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Blockchain, Crypto, ICO

Blockchain and Crypto update: Reality begins to bite

There have been several developments in the Blockchain and crypto currency world since our last update (see here).

This article by DLA Piper on the Lexology web site reports that the FCA is soon likely to begin enforcements against companies that are carrying out activity in either crypto currencies or ICOs that should be regulated. In many cases, trades may be Financial Instruments, as may be tokens (see here). In the US, this article on The Market Mogul reports that the SEC has ruled that Ether is not a “security”, which has regulatory implications. In May, the CFTC issued an advisory that gives exchanges and clearinghouses registered with the CFTC guidance for listing virtual currency derivative products. The press release can be found here and an article on Coindesk looking at the contents can be found here.

Meanwhile, the Bank of International Settlements has issued this report which provides a view that Bitcoin is too easily manipulated. The issue is discussed in this article on the Daily Hodl. In Europe, DNB, the Dutch Central Bank, has concluded that blockchain cannot yet support the financial markets infrastructure, as reported here on the CCN site.

This article on the Tabb Forum by George Bollenbacher of Capital Markets Advisors looks at the possible contention between Distributed Ledger Technology(DLT) use and the GDPR regulation. There are many issues to consider, including the isue of who the “controller” is, and the application of the “right to be forgotten” in an immutable technology.

This article by Bill Dwyer of Numerix, on the Tabb Forum site, examines  the promise held by blockchain and DLT for the financial markets, looking at the potential of the technology to facilitate processes involving multiple parties. This article by Keith Pritchard of JDX Consulting on The OTC Space suggests that the business case for blockchain use, including for regulatory applications, needs to be properly examined. While blockchain is a useful tool for some applications, it may not be the technology to solve all problems.

On the energy side, there are some views emerging which do not feel that blockchain necessarily represents a useful technology for supporting the industry. This post on Green Tech Media looks at issues which could arise if using blockchain to support peer to peer trading on the distribution network, whether by “prosumers” or others. Similarly, this report om Green Tech media argues that since the “hype cycle” for blockchain projects is on the wane, startups should turn their attention to making their products useful. On the wholesale side, Enerchain has published this key insights report which looks at how the initiative has fared over the past year.

A new phase in the use of DLT and blockchain has been entered, following the “hype cycle”. This phase will likely see which applications have “real life” use and which are no longer viable. It will be interesting to watch these as they develop, and in some cases get adopted.

About avivhandler

Aviv is the Managing Director of ETR Advisory, a niche consultancy focused on the regulation of the commodity, energy and financial markets. He has more than 23 years of experience in the financial, energy and commodity markets, covering regulatory compliance, credit, risk and financial technology. Prior to founding ETR, he was Partner at SunGard Global Services, where he built a Centre of Excellence in European Energy and Commodity Regulation. Before that, he founded Coherence, a consulting firm specializing in credit risk in commodity and energy trading as well as software product management. The credit practice ultimately became part of Sirius Solutions, where he was the Managing Director of Europe. He has also held management roles at KWI and Iris Financial, among other organizations. Mr. Handler holds a degree in computer science from Imperial College, University of London.

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