At conferences and events I often get asked a variation of “Is blockchain regulated?”. The short answer is no: technology is rarely regulated. It’s entities who are regulated (especially in finance).
Banks need their technology to conform to certain standards – resilience, security, and so on. The banks (not the technology!) get penalised if they can’t demonstrate high standards with the technology they choose to deploy. A common rulebook that is adapted for each jurisdiction is called Principles for Financial Market Infrastructures.
But blockchains and distributed ledgers share data, and often business is conducted across borders. And many countries have data protection laws specifying that certain types of data (eg personally identifying data) need to remain stored on computers within the borders of the country itself. How do we reconcile data sharing with data protection laws?
Well, instead of thinking about blockchains and distributed ledgers as a mechanism for sharing data (we know data sharing is a solved problem), think of them as “business to business glue” that can make business processes between entities much more efficient.
So, some data absolutely needs to be shared. In finance that may be some trade details: prices, amounts, delivery dates, etc. We do this today anyway, bilaterally and via intermediaries. But we only really want to share this kind of data with the other party (and not the entire network of participants!). Other data needs to be kept completely internal: customer details and instructions, valuations and profit margins, etc.
Can blockchains and distributed ledger platforms deal with these kinds of requirements? Absolutely – R3’s Corda was built specifically for this.
In my role as Director of Research at R3, I recently coauthored Blockchains and Laws: are they compatible? with Baker Mckenzie, the world’s leading cross border law firm. If you’re into that kind of thing, it’s well worth a read.
R3’s cutting edge research and thought leadership is also now available as a separate offering to consortium membership – here’s a selection of papers that R3 has produced.
2016 was the year of creating frameworks and filters to determine if a business problem was worthy of a blockchain-based solution. Often, the frameworks would declare inappropriate potential use cases as ripe for blockchaining, as the frameworks were often designed by blockchain vendors or consultants to let as much through as possible. However, many of the proofs of concepts built in 2016-17 have not become industrial solutions. Why?
Two main reasons are:
The technology didn’t meet the requirements of the use case
The use cases themselves were selected badly
This post discusses what went wrong with use case selection, and presents two new and better questions for use case selection.
Currently a number of central banks around the world are exploring two things:
A decentralised interbank payment system
A central bank digital currency
Though often conflated, these are slightly different concepts. You can decentralise your interbank payment systems without allowing the public to have digital access to the central bank’s balance sheet, and vice versa.
This short post is about the first set of experiments: decentralising the interbank payment systems.
In May 2017, the Indian Centre for Internet and Society think tank published a report detailing the ways in which India’s national identity database (Aadhaar) is leaking potentially compromising personal information. The information relates to over 130 million Indian nationals. The leaks create a great opportunity for financial fraud, and cause irreversible harm to the privacy of the individuals concerned.
Some technology startup companies are raising money in a new way, by issuing digital tokens in return for funds. This is often colloquially called “doing an ICO”, and this article aims to explain how this works.
There is a lot of misleading commentary about smart contracts, leading to confusion about what they are and what they can do. Here are three of the most common myths that I have noticed. This builds on a previous piece, a gentle introduction to smart contracts.
Myth: Smart contracts are self-executing bits of code
Distributed ledgers – databases with shared control over what and how data is added – can be seen a strategic solution to the “reconciliation” workaround that we have had to put up with until now. This strategic solution is applicable to all industries, not just financial services.
This short post is inspired by a conversation I had recently with a couple of finance professors from top business schools who had some questions about blockchains.
Prof A explained that he had heard all the fuss about blockchains but was unsure whether it was revolutionary or evolutionary (I think the word disruptive was also used). I have written about disruption in Fintech and the Evolutionary vs Revolutionary aspects of distributed ledgers before (hint: it depends, it’s both, and yes, perhaps).