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Blockchain Research Institute Report Calls for Crypto Regulation Clarity

“Regulators would be wise to avoid the chainsaw when microsurgery could do” when it comes to blockchain technology, says author Don Tapscott.

Tapscott, the co-founder and executive director of the Blockchain Research Institute (BRI) – a multi-million dollar global blockchain think tank – published a report Wednesday calling for increased regulatory clarity on blockchain and cryptocurrencies. The report also recounts the takeaways from a roundtable discussion held in May on cryptocurrency regulation.

The report identifies the four “core issues” of regulatory oversight as being a lack of regulatory clarity, obsolete statutes, a lack of dialogue between both regulators and other stakeholders, as well as, financial service providers and blockchain entrepreneurs.

The report does caution a clear “Canadian slant,” given that the majority of the near 70 participants were from Canada.

This would explain why some of the major takeaway items are explicitly geared towards a Canadian audience, with one such action item being “establish a national regulator in Canada” highlighting the lack of a central securities regulatory authority in the country.

Other such recommendations in the report include forming action committees, encouraging special interest groups and creating clearer distinctions between different types of cryptocurrencies.

All of these recommendations, however, seem to support the sentiment for a greater degree of clarity when it comes to blockchain technology, not just with government officials but with the broader public as well.

Tapscott explains:

“The new oil of the digital age is data…We need to help educate the public to distinguish a cryptocurrency from the many amazing results that people are achieving with blockchain, and what they might do with a self sovereign identity secured on a distributed ledger”

Ongoing research by BRI on the impact of blockchain technology to society is supported by leading corporations and government agencies such as Microsoft, IBM, the Bank of Canada and more recently, Salesforce.

In February, it was reported that BRI would be taking on a new project with one of India’s leading tech industry organizations to help developers in the country learn more about the use cases of blockchain technology and spur forth stronger digital economies.

Image via Shutterstock

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

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“We Need Microsurgery on This New Economy”, Don Tapscott

Cointelegraph had the opportunity to meet Don Tapscott, one of the world’s leading experts on the economic and social impact of technologies and innovations, at the World Economic Forum in Davos.

Don has been an advocate of Blockchain and the digital economy for many years. This year at the World Economic Forum is the first year he was not in the minority. Blockchain was talked about more than every other topic (with the exception of Donald Trump attending the Forum at Davos) this year. Don Tapscott sat down with Cointelegraph to talk about the evolution of the digital economy and the impact blockchain has had and will continue to have on our lives.

Cointelegraph (CT): I’m here with Don Tapscott, CEO of Tapscott Group, co-founder at the Blockchain Research Institute and one of the most influential voices of blockchain and the digital economy. Thank you for being with us today.

Don Tapscott: Happy to be here.

CT: You are a senior advisor for the World Economic Forum. What are your thoughts on how big a role Blockchain and the digital economy are playing in Davos this year?

DON: It’s interesting. First of all, I don’t speak for the forum, I speak for myself, but I was interviewed recently by the Wall Street Journal television here and the guy said to me, “You know, this is the third year that we’ve interviewed you about Blockchain and this year everybody’s talking about it in Davos. Describe how it’s changed over the three years.”

I thought about it for a second and replied, “Three years ago the main person I was talking about was me and I was certainly talking about myself, maybe a few other people. Last year we had big financial institutions that we talked about and also some entrepreneurs around the congress, central bankers, ministers of finance. I spent some time with them. This year this is the Blockchain Davos.”

Blockchain – number two word at Davos

Apparently Blockchain on the formal program as a word appears more than the United States and Europe combined. Someone did an analysis of the language used at the World Economic Forum and they found that “Blockchain” was the number two word at Davos, number one being “Trump”. Anyway, be it as it may, it’s an extraordinary thing; it’s not just integrated into the formal program and not only powerful people are talking about it. I estimate that around 1000 entrepreneurs, investors, social activists, social entrepreneurs, academics and so on – have come to Davos and are not inside the Congress Center. They’re outside doing all kinds of things. So you’ve got the Global Business Blockchain Council holding whole days of programming, hosting a dinner with 200 people, with hundreds of people lined up hoping to get in. Then there was the Crypto HQ – I wondered what that was for days. I couldn’t get in there because there were lines up there all the time. Everywhere there were activities related to Blockchain. For example, i’m walking on the street, someone recognizes me and says “We’re having a big Blockchain meeting upstairs. Would you come and speak to us?” And I go upstairs and there’s a hundred people in the room and I do a panel discussion and answer a bunch of questions. So this is very reflective of what is happening more broadly in the world. Finally, this technology has not just come of age. It’s really becoming a part of the vernacular and everyone is trying to figure it out.

CT: Thank you. You are from Canada. How do you feel the Canadian government piloting Ethereum blockchain to create more transparency?

DON: Canada is a pretty interesting story. When you think about where this whole [Blockchain] thing is going to be centered in the world, there are a few candidates; Switzerland is obviously one. I don’t think it’s going to be Silicon Valley, basically because leaders of all paradigms have difficulty embracing the new. But Canada’s going to govern it. It’s pretty interesting – particularly including the fact that the Prime Minister was here. He was totally into Blockchain and all the things.

As a part of our Blockchain Research Institute we have organizations such as the Bank of Canada, the Federal Government, the Provincial Government and the City of Toronto, but there’s also 5, not 95, big banks who are working on reinventing the payment system. We also have Ethereum that was created by a university dropout from the University of Waterloo. We’ve got a thought leadership with our Research Institute. The two biggest incubators in North America are in Toronto. MaRS alone is 1.9 million square feet.

How to manage brain drain

We used to have a brain drain in Canada where entrepreneurs would leave the country and move to the U.S., but now thanks to two things that’s been reversed. One of them is Donald Trump. A lot of people, especially Canadians, want to move back to Canada, but the second one is: there is a funding problem when you would get to a certain point where your company would make maybe 20 million in revenue and you will need to do a series A and some big venture capitals in Silicon Valley would say, “Great. We will fund you, but you’ve got to move to the Valley.”

As a result of this there was a company drain as well. That’s been turned around now because of ICOs and the people who don’t have to go the venture route to fund the company. The other thing is that we have a pretty easy regulatory environment in Canada too. We surely have crazy stuff going on like in some countries in the world. I’m also very hopeful that the Bank of Canada is going to be a real leader in the space because ultimately every country needs to embrace Blockchain for the fiat currency.

So we need the digital dollar, digital pound, digital yen and so on. That would give central bankers powerful tools to manage the money supply, and change the inflation rate. You can see what’s happening instantly. You have a crisis, and rather than give the money to a bank, you could helicopter onto the mobile devices and save the poorest people. There’s a lot going on in Canada right now.

CT: Thank you. You already mentioned this, but maybe you can tell us more. Do you think other governments will be as open to these technologies as Canada?

DON: Well, all around the world it’s very uneven in terms of government understanding and comprehension of this whole secondary era of the Internet. Because that’s what we’re talking about here. We have had the internet of information for 40 years and now we’re getting the internet of value or anything that value can be moved, stored, transacted in a secure and private way. Trust is achieved by cryptography and collaboration and code rather than by intermediaries. That’s is a very, very powerful thing. It will be the center of any building and innovation economy, but governments…

Many don’t understand it, you know. I was recently in Korea. Here’s the country that created a miracle around the whole first era and they created these amazing manufacturing facilities – they call it the miracle on the Han. Now the Korean government is trying to figure what to do with them. They banned ICOs and now looking at restricting or even banning cryptocurrency exchanges. I was there meeting with the government leaders and doing a lot of press conferences and stuff saying, “This is going to hurt you. You don’t want to do that. There is a public interest here. It’s not like the internet of information where I would say, “Just leave it alone.”

But you know, if you’re doing an ICO and the token represents a share in the company that’s called a security, it should fall under securities legislation. But we need microsurgery on this new economy. We don’t need to bring a chainsaw to it. This would be one of the three most important rate determining factors in terms of what countries emerge not just with the Blockchain industry, but with the whole new innovation economy. Do governments do the right thing and implement sensible legislation or did they mess it up?

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CT: Thank you. What are the ways you have seen blockchain and the digital economy mature throughout 2017?

DON: It was pretty an extraordinary year. Of course the biggest thing that’s caught everybody’s attention is the crypto craze, right? Just a word on that, you know, this is the tulip bubble, like in Holland. I don’t think those kinds of analogy is quite right, actually. Yes, there will be all kinds of volatility and there will be bubbles, but think about it: in the first era of the Internet, information was placed in the commons by Tim Berners-Lee; in the second era the actual protocols are going to be owned by investors and people.

Internet hype

So the first era was worth how much – tens of trillions of dollars? The second era is probably going to be bigger. An alternative way of looking at this is the biggest investment opportunity perhaps in human history. Now, are a lot of these ICO’s garbage? Yeah, well, but in 1995 a lot of those “dot coms” were garbage too. Are a lot of people going to lose money? You bet! Will there be all kinds of speculation? For sure. Is there hype? Yeah! There’s hype, there’s that much hype! But there was that much hype about the Internet in 1995 and we’ve talked more about the internet today than we did in 1995. So that hype it’s not going to go up and burst, it’s just going to continue (probably for decades) as we understand that this is the new operating platform for firms and for the economy at large.

But what we have here is a sort of crypto asset class tail wagging the Blockchain dog, you see. Because the real pony here is not all these asset stuff, although maybe a big opportunity. The pony in this pile is that we have a new platform emerging that’s going to change the deep architecture and structure of the firm. That’s going to fundamentally transform every industry in our economy and over the last year we’ve seen some really big developments. I could talk all day about this, but I’ll just give you one example.

Blockchain and supply chain

The supply chain industry globally is a $64 trillion industry and supply chains are going to move to Blockchain. You can see that with Foxconn doing this now, we’ve done a case on that. On the Walmart food sale they use Blockchain for food safety. The biggest supply chain in the world ever is the ‘One Belt One Road’ project linking Hong Kong and Rotterdam. All the trade and finance and a lot of the supply apps on that are being done via Blockchain.

Blockchain is perfect for situations where you have a buyer and a seller and escrow agent, and governments, and various shippers, and tax authorities and so on. Instead of passing pieces of paper and faxing, and emails and so on, they have a single shared network state where they can all instantly see what’s going on. It turns that supply chain into something we call an asset chain. And ultimately, this thing becomes cognitive. It really becomes a new cognitive computer. That’s where the supply chain will be.

CT: Thanks. In what ways do you think cryptocurrencies will impact the way we understand and use money?

DON: It’s a good question. I don’t think that non-fiat currencies will replace fiat currencies. Lots of people may disagree with me. I’d be surprised if Bitcoin got to more than 1% of transactions in a major country five years from now. There is a rule for these currencies, but more as a tool for creating new apps. For example, the global diaspora. People who left their lands and they send money back home. It’s called remittance. It’s a trillion dollar market. For example, If you’re a Filipino nanny in Toronto, you don’t have to pay Western Union 15% to send money to your mom in Manila. You can use a platform for remittance, but that platform actually uses Bitcoin as the underlying tool to enable that to occur. So that’s not the actual currency. The currency is a sort of a transition between the two fiat currencies. And as I said before, the biggest opportunity is to turn the fiat currency into a cryptocurrency.

CT: Like national or…?

DON: Yeah. I think that every country should have its cryptocurrency for the next period of human history. Ultimately, I’m like John Lennon who said “Imagine there’s no countries. It’s easy if you try.” You know, the whole idea with all these nation states is that they are an interesting idea that were developed in a certain period in the human history. We have these areas and there were a bunch of cities that consolidated together and they had a common currency and borders. They created institutions, the rule of law and bureaucracy and so on. So there were nation states for national economies, but increasingly the economy is becoming multinational.

You know, it’s not withstanding Donald Trump and “America first”. No country can succeed in a world that’s failing and increasingly we have regional economies like North America and Europe and increasingly they are going to need some kind of global economy. So it’s fun to speculate about stuff like that in the future, but I think it’s probably not in my lifetime.

CT: It’s very interesting! Could you tell us about what you personally will be focusing on in 2018?

DON: In the Blockchain Research Institute we’re doing 75 projects right now and these are all looking at the strategic implications of Blockchain to transform corporations in 10 different industries we’re looking at. We are also looking at seven functions of management. What is the triple-entry accounting for the CFO? What do smart contracts mean for the Chief Legal Officer? What does Blockchain mean for enterprise architectures? It’s a fine bunch of pilots, but, you know, the companies are not a bunch of divisions, it’s an enterprise ultimately and we do need enterprise architectures.

We have got a great group of about 60 of the world’s leading thinkers that are leading these projects. And over the next year we’re going to complete these projects and then our management team will be out in all these companies doing executive briefings. These typically consist of the CEO and the executive committee of some of the biggest companies in the world. I’m pretty excited that that’s going to bring about some big changes.

The other thing is, both my son Alex and I are spending a lot of time around the world speaking to big conferences and also to the small and more important events. In three weeks I’m speaking to… I don’t want to mention the name, but it’s 150 CEOs of 160 largest corporations in America. They’re very curious about this. Most of them haven’t quite figured it out, so we’re serving the business of bringing clarity to the market. We partner with Hyperledger enterprise, Ethereum, Chamber of Digital Commerce and other organizations. They are affiliates. We’re not duplicating what they are doing. We are trying to address these strategic issues. That’s going to keep me busy for the next year.

CT: Thank you so much!

DON: Thanks!

More interviews from the World Economic Forum will be available soon on Cointelegraph Web-site and Youtube channel.

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The 2017 Tapscott Prediction Scorecard

Don Tapscott is the CEO of The Tapscott Group, one of the world’s leading authorities on the impact of technology on business and society. He has authored over 15 books, including “Blockchain Revolution,” published in May 2016 by Portfolio.

The following article is an exclusive contribution to CoinDesk’s 2017 in Review.


Notwithstanding our admonition in “Blockchain Revolution” that “the future is not something to be predicted but something to be achieved,” a year ago my son Alex Tapscott and I made some predictions for 2017.

A key theme was the issue of governance. As we wrote in our submission for CoinDesk’s 2016 in Review, “In 2017, we need to get our act together. Decentralization is critical to this technology and to the future of civilization. But decentralization does not mean disorganization. So, we resolve to focus on governance in the new year.”

We also said that, “Investment (in proprietary blockchains) will continue in 2017, but the pendulum will swing back somewhat to the public blockchain space. If the bitcoin community can get its act together and solve some basic governance issues (like scaling), investors will again see it as an attractive play – and with good reason. Bitcoin is still the biggest, most secure, most liquid blockchain to date.”

“Bitcoin bad, blockchain good” was heard a lot less in 2017 than in 2016. And for good reason. Business-leaders awoke to the reality that the most ground-breaking innovation in this industry is happening in the permissionless open-source blockchain world, including in bitcoin, but also ethereum, Cosmos, Tezos, Eos and other new platforms. As for bitcoin, there were improvements in governance, and a temporary resolution of the scaling debate acted as one of a few big catalysts enabling bitcoin to resume its upward trajectory.

Prediction: “Bitcoin will hit $2,000 (that’s right: one bitcoin will be worth $2,000). Ethereum will not collapse, post-DAO, but will become a dominant platform for new apps and new business models.”

What happened: We were ridiculed for forecasting that bitcoin would triple in value. “You guys are nuts,” was a popular tweet.

However, only in the wild world of cryptocurrencies can you set a one-year price target implying a 200 percent return, and miss the mark by a factor of nearly 10! As for ethereum, the fork happened and ethereum kept on chugging away, became the de-facto platform for the ICO boom that launched a thousand dapps, from distributed file storage and prediction markets to collectible kittens.

Prediction: “A major central bank will live test a digital fiat currency and it will work, very well, leading to broader adoption.”

What happened: While some central banks did explore and test the concept of a digital fiat currency, none was able to take the next step and implement it in production and at scale. Indeed, most central bank chatter in 2017 was about bitcoin-mania, with many (India, France, Russia, China, New Zealand, etc.) calling it a speculative asset and some even a bubble.

We think this analysis misses the mark. To be sure, bitcoin is hot, but its bigger importance is what it represents: An emerging alternative to central-bank-issued currencies, governed not by a centralized authority but by a combination of math, consensus and clever code. Central bank governors would be wise to better understand what bitcoin represents and what seismic economic and social shifts are driving it, rather than just its price (the same too could be said for all the HODLers out there).

Perhaps the most remarkable response was from Christine Lagarde, managing director of the IMF, who said in a speech in February that that cryptocurrencies could, among other things, improve financial stability, inclusion and provide better value than traditional fiat currencies, particularly in less developed countries and warned central bankers to ignore them at their peril

Prediction: “Large banks will begin shifting large amounts of over-the-counter (OTC) transactions to real-time settlement on private distributed ledgers. Look for JPMorgan, Goldman Sachs, Barclays and Santander to lead the charge.”

What happened: Even though the chief executive officer of JPMorgan, Jamie Dimon, asserted that bitcoin is a “fraud,” JPMorgan is one of the most active and innovative banks in this area. It partnered with zcash, a distributed and anonymous cryptocurrency network, to pioneer anonymous transactions in other financial assets like stocks and bonds. It uses the awkwardly named but potentially transformational technology called zk-snarks. JPMorgan was also a co-founder of the Enterprise Ethereum Alliance, with more than 100 other big firms.

As the sun set on 2017, the Australian Securities Exchange (ASX) announced that securities trading would migrate to a blockchain infrastructure being developed by Digital Asset (run by Blythe Masters). Expect more to follow. As for Jamie Dimon, he doth protest too much.

Prediction: “Incumbent companies in every industry will begin developing a blockchain strategy, hiring key IT talent and launching pilots – for sure, insurers, healthcare providers, music labels, defense contractors and others.”

What happened: Yes! This happened. Our Blockchain Research Institute is documenting this development in 70 projects in 10 industry sectors.

Prediction: “A new round of startups will enter this space in virtually every industry, particularly a new class of platform and middleware companies. From what we’ve seen, the innovation may well be stunning.”

What happened: Check!

Prediction: “The crisis of legitimacy of democracy (as evidence by the recent U.S. election) will accelerate the development and sandboxing of new e-voting systems and new platforms for accountable democracy emphasizing the use of smart contracts.”

What happened: As with the internet’s first era, governments are slow to embrace change. There is experimentation with blockchain for improving operations and some governments (such as Dubai, Estonia, Georgia) are doing large deployments. But when it comes to building new models of democracy based on transparency, accountability, public deliberation and active citizenship through blockchain e-voting, smart votes, and new collaborative tools, most politicians are oblivious.

It is no surprise that trust in governments continues to plummet. In the U.S., we see tax changes favoring wealthy individuals and large corporations. The rollback of healthcare, increasing mass gun violence, attacks on consumer and environmental laws, and looming cuts to social services, will undermine prosperity for the vast majority of citizens. Opposition candidates in the 2018 mid-terms must demonstrate that technology can counter fake news, thwart the voter suppression of 2016 and rebuild trust for the digital age.

Prediction: “‘Blockchain Revolution’ will continue to be a global best-seller, in multiple languages, and make the New York Times non-fiction list.”

What happened: Well, we didn’t make the NYT non-fiction list (yet), but the book is still the best-selling book on blockchain ever, and already translated into over a dozen languages. The book has led to the launch of the Blockchain Research Institute. It is conducting the definitive investigation into the strategic issues in blockchain.  The multi-million program includes 70 projects across 10 industry verticals, including government as well as projects on how blockchain changes the way we manage our companies.

Think you can do better than Don? CoinDesk is looking for submissions to its 2017 in Review series. Email news@coindesk.com to make your view heard.

Golf scorecard image via Shutterstock

The leader in blockchain news, CoinDesk strives to offer an open platform for dialogue and discussion on all things blockchain by encouraging contributed articles. As such, the opinions expressed in this article are the author’s own and do not necessarily reflect the view of CoinDesk.

For more details on how you can submit an opinion or analysis article, view our Editorial Collaboration Guide or email news@coindesk.com.

Disclaimer: This article should not be taken as, and is not intended to provide, investment advice. Please conduct your own thorough research before investing in any cryptocurrency.

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Bitcoin’s Journey Toward Mainstream Acceptance Has Begun

Though Bitcoin was created eight years ago, the currency is just starting to attract largescale mainstream attention. The digital currency uses Blockchain technology for a safer and more efficient way of transacting online without the use of banks or credit cards.

In an interview by PBS, Don Tapscott discusses potential uses of Blockchain technology. Tapscott is the co-author of the book entitled “Blockchain Revolution: How the Technology Behind Bitcoin Is Changing Money, Business, and the World.” Watch the interview below:

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Pundits and investing professionals have called Bitcoin a bubble, since the price has increased an unbelievable 700% over the past year. While many wonder if such growth is is sustainable, Tapscott explains that the technology that powers Bitcoin is so transformative as to render the question moot.

Indeed, with the rapid growth of Bitcoin, the days of bankers may be numbered. Digital currency disintermediates banks, provides services to the unbanked and is more secure.

Disintermediation

Traditional banking has seen fees grow steadily over the year, to the point where they make up about 40% of the average bank’s income, according to CNBC. Blockchain technology’s promise is simple: cut out the middleman (along with their exorbitant fees) and help secure financial transactions through a distributed ledger system. This results in fully decentalized transactions with relatively low fees.

Helping unbanked

Over 2 bln people are currently unbanked, and this number shows no signs of decreasing any time soon. Bitcoin is growing in popularity in developing countries, where it serves as a better, and bankless, way to send remittances. This is especially true in remote areas of the world, where banking centers are rare.

Better security and safe from chargebacks

Over $7 bln worth of chargeback fees are being shouldered by merchants each year. Bitcoin eliminates the ability for consumers to file fraudulent chargebacks, making it an attractive payment option for merchants. In cases where chargebacks might be genuinely warranted, companies such as Bitrated have developed an escrow-based system that gives both buyers and sellers recourse in case the other party doesn’t live up to their side of the transaction.

Blockchain technology is also secure, something many banks (and credit bureaus!) can’t say. Bitcoin’s Blockchain is secured with advanced cryptography that is mathematically unbreakable. While it’s possible that merchants or payment processors could be hacked, the Blockchain itself is secure.

When moon?

Bitcoin is such a radically different product that it takes time for people to truly understand it. The good news is that as buyers and merchants begin to gradually experiment with digital currency and understand its usefulness and advantages, adoption should grow rapidly.