OAX Project Q4 Roadmap Update — Legal and Regulatory Stream

By Hugh Madden & Liam Bussell

Yesterday we posted the first part of the Q4 Project Roadmap with the “Technology Stream”. Today we continue by looking at perhaps the most overlooked aspect of Blockchain projects, the “Legal and Regulatory Stream”

The long term deliverables of the legal and regulatory stream include:

  • Corporate structure and governance for the Foundation itself, which should not be an operator of the platform; rather it’s focus is to produce the technology, ecosystem, and legal framework to allow other entities to operate and participate with the platform in a safe and legal manner
  • Structure and governance for a supporting organisation that -may- operate some aspects of the platform, including but not limited to official positions on security and underlying blockchain structural matters, and facilitation of dispute resolution. Formation of an association has been one proposed model.
  • A governance model for the decentralised platform itself
  • A high level legal framework to support the participation in the platform and eco-system; particularly:

◦ “User Fund’s”; the implications for gateway services holding and tokenising customer funds under banking, stored value, and similar regulations

◦ Money services; the AML, KYC, CTF, and other related matters

◦ Securities laws; impact, if any, of such laws and regulations of the OAX token itself, and the tokenized and traded tokens support by the platform and consideration for other regulated assets such as futures or certain commodities

  • Detailed legal positioning on a per jurisdiction basis in support of the foundation itself, and early adopters and service providers to the platform
  • Regulator and government engagement as needed and/ or suitable

The Early engagement with potential working group candidates, and decentralised exchange protocol projects, has highlighted the following, salient points with regards to project priorities:

  • Very few groups are focussed on integration with traditional financial services and regulations; however there is a strong desire across the industry to have gateways and tokenised fiat currency support with a legal framework
  • Most jurisdictions are expecting regulatory changes related to exchanges and gateways holding customer moneys; but few industry groups have significal legal projects underway to understand and position for the implications
  • There are many “digital asset only” decentralised exchange protocol projects underway, significant innovation is occurring in this space, however:

◦ Currently the only production ready protocols are better suited for low volume peer-to-peer trading

◦ Robust “order book” style protocols suitable for high frequency, liquid markets are not expected until 2018

Subsequently it seems apparent that the foundation can deliver the earliest value by focussing on the following areas:

  • Delivery of a technical and legal framework for compliance friendly fiat tokens
  • Structure of the platform and foundation corporate governance and operating model
  • Critical mass ecosystem building of industry partners and community

These fiat tokens can readily be integrated into existing blockchain services, and add significant value.

Decentralised exchange integration is a critical delivery for the project; however a robust liquid decentralised exchange market is not likely to be available until 2018 — by which time the platform’s fiat tokens should be positioned as the industry standard.

Note that this split of the project into two phases is congruent with general input from the community which has voiced a desire to see a rapid delivery of value from the project, rather than a delayed “big bang” of delivery in 2018.

Legal and Regulatory Stream

The key deliverables for the legal and regulatory stream of the project for this phase are as follows:

  • Corporate and governance design for the foundation with PWC assistance
  • Overall operating model and governance design for the working group, platform, and potential association or other related organisations
  • Global positioning papers on custom moneys, money services, and if relevant, securities laws
  • Deep dive into relevant jurisdictions for early adopters and working group members

Tomorrow we will cover the third and final stream in “OAX Project Roadmap — Community Stream”

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