February 2019 Newsletter
In this edition:
- CEO’s Report – Blockchain and the Financial Services Royal Commission: Enhanced Compliance and Lower Costs?
- ADC Forum Global Blockchain Summit – Adelaide, March 18 – 20
- Treasury Consultation on ICO’s
- ADCA & Austrade Trade Missions: Dubai & New York
- Welcome to our New Members
Blockchain and the Financial Services Royal Commission: Can Blockchain Enable Enhanced Compliance at Lower Cost?
Blockchain enthusiasts have long pointed to the opportunity to utilise blockchain technology to create a new trust architecture for key elements of the financial services sector.
Yet, despite the obvious potential, most blockchain projects in the financial services sector have made slow progress. Often doubts on the business model and necessity for network effects that would facilitate the creation of shared trust elements have been the biggest stumbling block.
The Hayne Royal Commission into Australia’s Financial Services sector is perhaps the stimulus that will, at last, encourage real co-operation between key industry players and their regulators. Significant investments in compliance systems are likely to be required to enhance compliance outcomes and to prove that required compliance obligations have been met. These costs will fall upon regulators and the regulated alike. Or is there an alternative model where there is now a business case for a shared trust model for key information and processes?
A relatively straight-forward example could be in the domain of income verification. Systems to confirm claims of income made by loan applicants exist but often involve cumbersome manual steps or processes that can be circumvented or just ignored. Wouldn’t it be easier if a loan applicant could present a trusted digital credential certifying their previous year’s income or their salary? Wouldn’t it be easier if the business rules used to assess the impact of that income on loan eligibility were applied using smart contracts and recorded in a secure repository? And wouldn’t it be easier if inherent compliance was built into systems and easily demonstrable to a regulator rather than the post-transaction reporting models that impose significant costs on regulated and regulator alike?
These are not all easy questions and will require a significant collaborative effort between industry players and regulators and careful thought about the appropriate boundaries for collaboration and market competition.
But with a wave of compliance costs heading for the sector perhaps the business case for a shared trust architecture is stronger than “more of the same”?.
CEO & Managing Director
Full Programme for ADC Global Blockchain Summit Released
Great Line Up of Speakers for Adelaide on March 18 – 20
To see the full conference programme with many more leading speakers, click here.
Treasury Consultation on ICOs
Ensuring Australia is a Welcoming Environment for Token Issuers
The Australian Treasury recently released a Consultation Paper on Initial Coin Offerings enquiring into the effectiveness of Australia’s regulatory approach and the economic case for encouraging innovation in this area.
ADCA welcomes this important enquiry as Australia is not getting anything like a proportionate share of the almost $8 Billion of investments raised through token offerings. Indeed, at least 10 Australian token projects are known to have moved offshore in 2018.
Some would argue that this is a necessary price to pay to protect consumers from potential scams or ill-informed investments.
Indeed, consumer protection is an essential element of any sensible regulatory regime. Not just because it is a vital outcome in its own right but also because it brings strength and credibility to the market and makes that jurisdiction an attractive place for investments.
Regulatory settings that encourage innovation by providing both certainty and speed are also essential. Although Australian regulators have made significant strides in providing guidance to token innovators and entrepreneurs, there remains significant ambiguity that translates as unattractive business risk.
Some key issues that need to be considered are the possibility that the definition of Managed Investment Schemes is so broad that almost any token project could be captured by a regulatory scheme designed for an entirely different purpose or that tax law could require a start up creating the network effects for its token centric business model to regard the receipts of token sales as income that is immediately liable to tax rather than capital to be applied to building the business.
Where an ICO structure has been used as a means to package what is essentially an existing business model then there is no doubt that normal securities law should apply. However, where a token issuance is at the core of a decentrailised business model linking together stakeholders, then there would seem to be a strong policy case for some form of regulatory sandbox to encourage innovation whilst protecting consumers.
ADCA & Austrade Blockchain Trade Missions
See you in Dubai or New York?
The Empire State Building and Burj Khalifa are globally recognised symbols of the dynamic – yet very different – economies of New York and Dubai.
As part of our ongoing collaboration, ADCA and Austrade, are delighted to announce the opening of registrations for the 2019 Blockchain Mission to Dubai and the 2019 Blockchain Mission to New York.
The Dubai Blockchain Mission will take place from 31 March to 3 April and is centred around the Dubai Future Blockchain Summit. With over 20 blockchain projects in areas including digital trade, education, supply chain, health, banking, smart cities and government services, this programme provides the perfect opportunity for Australian blockchain innovators to learn more about this market and how to bid for projects.
Register your interest in participating in the Dubai Mission here.
New York is home to the world’s biggest blockchain conference, Consensus. The 2019 program is bigger than ever and is expected to attract almost 10,000 participants. Key speakers will include leading technologists, regulators and business entrepreneurs. The accompanying mission program will include networking activities to help Australian businesses find customers, partners and investors in the Big Apple.
Register your interest in joining the New York Mission here.
Welcome to our new members
A warm welcome to our new members:
DWF is a global multi-disciplinary legal business, delivering quality legal and strategic business advice. By questioning traditions and thinking beyond conventions, DWF achieve outstanding levels of innovation through their range of connected and managed services that compliment their legal offerings.
Emparta is an exciting fintech solution that enables the transmission of money (fiat currency), using blockchain technology. Emparta is set to launch an Australian Dollar backed stablecoin – eAUD – which is backed 1:1 by real Australian Dollars. Leveraging the efficiencies and benefits of blockchain technology, eAUD offers a secure method of payment that is useful for all kinds of commercial transactions (e.g. P2P, PoS, escrow, e-commerce etc.) which can incorporate the use of smart contracts – a key feature of blockchain technology that will revolutionise commerce and trade.
Ledgerium is a Melbourne based start-up that aims on bringing blockchain to the accounting and auditing industry. Ledgerium focuses on creating a decentralized ledger through a triple entry accounting system that will revolutionise Audit Confirmation, AP/AR Management, and Trust Account Audit. The platform will allow tamper proof and secure transactions, while delivering significant time and cost saving compare to traditional platform and processes.
NEM Foundation is a technology organisation which supports the growth and commercialisation of the NEM blockchain protocol. NEM blockchain is one of the pioneers of open source; blockchain technology that is used by enterprises, universities and governments utilising advanced cryptography in executing transactions. It is known as an easy-to-use, plug-and-play solution. NEM Foundation represents through a diverse and dynamic ecosystem, and we do this by adding partner support, contributing code and tools to the platform, and providing education and training to grow the ecosystem.
We are building a multifaceted solution that will function as a repository for pet health records that are portable, secure and owner permissioned. So no more relying on manual transmission of data between Vets, especially in emergency situations. Or having to carry around a separate vaccination card, it will be on hand, anywhere your phone is and you control who can access your pets medical history and when. Petcoin itself is a store of value, through the Petcoin app you can put away one-off amounts or a regular subscription, then that value can be spent on Veterinary Procedures or Pet Supplies and Enrichment.
Piper Alderman provides commercial and client focused legal advice with a reputation as the ‘go to’ firm in Australia due to our deep knowledge of distributed ledger, blockchain and cryptocurrency technologies. Our passion for blockchain technology and drive to understand our client’s projects and business set us apart and enables us to deliver high quality and relevant commercial advice with attention to the technological opportunities and risks inherent in blockchain projects.