence (AI) – to complement each other and build new kinds of platforms, products, and services.

The report first looks at the interplay of blockchain with the IoT, addressing how blockchain can aid its functioning by providing a decentralised platform to the otherwise centralised approach of the IoT. This centralisation poses a number of challenges while monitoring, controlling, and facilitating communication between the millions of heterogeneous devices. The report highlights how blockchain can provide a more robust, more scalable, and more direct platform to overcome these challenges.

The report similarly delves into the potential relationship between blockchain and AI. It explains some concerns surrounding AI, like how it is currently concentrated in the hands of a few large companies due to the high cost of gathering, storing, and processing the large amounts of data, as well as engaging AI experts. It then illustrates how blockchain can mitigate such concerns so that access to AI models is more readily available to individuals and small companies.

Continue Reading EU Blockchain Observatory and Forum explores the convergence of blockchain, AI, and the IoT

The UK Jurisdiction Taskforce (UKJT) recently published a consultation paper requesting submissions from stakeholders working with, or interested in, cryptoassets, distributed ledger technology (DLT) and smart contracts. Submissions will inform a legal statement by UKJT which will aim to settle questions on the legal status of cryptoassets and smart contracts. UKJT is drawn from industry,

The European Parliament has published a non-binding resolution on distributed ledger technologies and blockchains (blockchain technologies).

What is distributed ledger technology?

Best known as the technology behind bitcoin and other crypto-currencies, distributed ledger technology is, in its simplest form, a ledger of digital information maintained in decentralised form across a large network of computers. The information making up the ledger is secured using cryptography and can be accessed using keys and cryptographic signatures. Cyber-attacks are considered to have less impact on such technologies as they need to successfully target many decentralised ledgers.

Positive applications of blockchain technologies

The resolution highlights the potentially positive applications of blockchain technologies across numerous industries and sectors including:

  • Transforming the energy markets by allowing households to produce environmentally friendly energy and exchange it on a peer-to-peer basis;
  • Improving the efficiency of the healthcare sector through electronic health data interoperability;
  • Improving supply chains by facilitating the forwarding and monitoring of the origin of goods and their ingredients or components, and improving transparency, visibility and compliance checking;
  • Enabling the tracking and management of intellectual property and facilitating copyright and patent protection;
  • Improving transparency and reducing transaction costs and hidden costs in the financial sector by better managing and streamlining processes; and
  • The potential of initial coin offerings as an alternative investment instrument in funding SMEs and innovative start-ups.


Continue Reading European Parliament favours innovation-friendly blockchain regulation

Last month (September 2018), the House of Commons Treasury Committee issued a report on its inquiry into the regulation of crypto-assets. The inquiry examined, amongst other subjects, the role of digital currencies in the UK; the impact of distributed ledger (blockchain) technology; and how these should be regulated. The report recommends improvements to consumer and anti-money laundering protections (AML) when dealing in crypto-assets. The improvement will be achieved in part by extending the Financial Services and Markets Act (Regulated Activities) Order 2000 (RAO) to crypto-assets and associated activities.

‘Crypto-assets’, not ‘cryptocurrencies’

As a point of protocol, the report employs the term ‘crypto-assets’ instead of the more commonly used ‘cryptocurrencies’ on the basis that they do not demonstrate the functions of a conventional currency, such as a medium of exchange or store of value.

Crypto-asset concerns

The report also identifies a number of inherent problems with crypto-assets. It identifies the inherent risks to investments due to volatile crypto-asset markets, when compared to conventional fiat currencies. Related to this is the vulnerability of crypto-assets to market manipulation given that the exchanges currently sit outside of market abuse regulations.

There is also increased scope for hacking, which would inevitably lead to the theft of the crypto-assets. The Committee suggests that such risks were exacerbated by the lack of a deposit insurance scheme (such as the UK Financial Services Compensation Scheme) to compensate investors in the event of a hack. Investors themselves have also caused losses, particularly where they have lost their passwords and have, therefore, been barred from accessing the exchange.

The Committee believes that investors and consumers are further let down by the irresponsible nature of promoters, whose advertisements are often misleading (and in some cases initial coin offerings have used celebrities to advertise the offering). The Financial Conduct Authority (FCA) is powerless in mitigating this, as crypto-assets, conveniently (!) fall outside of its remit.

Crypto-asset platforms were widely considered to provide opportunities for money laundering and other criminal enterprises because exchanges allow anonymous access and are not governed by the AML regulation.

Each of the above concerns is underpinned by the absence of a secure regulatory environment that affords investors and consumers sufficient safeguards.

Continue Reading The dawn of crypto-asset regulation

The EU Commission continues to show its support and investment in new technologies in the digital economy. On February 1, 2018, the Commission and the European Parliament launched the EU Blockchain Observatory and Forum, and earlier this month, the Commission also unveiled its FinTech Action Plan.

The Blockchain Observatory

The observatory is designed to be a comprehensive repository of blockchain expertise and a source of innovation and development. It brings together policymakers, technology experts, regulators, businesses and users with the goal of building on new opportunities offered by the blockchain technology. The initiative forms part of the drive towards the digital single market, a Commission strategy to boost e-commerce, modernize regulations and promote the digital economy. The observatory also aims to support the interoperability of blockchain, which is the ability of computer systems and software to exchange and utilize information without restrictions. It also seeks to address the varied challenges in the blockchain ecosystem – such as trust, compliance, security, traceability by design, among other issues.

The EU Commission has also called for a feasibility study on the opportunity of an EU blockchain infrastructure, with tenders closed in January. The study will research the opportunity, benefits and challenges of an enabling framework supporting blockchain-based services, and whether EU services could run on such an infrastructure.

Continue Reading European Commission outlines blockchain development plans, calls for a feasibility study and unveils FinTech Action Plan.

Digital tokens are now being incorporated into federal and state regulatory regimes.  Over the past two weeks, the Securities and Exchange Commission (“SEC”) has suspended the trading of company securities of three publicly-traded blockchain-related companies The first company to be suspended was CIAO Group, Inc. (“CIAU”) due to questions regarding the accuracy of statements pertaining

The UK FCA Publish Discussion Paper on Distributed Ledger Technology
Regulators globally are focused on understanding industry consumers’ views on distributed ledger technology’s (DLT) potential risks and opportunities. On 10 April 2017, the UK Financial Conduct Authority (FCA) published a discussion paper DP17/3 on DLT, and followed it with a speech at the Innovate Finance

The Federal Trade Commission continues its efforts to be the leading federal regulator in the areas of privacy and data security.  Its latest FinTech Forum highlights emerging issues relating to blockchain, machine learning, and related tools that increasingly influence how sensitive information about consumers is collected, used, shared and secured.  These programs help inform the