Blockchain News Issue. 5

moac.io

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MOAC

10 min readJul 5, 2018

I. Commentary of the Week

Banking Regulatory Commission Essay: ICO financing related to digital currency is a legally recognized financial activity which must be included in the financial regulatory framework and prudently operated within the scope of the company’s official license.

The official website of the China Banking Insurance Regulatory Commission published an essay titled ‘Development and Regulatory Research of Distributed Ledgers, Blockchains, and Digital Currency.” The essay points out that activities related to distributed accounts, blockchains, digital currency-related fund transactions, derivative transactions, ICO financing, and operating trading venues are all statutory financial services, and must be included in the corresponding financial regulatory framework and prudently operated within the limits of its license.

According to the paper, regulators should follow the principle of ‘technology neutrality’ in relation with the rapid development of financial technology. Supervision should be implemented according to financial business principles, and fair competition in the market should be maintained. Qualitative penetration of financial technology/internet business should also be conducted in a timely manner to prevent technology from being used in the name of illegal business. Regulation over cooperation between financial institutions and enterprises should also be strengthened, as well as control over the risks of information technology. At the same time, tracking, monitoring analysis, professional knowledge reserves, talent teams, and policy measures should also be continuously strengthened.

Comment:

‘Although it is a dissertation rather than a clear official policy, it can be seen that the government has gradually adopted an acceptant policy towards digital currency. This is theoretical foundation for a change from a one-size-fits-all regulation policy to a looser policy. Perhaps digital currency will be formally legalized in the near future. ICOs been included in the regulation is also big news for the blockchain industry, because empty projects can’t cheat others anymore, and real projects can be funded through ICOs.’

Ⅱ.Policy Developments

1.

Europe — The European Parliament Economic and Monetary Affairs Committee: Digital currency from a central bank could create a more stable financial system.

26 June: Six European Parliament Economic and Monetary Affairs Committee officials stated that although cryptocurrency can’t replace traditional currency due to scalability limitations, Central Bank Digital Currencies (CBDCs) could create a more stable financial system. A paper by a German member of the Kiel Institute for the World Economy also concluded that CBDCs could be used as a substitute for some of the current reserve banking systems.

2.

United States — A Southern Florida District Court ruled that a startup company’s tokens count as a security.

June 28: The Southern Florida District Court issued a detailed analysis describing why the digital currency startup Central Tech’s tokens are securities under the current law. The court quoted the Howey rule, stating that this token satisfies all three conditions defining an ‘investment contract,’ and is therefore a security. These three key points include: investment in assets, investors can receive economic benefits from the company’s success, and the success or failure of Central Tech depends entirely on the efforts of its founders. Stephen Palley, a lawyer in blockchain and digital currency matters, commented that although the report may not be a precedent from other similar cases, it may be cited in legal proceedings related to digital tokens and securities.

3.

Guangzhou — The Guangzhou Tax Department plans to launch a large-scale ‘tax-chain’ platform across the city in July.

According to the Southern Metropolis Daily, 11 companies in the Huangpu District and Guangzhou Development Zone are currently piloting the ‘tax chain.’ The Guangzhou Tax Department plans to launch a large-scale ‘tax chain’ platform across the city in July. The country’s first blockchain electronic invoice was already successfully launched on a ‘tax chain’ platform. The link nodes of the invoicing party, the receiving party, and the taxation department etc. have already been opened, making this invoice data flow a reality.

Shenzhen — The ‘Action Plan’ released by Shenzhen will promote blockchain and another industrial internet research.

June 28: Shenzhen recently launched the ‘Shenzhen Industrial Internet Development Action Plan (2018–2020)’ and the ‘Measure for Shenzhen City to Accelerating the Development of the Industrial Internet.’ This includes a number of measures for internet development as Shenzhen strives to build a leading national industrial internet region that drives innovation and guides applications and ecological activities by 2020. The Action Plan states that it will promote the application and exploration of emerging frontier technologies such as edge computing, artificial intelligence, augmented reality and virtual reality, blockchain, and physical information systems in the industrial internet field. 30% of funds used for demonstration applications are subsidized, so long as it doesn’t exceed the total investment, up to a maximum of 3 million Yuan.

Hangzhou — A Hangzhou internet court confirmed the legal efficacy of electronic data stored on blockchains for the first time.

June 28: A Hangzhou Internet Court publicly announced the results of a dispute over rights infringement concerning the circulation of works, the first time that electronic evidence on blockchains was confirmed to be legally effective.

Ⅲ.Industry Developments

1.

Europe — Large financial companies like BNP Paribas and Deutsche Bank have launched KYC trials.

June 25: BNP Paribas and Eutsche bank and other large banks have conducted ‘Know Your Customer’ experiments on compliance applications on the R3 Corda blockchain platform. It is reported that ABN Amro, Societe Generale, China Merchants Bank, Holland International Group (ING), Raiffeisen, and others also participated in the test. Regulators and central bank participants also include the Central Bank of Columbia, the Federal Reserve Bank of Boston and the Bank of Peru, as well as the Insurance Regulatory Authority.

2.

Ant Financial Service — Ant Financial announced the launch of a blockchain cross-border transaction.

June 25: Ant Financial announced that Standard Chartered Bank has become a core partner to support its new blockchain-based cross-border payments service between Alipay HK and the Philippines-licensed e-wallet GCash will be the first to launch the service in Hong Kong and the Philippines respectively. Standard Chartered Bank will provide settlement services for AlipayHK and GCash, and provide instant foreign exchange rates and liquidity to support instant money transfers between the two licensed e-wallets.

Xiong’an — The first ‘blockchain supply chain’ financing business in China was launched on June 28th.

The country’s first ever ‘blockchain-supply chain’ subcontractor financing business was launched in China. The subcontractor financing business successfully completed the first phase of the interception channel in the Rongdong area of Xiong’an New District’s Rongcheng District. CCCC First Airline and Huaxia Bank worked together to complete the first phase of the Rongcheng Rongdong District’s interception channel application, providing order financing for subcontractors with a credit of 4 million Yuan. The ‘blockchain-supply chain’ is the first financing business for small and medium-sized enterprises in the Xiong’an New District, and even the national financial system, to successfully implement blockchain technology, and has great value as a reference for the development of future related businesses.

Huobi Jingdong — Huobi China and Jingdong Cloud reached strategic cooperation.

June 28: Huobi China and Jingdong Cloud reached an agreement concerning R&D of blockchain technology and applications. According to the agreement, Huobi China and Jingdong Cloud will focus on three areas of collaboration: First, the two parties will jointly explore and research lower layer blockchain technology. Second, the two parties will jointly explore blockchain technology applications in finance, the Internet of Things, gaming, logistics, and other fields. Third, both parties will explore and analyze public data of current public chains and chain alliance projects and conduct in-depth data mining to form industry insights and data reports.

IV. Cryptocurrency

Ethereum — Ethereum’s new standard, ERC 1155, has entered the game industry, and has already submitted to the Ethereum GitHub Repository.

June 28: Ethereum’s new standard ERC 1155 is working hard to break in to the gaming industry. Unlike previous models, ERC 1155 stores projects in a single contract, with very little data to distinguish between tokens. 1155 allows instant transfer and conversion of any number of items, with up to 200 operations per transactions, a huge milestone in scalability. More importantly, the system is compatible with both interchangeable and non-interchangeable items. For video game enthusiasts, this solution will easily become the most direct choice. The biggest question is whether game developers will accept this concept. The standard has currently been submitted to the Ethereum GitHub Repository and is awaiting feedback.

Digital Currency — More than 1,000 digital currencies have been declared dead.

June 28: As the digital currency frenzy abates, Dead Coins lists about 800 currencies that are regarded as failed, while Coinopsy estimates more than 1,000 digital currencies have been declared dead. According to an analysis by the ICO consulting firm Satis Group in March, less than 4% of ICOs increased from $50 million to $100 million. Most ICOs raise funds in development teams with no experience or actual products, only IOUs.

Mining — Flooding in Sichuan has caused water damage to mines, resulting in Bitcoin’s entire network computing power plummeting.

June 30: Mianyang, Guanyuan, Chengdu, Aba, Meishan and other regions in Sichuan have suffered from continuous heavy rains and floods, resulting in various degrees of damage to local hydropower and communications facilities. According to statistics, 70% of the world’s cryptocurrency mining machines are in China, with 70% of those being located in Sichuan, making Sichuan the global hub for mines. Before the flooding disaster, Sichuan mines were receiving a large number of mining machine hosting orders, and the mines were shut down in the face of natural disasters. There is no specific loss of data for Sichuan mines at present. However, at least tens of thousands of mining machines in affected areas have been flooded. It can be inferred from recent viral photos that many of the machines have been practically destroyed beyond repair.

Ⅴ. Voices

Martti Malmi — Bitcoin developers: The global digital currency market is in its infancy.

June 27: Martti Malmi, a core development member of the Bitcoin project, said at the first Blockchain Technology and Industry Application Seminar that the entire digital currency market is in its infancy in both the world and in China. According to Malmi, in the future the industry will become more and more official, and the difficulty of financing empty currency will be even greater. China’s currency circle is different than the global one. China is more concerned with mining transactions, while Asia is highly concerned with digital currency, because people are already familiar with and accept digital payment. China’s digital payment system is already very well developed, with Alipay being a case in point. There is no Alipay system in Europe, with credit cards being used more often.

Zhang Jian — Fcoin Founder Zhang Jian: Not optimistic about the system currently regulating Fcoin, but advocating the establishment of new rules.

June 25: Fcoin founder Zhang Jian commented on regulatory issues in Wang Feng’s ten questions. ‘There are currently two different natural currency platforms. One is points, and the other is stocks. Our currency platform is similar to stocks. There is no doubt that one has various rights such as dividends, benefits, and voting rights. But I don’t think it’s the modern stock system. Rather, it is the future stock system. The current system of regulations is now regulating future forms of stocks.

I think there are a few problems. So we call it a token, and not a share. Therefore, I am not optimistic about using the current regulatory system to supervise future high-volume circulation of this kind of equity, as it is completely different from the original system. At the same time, I strongly advocate and admire establishing new rules as soon as possible. I think that the direction supervision will take in the future will be publicized supervision. What is community-based supervision? For example, in a traditionally listed company, ordinary users can’t supervise because you can’t run their company, check their inventory, and see if their assets are still there. But one can always see whether the assets are still there with digital currency. Therefore, I believe that public autonomy must be the direction that supervision takes. The theory is now, the formality is yet to come.

Wen Xinxiang — Wen Xinyang, who once wrote on the advantages and risks of virtual currency, has been transferred to a position in the Central Bank’s payment department.

June 25: Wen Xinxiang, deputy directly of the Monetary Policy Department, was transferred to a position at the Central Bank’s payment department. Wen Xinxiang once wrote that bitcoin has, to a certain extent, broken the oligopoly of currency exchange restrictions and payments in the real world. The cost is very low, which meets the public need for low-cost international payments and transactions. However, virtual currency still has many risks. First, there is a lack of transparency. Second, there is a lack of legal recognition and supervision, and a lack of compensation mechanisms for losses suffered by frauds, theft, and physical bankruptcy. Third, there are technological security problems. Fourth, the cost of solving these problems is very high.