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Nasdaq-Powered EU Digital Exchange DX Launches Security Token Trading

DX.Exchange is claiming an industry first with its launch of security token trading and security token offering listings.

Estonia-based Nasdaqpowered digital trading platform DX.Exchange is claiming an industry first with its launch of security token trading and security token offering (STO) listings. The development was shared with Cointelegraph in a press release on March 14.

As previously reported, DX.Exchange went live in January, with support for various fiat and cryptocurrency trading pairs and tokenized stocks. In March, the platform added tokenized exchange-traded funds (ETFs) to its supported products.

According to the press release, the platform now allows investors to purchase security tokens using both fiat and major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Tether (USDT) and Ripple (XRP). Following this latest development, DX Group will also reportedly restructure into a new entity called DXtech Exchange.

Security token trading represents the latest offering enabled by DXtech Exchange’s existing partnership agreement with Cyprus-regulated broker MPS MarketPlace Securities Ltd., which has thus far enabled the platform’s provision of tokenized stocks and ETFs.

Trading of security tokens will reportedly require investors to undergo an additional layer of Know Your Customer checks, in compliance with the European Union Markets in Financial Instruments Directive II.

MPS will be the entity that lists the tokens and acts as a counterparty in their trading. All trades will be automatically matched using matching engine technology and monitored by a surveillance system.

To demonstrate its new services, DXtech Exchange launch STO listing and trading for a security token dubbed IGWT, which will be offered in a time-limited private security token sale of 18 million IGWT. Thereafter, ten percent of the company’s profits will reportedly be regularly distributed to IGWT token holders that will own 100 percent of the tokens.

The press release outlines the eligibility requirements for listing a security token with DXtech Exchange, which include evaluation by the platform’s investment committee, the provision of a legal opinion, full background vetting, a review of the token’s blockchain protocol and providing DXtech exchange with data on to whom and how tokens are distributed.

The platform’s investment committee reportedly assesses security tokens issuers on the basis of their white paper’s transparency, fundraising method and team.

The press release states that the platform eventually aims to list various security tokens including company shares, company profit splits, funds, bonds, real estate and art.

As security tokens continue to gain industry traction, top crypto exchange Binance is also eyeing the sector, signing an MoU last fall with the Malta Stock Exchange’s fintech and digital asset subsidiary, MSX PLC to jointly launch a new security token digital exchange.

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Nasdaq-Powered EU Digital Exchange DX Adds Tokenized ETFs

Nasdaq-powered digital trading platform DX.Exchange has announced the addition of tokenized ETFs, including SPY and QQQ, to its services.

Estonia-based digital trading platform DX.Exchange has added tokenized Exchange-Traded Funds (ETFs) to its services, according to press release shared with Cointelegraph on March 6.

The move involves the tokenization of popular ETFs, such as SPY, which represents the S&P 500, and QQQ, which backs the Nasdaq Composite at a 1:1 ratio. UWT (crude oil) and UDOW are among other ETFs offered on the platform. The ETFs offered can now be purchased both for cryptocurrencies and fiat during trading hours as well as after-hours.

According to the press release, the introduction of tokenized ETFs on DX.Exchange complies both with the latest guidelines issued by the European Securities and Markets Authority and with the EU Markets in Financial Instruments Directive II.

The chief operating officer of DX.Exchange, Amedeo Moscato, stated that he believes that the latest move by the EU-regulated company opens the world of popular financial assets to crypto holders. His statement reads:

“As of today, there’s over 130 Billion USD worth of Crypto that can now be invested in Digital Stocks and ETFs. Crypto investors who wished to hedge part of their crypto portfolio had only USD stable coins or limited options. Now they can invest in real world assets on the blockchain.”

DX.Exchange states that adding ETF trading to the platform will attract investors seeking to benefit from a lower-cost venue for executing their trades. Moreover, the decision will reportedly allow smaller retail investors or investors from developing countries to enter the market.

DX.Exchange first appeared as a concept in May last year and was launched in January of this year. The company uses Nasdaq’s Financial Information Exchange protocol to deliver its products.

As Cointelegraph wrote, the company initially proposed that crypto holders purchase tokens backed by stocks in various major companies, including Amazon, Baidu, Apple, Facebook, Google, Intel, Microsoft, Netflix, Nvidia and Tesla.

The trading at the Estonian exchange is currently only available for traders in the European Union. However, the company plans to make trading available to United States-based customers in 2019, according to a tweet from its co-founder and CEO in early January.

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Estonia: Amendments to Anti-Money-Laundering Regulations Will Tighten Crypto Regulation

The Estonian Ministry of Finance is about to add amendments to the national AML regulation, bringing tighter cryptocurrency regulation.

The Estonian Ministry of Finance will shortly add amendments to a recently-passed financial bill that are meant to “tighten” crypto-related regulation, Estonian financial newspaper Äripäev reports Nov. 28.

According to the article, a new version of the Anti-Money-Laundering (AML) and Terrorist Financing Prevention Act came into force this week in Estonia, conforming legislation to the EU’s so-called “Fourth Money Laundering Prevention Directive.”

The regulation introduced this week reportedly introduces “virtual currency exchange service providers” and “virtual currency payment service providers,” while before there only was “alternative means of payment service provider.”

Still, the Financial Supervision Authority (FI) has since announced that cryptocurrencies and the companies offering crypto-related services introduce money laundering risks, which is reportedly the reason for the new amendments, according to Äripäev.

As Cointelegraph reported, Estonia has rolled back its plans to release Estcoin, a national digital currency, after the President of the European Central Bank Mario Draghi criticized the initiative.

Canada is also looking towards more regulation to prevent crypto from being used for money laundering, as the Canadian House Finance Committee recommended during its review of the Proceeds of Crime Money Laundering and Terrorist Financing Act (PCMLTFA) in mid-November.

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Online ID Control: Blockchain Platforms vs. Governments and Facebook

We’re living at a time of unprecedented concern over identity. Fears abound that our personal data is being abused by distant third-parties, while this data has become more valuable to us at a time when our identities and the identity politics we base around them have become more central to our lives. It’s in this context that blockchain technology has appeared, and while its application beyond cryptocurrencies is still limited, protecting our online identities and data more securely looks set to be one of its most central applications.

In its most basic outline, the use of blockchains in the area of securing personal data is simple: Our data is stored in encrypted form on a decentralized network, and we can grant other parties access to (some of) this data by the use of our private keys, in much the same way that using our keys allows us to send cryptocurrency to someone else. By virtue of this basic framework, blockchain tech promises to place control over our data back in our hands, at a time when Facebook and other technology giants have been abusing and misusing it. And seeing as how crypto-giants such as Coinbase have recently moved into the area of decentralized ID, it would seem that it already has strong backing and support within the cryptocurrency industry.

However, as sound as this all is in principle, there are a variety of challenges — some technical, some commercial — that have to be overcome before blockchains can be used at scale to secure personal data. The companies working in this area are all approaching these problems from different angles, yet it would appear that in solving them, a (partial) departure from the ideals of ‘complete’ decentralization is necessary.

And even when the technical challenges are all surmounted, there will still be the issue of weaning people off platforms such as Facebook, which — thanks to the profits of centralization — can afford to offer the public an enticingly ‘free’ and polished service.

Control and privacy

Alastair Johnson, CEO and founder of e-commerce and ID platform Nuggets, Johnson understands the pitfalls of storing masses of ID data in centralized siloes all too well.

“Today, the reality is that individuals do not control their personal data in any meaningful way. On average, a person has personal data — in the form of payment card details, home addresses, email addresses, passwords and other personal details — spread over roughly 100 online accounts. They can access this data but they do not own it.”

By contrast, the use of blockchain tech grants newfound control to the user, who will be empowered to share their ID data only with the parties they approve. This is achieved primarily through the utilization of “decentralized identifiers” (DIDs), as explained by the Sovrin Foundation, which is building a blockchain platform aimed at providing individuals with “self-sovereign identity” (i.e. an ID they can take with them from platform to platform). As it notes in its white paper, “decentralized identifiers” (DIDs) not only encode information that identifies someone as, say, female, Asian, 35, and living in France, but they also circumvent the need for a centralized authority to verify ID claims.

“A DID is stored on a blockchain along with a DID document containing the public key for the DID, any other public credentials the identity owner wishes to disclose, and the network addresses for interaction. The identity owner controls the DID document by controlling the associated private key.”

In other words, a protocol for a suitable blockchain is created, users register their ID data on this blockchain, and then use their private keys to decrypt this data for chosen parties. This is the kind of system also employed by Nuggets, although in its case it’s referred to as “zero-knowledge storage,” since no one else knows what your data says about you. And it’s also the system being worked on by Coinbase, which on August 15 announced its acquisition of ID-focused startup Distributed Systems. Having purchased the San Francisco-based company for an undisclosed fee, it will now develop a decentralized login system for its own crypto-exchange platform that will enable users to retain ownership of their ID credentials.

“A decentralized identity will let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity,” it wrote in its press release.

With such a setup, there’s little chance of a Cambridge Analytica-style scandal where data gets shared with unwanted groups or individuals, while it also grants unprecedented power to the individual user, who’s likely to be treated with much more respect by companies now that his data is in such scarce supply. As explained by Johnson, this provides a vast improvement over the current stage of affairs.

“[Personal data] is stored and controlled in a series of centralized databases controlled by institutions such as retailers, marketing companies, utility companies and data reporting companies. In order to make purchases online, individuals simply authorize these different bodies to connect the different pieces of information they hold in order to authorize a transaction.”

However, while the individual user is currently dependent on hundreds of different companies to store and transmit his/her data in order to gain access to the services, the introduction of blockchain technology completely reverses the balance of power. Johnson shares with Cointelegraph:

“Blockchain-based solutions flip this model on its head, so that individuals can store and control their data associated to a digital identity. It is not stored in the centralized databases of third party organizations, it can be stored on the blockchain in a decentralized network. With the individual controlling their data in this way, they are then in full control to ideally not have to share or store anything by using attestations, tokens or references and share it only if and when they choose to do so.”

Yet, this is only the tip of the iceberg, as using blockchain tech to confirm who we are furnishes many additional benefits beyond user control. For one, it heightens privacy, since with many of the platforms being proposed, our ID credentials won’t even be revealed to those parties and organizations requiring their verification.

This is enabled via the use of zero-knowledge proofs (ZKPs), a cryptographic method that can prove a claim without actually sharing the data (‘knowledge’) through which the claim is proven. ZKPs are being implemented by Sovrin and are also planned for use by such startups as Civic, Verif-y, and Blockpass. By using them, these companies will make the process of ID verification simpler and more efficient, while opening up the possibility of storing biometric ID on the blockchain. They’ll spare organizations that verify our IDs the headache of having to securely store personal data after validating it, which in turn eliminates a potential vulnerability, given that these organizations would have normally kept any data they received on a centralized database.

And while not all decentralized identity platforms will employ ZKPs, others will still make use of functionally similar methods. For example, SelfKey harnesses a technique it describes as “data minimization,” which “allows the identity owner to provide as little amount of information as possible to satisfy the relying party or verifier.” This sidesteps the need to develop advanced technologies such as ZKPs, although it raises questions as to what is meant by ‘minimal.’ SelfKey writes that “claims can be signed in a way whereby one could choose to disclose only a minimum of information.” But without a more formal specification of “minimum” and “choose,” it’s conceivable that such functional approximations of ZKPs might end up revealing more data than some users would want.

Security

Aside from providing greater user control and privacy, blockchain-based platforms for verifying ID are more secure than their centralized counterparts. This is because, being distributed among multiple nodes, they won’t suffer from having a single point of failure like traditional ID systems — e.g. government databases, social networks. As such, one or two nodes of a blockchain can become inactive and users will still be able to use it, while the encryption involved prevents any publicly available data from being gleaned for sensitive info.

By removing the single point of failure, decentralized ID platforms make a large, Yahoo! style hack nigh-on impossible. Instead of being able to penetrate a centralized database that houses all user information in a single location, attackers will have to obtain the private keys for every individual on a one-by-one basis, something which is extremely unlikely in practice. Alastair Johnson agrees:

“The major benefit of a decentralized ledger of personal data over a centralized database is the security against hackers that it provides. We’re all familiar with the major data breaches that have occurred in recent years, such as that at Equifax in 2017. These centralized databases act like magnets to hackers who often only need to take advantage of a single vulnerability to either take them down or extract data from them.”

By contrast, decentralized ledgers aren’t so sensitive to cyberattacks. “The hijacking of a single node will not disrupt the ongoing functioning of the ledger, as the other nodes can continue to operate without the compromised node’s involvement and the network requires consensus to prove the blocks.”

Security is part of the reason why the Indian government, for example, is turning to blockchain for its AADHAAR database — the world’s biggest biometric ID system, containing the records of over one billion people – as the country has been the victim of repeated hackings over the past year.

With such a revamped platform, there will be a variety of security benefits. The transparency and immutability of blockchains would mean that users are able to see when their data has been accessed and by whom, thereby providing a deterrent to any would-be hacker. Similarly, this transparency and immutability can be violated only in the unlikely event that a bad actor assumes control of 51 percent of the blockchain’s nodes, which in theory would enable to access data and then erase the corresponding records of this illegitimate access.

AADHAAR currently isn’t blockchain-based, while a comparable project from the government in Dubai to use blockchain-based ID at the international airport is still under construction. However, one government-led ID system than does use distributed ledger technology (DLT) right now is in Estonia. Its KSI (Keyless Signature Infrastructure) Blockchain forms the backbone of various e-services, including e-Health Record system, e-Prescription database, e-Law and e-Court systems, e-Police data, e-Banking, e-Business Register and e-Land Registry.

Once again, the use of the KSI Blockchain provides greater transparency than previous systems, since it detects when user data has been accessed and when it has been changed. And as the e-Estonia FAQ explains, it’s much quicker than traditional platforms in detecting misuses of data:

“[It] currently takes organizations […] about seven months to detect breaches and manipulations of electronic data. With blockchain [solutions] like the one Estonia is using, these breaches and manipulations can be detected immediately.”

Not only are breaches capable of being detected immediately or quickly on a blockchain-based ID system, but they’re more likely to be detected more quickly than with a centralized platform due to their public and continuous access to scrutiny from a wide range of armchair experts and professionals alike, as highlighted by PolySwarm CTO Paul Makowski in a December blog post on decentralized threat intelligence:

“Geographically diverse security experts proficient at reverse engineering or capable of providing unique insight will be able to exercise their knowledge from the comfort of their own home or wherever (and whenever) they choose to work.”

Standardization, interoperability

At the present moment in history, the world’s digital identity systems are siloed off from each other, separated in a way that forces people to create new accounts and new data for virtually every digital service they use. This causes personal data to proliferate to dangerous levels, making data breaches and cybercrime much likelier. For instance, the cost of identity theft reached $106 billion in the United States alone between 2011 and 2017, at a time when the average consumer has a staggering 118 online accounts (at least in the United Kingdom, where data was available).

Blockchain-based digital ID systems offer a way out of this. While most chains are currently cut off from each other, standards for sovereign digital identity are being devised by the Digital Identity Foundation (DIF) and the World Wide Web Consortium (W3C). Similarly, a number of startups are building interoperability platforms connecting separate blockchains together, including Polkadot, Cosmos and Aion. By working to achieve an ecosystem in which the standards of one identity platform are accepted by all other platforms that require ID verification, such organizations could dramatically reduce the amount of personal data people need to produce. Instead, users would create an account with one blockchain-based ID service, which they’ll then use to register with a host of other services and systems.

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Never Stop Marketing CEO Jeremy Epstein said in a December blog:

“Interoperability standards free up capital and time to drive value. What’s more, it offers the possibility to pool security (making the whole system more robust against attack) and enable trust-free transactions across chains.”

Blockchain interoperability is still a nascent field, and different organizations are pursuing different approaches to it. However, to take one example, Polkadot is aiming to achieve interoperability via its “heterogeneous multi-chain,” which has three fundamental components. These are “parachains,” which are in fact the individual blockchains being linked together, “bridges” that connect each parachain to the Polkadot network, and then the Polkadot network itself, which is a “relay chain” of the various parachains being connected.

Other routes to interoperability diverges from this, with Cosmos achieving inter-chain communication via use of the Tendermint consensus algorithm, and with the Aion network monetizing interchain transactions. However, assuming that an interoperability platform receives universal adoption within the blockchain ecosystem, users would find that they’ll have to register their personal data only once. From then on, they’ll be able to provide other platforms with ID attestations securely and quickly, all without having to reveal any of their data to the companies and services they use.

Scaling toward a new kind of blockchain

The benefits promised by blockchain-based ID systems — control, security and standardization — are all appealing, yet questions remain as to how feasible such systems are and how long we’ll have to wait for them to be released in fully functioning form. Added to this, there’s also the worry that — for all the improvements offered by blockchains — as a society we may still remain wedded to ‘traditional’ online services and the organizations responsible for them, which may actively resist the adoption of decentralized platforms that enable us to keep data to ourselves.

Unsurprisingly, the biggest issue with regard to feasibility is that of scalability, so often the achilles heal of many a crypto-based project. Given that an ID service should — by definition — be able to serve millions of people, any blockchain that forms the basis of such a service has to be significantly scalable. Yet, so far the most popular blockchain for decentralized applications (DApps) — Ethereum — was almost brought down by a popular video game last year, CryptoKitties. This is why most of the platforms mentioned above aren’t built on any of the most well-known blockchains, but rather on proprietary ledgers, some of which don’t meet the conventional definition of a decentralized blockchain.

For example, Enigma is a “decentralized computation platform” that has been designed for use with identity verification, among other things. As described in its white paper, it solves the scalability problem by delegating all “intensive computations to an off-chain network.” This network also stores all the user data, while the blockchain itself merely stores “references” to this data. In other words, Enigma’s platform isn’t really a blockchain — and while its off-chain network is still distributed (although each node sees separate parts of the overall data), this isn’t decentralization in the way that, say, the Bitcoin blockchain is.

Something similar could be said for other ‘blockchain-based’ ID platforms: Estonia’s KSI Blockchain isn’t a full-fledged blockchain that uses asymmetric key cryptography, but rather a Merkle tree-based ledger. Meanwhile, the Sovrin network achieves consensus via a limited set of “validator nodes,” arguably making it less decentralized than certain other blockchains. Together, what such tradeoffs reveal is that, if an ID platform is to be scalable (and also private), it needs to be less distributed in certain areas — and arguably less secure as a result. But more importantly, from a practical viewpoint, it also needs to redefine and adapt just what a ‘blockchain’ is, since the most familiar chains currently aren’t up to the task of securing and communicating our personal data on a massive scale.

Vested interests

This is why even the most advanced projects have roadmaps that extend beyond 2020, since a viable ID platform requires a new kind of distributed ledger that squares the need for cryptographic transparency with the need for individual privacy. And even if any of the platforms above reach this goal anytime soon, they will have another massive hurdle to clear: the dominance of existing arbiters of identity, including social media giants like Facebook, as well as national governments.

Governmental initiatives

For instance, the U.K. and Australian governments have been investing millions in building their own centralized ID verification systems in recent years, making it unlikely that they’ll easily give way to a decentralized alternative. Likewise, the idea of Facebook overhauling itself with a truly decentralized platform — where users keep their personal data a secret — is, well, frankly unthinkable, seeing as how the social network reaps billions in annual profit from selling our data to the highest bidder. It’s also widely used to identify people online, so it’s unlikely that it will give up its dominance to blockchain-based platforms easily.

That said, a small number of national and state-based governments (e.g., Singapore, Illinois) have been trialling blockchain-based ID systems. In addition, figures within the burgeoning crypto-ID industry are hopeful that public and private organizations alike will either be forced to decentralize or will fall by the wayside.

“When you operate a centralized system that provides your organization with control and allows you to benefit from this position, it’s understandable that you might be resistant to change,” says Alastair Johnson. “But when there is a penalty if this information is breached in the form of fines, loss of share price and cost of recovering the situation and all the PR damage that comes with a breach, businesses will start to see that the model has to fundamentally change.”

A key driver of this change could be public sentiment, which has already been shifting in the wake of the Facebook-Cambridge Analytica scandal. “The blockchain provides clear benefits for customers in terms of control over personal data and digital identities and I expect the public recognition of this to move from an early adopter cohort to an early majority in the near future,” Johnson says. “From the other side, I expect organizations that have already experienced breaches in their centralized databases to be amongst the most willing to adopt blockchain-based solutions, as they seek to rebuild trust with consumers.”

It could be argued that slick, free-to-use, ad-based services such as Facebook will always be more attractive to the average user — a view strengthened by the fact that Facebook reported a 13 percent year-on-year increase of users in April, despite its recent loss of younger users in the wake of the aforementioned data harvesting scandal. However, Johnson believes that a gradual sea-change in attitudes is underway.

“The ‘Delete Facebook’ movement is one sign of change, as is the continuing scrutiny that the tech giant is being put under by American and European authorities. People are starting to wake up to the fact that their personal data is valuable. Not only could blockchain help them to monetize it for themselves, it will also eradicate the kinds of costly personal data loses that I have experienced myself.”

And even if blockchain technology is still largely unproven outside the domain of cryptocurrencies, it will start winning converts as soon as it demonstrates its superiority to previous systems when it comes to privacy and security.

“Right now, there may be hesitation to adopt decentralized platforms, but its common sense that personal information should be owned and controlled by the person, and because of this it will prevail.”

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Union of European Football Associations Implements Blockchain-Based Ticketing System

The Union of European Football Associations (UEFA) has successfully deployed a new ticketing system via mobile phones based on blockchain technology, according to an August 16 press release.

After the “successful implementation” of the blockchain ticketing system for 50 percent of the tickets for the 2018 UEFA Europa League final in Lyon in May, the UEFA had decided to increase the technology’s reach “to all of the general public” in Estonia.

The official UEFA announcement states that “100% of the match tickets” for the UEFA Super Cup soccer match between Real Madrid and Atletico Madrid held in Tallinn, Estonia on August 15 were sold using a blockchain-based iOS or Android application.

The UEFA will continue to develop the use of a blockchain-based ticket distribution system for future events, the announcement notes, adding:

“UEFA is looking to make its ticket sales process for matches more simple and safe — thanks to a new system aimed at providing secure ticket distribution, and which prevents the replication and duplication of tickets.”

Earlier this summer, Cointelegraph published a descriptive follow-up on how to use cryptocurrencies during the FIFA World Cup 2018 in Russia. And this winter, Harunustaspor, a Turkish soccer team, had announced that it had partially paid one of its players in Bitcoin (BTC), Cointelegraph reported January 31.

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Which Countries Are Best to Start Blockchain Projects?

Bitcoin’s boom has spawned more than just a digital currency revolution. Companies across the globe have explored the potential of blockchain technology in a range of different spheres, including cars, phones, and a multitude of disruptive alternatives in banking, government and as well as shipping.

Also, it is not only the small startups that are trying to push blockchain innovation, but rather conglomerates as big as Amazon, Alibaba and Microsoft. However, these companies are still trying to negotiate an ever-expanding regulatory framework that is growing at different rates across different states.

Many different companies began springing up within the cryptocurrency ecosystem, usually attached to a capital raising ICO, which left many regulators wondering how to control this decentralized, crowd-funded form of capital raising.

From the SEC to the Chinese government’s hard clampdown on ICOs to Malta and Switzerland competing to be the premier destination for fintech and blockchain, different nations have taken widely different views on how to regulate, quash or support blockchain startups.

Thus, because of the global nature of blockchain products, it is unnecessary to worry about a regional customer, but rather it is important for blockchain projects to examine the legislation, the atmosphere and approach from the community, fees, and a myriad of other factors in different countries to see which will aid them in realizing their outcomes.

Cryptocurrency havens

The different approaches by governments and regulators have created what has sometimes been referred to as ‘cryptocurrency havens’, as nations look to try to attract fintech and blockchain projects to their shores in the hope of using a potential financial revolution to boost their own agendas.

A lot of these havens are being created in smaller nations. Places like Switzerland, Malta and Bermuda are actively adjusting and creating legislation to welcome blockchain projects.

On the flipside, there are countries that are trying to discourage and scare away of as many blockchain projects as they can, and it has been successful in many cases. One of the most notable examples is China, where the ban of ICOs and access to exchanges has forced these startups and digital currency exchanges to go elsewhere.

For example, one of the globe’s biggest exchanges, Huobi, which was forced to leave China in September last year because of legislative changes. Since then, the exchange has looked to open offices in a number of other different locations, such as Australia, the United States, Singapore, South Korea, the United Kingdom and others.

While not all of these countries are actively supportive of cryptocurrencies, they are at least tolerant and are looking to set their rules to make it easy for companies to follow the legislation.

Importance of a regulatory framework

While regulations are often frowned upon by those who have spent some time in the blockchain space, they are a necessary part of the evolution of the technology. Some companies have gone from having free rein — building their company up with no restrictions — only for the legislature to catch up.

However, some companies are appreciative of building their blockchain company in a space that is regulated and has easily defined boundaries to follow.

One of the first countries to begin building a regulatory framework for blockchain projects — and a crypto-friendly framework — was Switzerland.

Switzerland – Crypto Valley

The U.S. may have Silicon Valley, but Switzerland wants to have the 2.0 version — Crypto Valley — in the small town of Zug. However, even before Zug started turning its full attention to cryptocurrency, Switzerland was working toward becoming a fintech sandbox.

In July last year, Switzerland put in place options for companies that accumulated around $1 million in third-party funds to test out their innovative financial technology ideas without the usual regulation surrounding finance and digital currency.

They also said that banking licenses would be re-evaluated in order to allow these companies earning less than $1 million to obtain licenses for depositing and allowing crowdfunding donations to be withdrawn over a period of 60 days rather than the previous seven days.

In the year since Switzerland started making life easier for blockchain and fintech companies, there has been a big boom in these innovative projects.

Stephen Meyer, a legal professional and Ph.D. Candidate in Blockchain & Law living in Zurich Switzerland, has seen both the advantages and disadvantages of launching a blockchain project in the small European nation:

“Switzerland has a very clear regulatory situation based on the Swiss financial authority FINMA’s ICO Guidance of February 2018. Also, one of the major benefits is the possibility of receiving an individual pre-ruling by FINMA. Every crypto team can describe its project, send it to FINMA and will usually receive within 4-8 weeks a clear statement whether regulatory provisions are applicable.

“Instead of creating new blockchain-related legislation, which — as with every new legislation — leads to uncertainty regarding the specific application, Switzerland applies the existing regulatory framework, but with a flexible and principle-based approach.”

ICOs are also nothing new in Switzerland, as they have seen the Ethereum Token Generation Event back in 2014 and have been gaining experience ever since.

“FINMA and the tax authorities have longstanding experience with crypto projects since the launch of the Ethereum TGE in 2014. In the meanwhile, they have handled a substantial number of ICO as well as more and more other crypto projects as exchanges and funds. Therefore, as a crypto team, you do not have to explain blockchain technology to these authorities, and they usually are up-do-date,” said Meyer.

Valentin Botteron, Swiss attorney currently visiting scholar at Columbia Law School in New York, completing a Ph.D. in Antitrust as well as research in blockchain and smart contract-related legal matters. He had similarly positive things to say about Switzerland’s approach:

“Switzerland has a very tech-friendly approach on regulating the fintech companies, ICOs and cryptocurrencies. The Government has already stated several times that it aims to make Switzerland a regulatory-friendly place for blockchain companies. Switzerland hosts several blockchain companies and associations who advocates for a healthy regulation of the technology.

“The parliament is well aware of the phenomenon and urges the government not to miss the opportunity to be amongst the first countries to attract blockchain-related actors. The political stability of Switzerland makes it an ideal place to develop business in general. Besides the economic actors, several scholars conduct research in economics and law about blockchain in Swiss universities.”

With a look at what Switzerland is doing, and then seeing how other nations are trying to replicate and advance it, there is this feeling of competition. As Botteron states, Switzerland’s parliament is pushing the government to be the leader in blockchain growth.

Mighty Malta

The biggest competition to Switzerland in terms of attracting blockchain companies is probably the small Mediterranean island of Malta.

A look at the cryptocurrency headlines surrounding Malta shows some impressive growth for blockchain and fintech on the island. The biggest vindicator was probably when Binance, the world’s biggest cryptocurrency exchange, decided to open an office in Malta due to building regulatory pressure in Japan.

However, since then, there has been an impressive level of growth for ICOs and blockchain projects.

The Maltese government put forward a legal framework for distributed ledger technology (DLT) as of March 12, which included three crypto-positive bills. These include: Malta Digital Innovation Authority (MDIA) Act, Innovative Technology Arrangements and Services (ITAS) Act, and the Virtual Currencies (VC) Act.

The result of these positive pieces of legislation has seen a flood of interest in Malta as a premier destination for blockchain and ICOs.

Other exchanges — including OKEx —  have moved there, as well as Polish exchange BitBay. The positive regulations for virtual currencies are clearly being gratefully accepted, but even the smaller blockchain projects are cashing in too.

Jonathan Galea, a graduated lawyer in Malta, president of Bitmalta and managing director at Blockchain Advisory, spoke to Cointelegraph about what makes Malta different from other countries.

“What distinguishes Malta from the rest of other jurisdictions when it comes to blockchain and cryptocurrencies — put simply — is the fact that the government, the opposition and all regulatory authorities are pulling the same rope together, chasing one single vision: making Malta one of the leading countries in the space. That, coupled with the ease of accessibility to top officials in relevant positions that are there to promote and aid business activities rather than to hinder it, makes Malta an attractive destination for all blockchain-related matters.

“Of course, one cannot not mention the regulatory framework that has been devised in the span of less than two years, following various consultations with various important stakeholders in the crypto sphere — both locally and internationally. The creation of the first ad-hoc, comprehensive framework in the world, catering for the legal, technical and financial aspects of blockchain and crypto-related activities, grants absolute legal certainty and peace of mind to those wishing to operate within a completely regulated ecosphere — which, at the same time, promotes rather than restricts business growth.”

Cryptoindex is such a blockchain project that has benefited from the Maltese regulatory stance, as CEO VJ Angelo explains just why it is important to get the financial regulations right in this space.

“For a company like ours,” Angelo told Cointelegraph. “We chose Malta as its location for the business headquarters because it became an early incubator for the crypto industry and, as a result, has been looking at its long-term impacts long before most other regions.

“In passing the Virtual Financial Assets Act in June of this year and creating the Fittest for classification of the various cryptocurrencies and tokens, the Malta Financial Services Authority took the lead in Europe. A great deal of the Act has been mapped to MiFID II, meaning the Europe-wide regulations have been carefully considered in their new laws. While it does not entirely solve the concerns of a different approach by other regulators in Europe and beyond, the use of existing regulation does mitigate some of the risk.

“The Maltese approach has been very much one of fostering all the opportunities for growth and development in the crypto market, while putting protections in place to cover ICO participants and ensure a dramatic reduction in the stories of fraud and scams that have prevented many new adopters of crypto.”

While both Malta and Switzerland are striving to make the most open and inviting environment for blockchain projects, there are other nations that realize the potential of the technology, but have strict laws governing finance and money, as well as securities.

Freedom, liberty and securities in the U.S.

The U.S. is a major player in both the cryptocurrency and blockchain ecosystems, with the majority of ICO projects from the last 18 months originating in the U.S. — 16 percent of all global ICOs.

However, the U.S. has been fighting a big battle with ICOs thanks to its Securities Exchange Commission’s definition of what a newly founded virtual currency can be classified as.

The SEC, however, found that, in a major precedent-setting decision, that the decentralized autonomous organization (DAO) tokens that were issued in 2016 were securities. This essentially lumped the majority of ICO projects as securities and put them under the scrutiny of the regulator.

But that does not mean that the U.S. is closed off to ICOs and blockchain projects, rather there are some harder hoops to jump through — especially with the division of state and federal law.

Jack Keating, an attorney in New York and a former regulator at the Financial Industry Regulatory Authority (FINRA), spoke to Cointelegraph about the challenges that ICOs and blockchain projects face in the U.S., and particularly in New York State.

“The biggest problem with ICOs is that many of them are being done in clear violation of U.S. securities laws. Whether the issuers are unaware or agnostic to the potential consequences of issues unregistered securities, without a exemption from Section 5 registration. Many ICO issuers have ignored the requirements of the raising capital in the U.S.

“[For] ICOs that do comply with the SEC Rules and U.S. securities laws, investment is often limited to accredited investors. This goes against one of the core tenets of many Bitcoin and blockchain evangelists, that being that this technology can democratize wealth. Unfortunately, when investment is limited to accredited investors, the rich get richer and the non-millionaires are left on the sideline.”

There is a path for ICOs to function in a popular ICO country, but the regulatory hoops go against the core values that the crypto community holds dear.

“Another challenge is banking solutions for crypto companies. Similar to how marijuana companies are blackballed by most financial institutions, many U.S. banks have a policy to not open accounts for crypto businesses. Because a bank account offers so many fundamental services to running a company, simply opening a checking account can be extremely difficult. Of late, Metropolitan Commercial Bank has professed its leadership in the space. However, they face heavy scrutiny from U.S. regulators, which challenges their sustainability.”

Keating concluded that it may not be the most welcoming place for blockchain, but the U.S. seems willing to foster the technology, and because of the hunger, it is worth it.

“In my opinion there is a lot of support for crypto and ICOs coming from the government. Whether they see value in it or are willing to foster the technology is hard to say. The lack of an outright ban is encouraging. It’s worth the pressure. The U.S. has the best investor base and the best courts in the world.”

The United Kingdom’s definition of an ICO token

With the likes of Switzerland and Malta setting firm and understandable definitions for crypto, ICOs and blockchain, the U.S. — as well as the United Kingdom — have far more ambiguous regulations about different aspects of the ecosystem, as they continue to decide how much, or little, they need to step in.

Romal Almazo, the cryptocurrency lead and principal consultant at CAPCO — a global business and technology consultancy in the U.K. — explained to Cointelegraph how the law is working around cryptocurrencies and ICOs in Great Britain.

“In the U.K., the FCA [Financial Conduct Authority] still does not regard cryptocurrencies to be a currency or a commodity under MiFID II. They do, however, admit that some firms will be regulated where they offer products or service which are caught under existing financial regulations — e.g., Bitcoin futures. Where firms offer ICO tokens, they also concede that some firms might be issuing a regulated security. For a token to be regulated as a security under the U.S. Securities Act of 1933, a firm should look to the ‘Howey test’ and the ‘U.S. Person’ test.

“Looking forward, there are still huge problems on agreeing what crypto assets are and how they behave. Is it an equity, commodity, currency, utility asset or some kind of hybrid? Until this taxonomy becomes clearer and universally agreed upon — which is unlikely in the near-term —  competitive advantages between states and jurisdictions will emerge. For example, we are already seeing Malta <…> leading the pack by offering guidance and regulation. They want to create a blockchain island of innovation. The U.K. is still looking promising, but we are still seeing the majority of ICOs in the U.K. set-up through Malta, Gibraltar, Liechtenstein or Switzerland.”

Budding smaller nations

Others — such as Bermuda, Estonia and Liechtenstein — are also doing their best to wrest some crypto authority with their own friendly regulations.

Bermuda has recently — on July 2 — put forward plans to make amendments to the Banking Act in order to establish a new class of banks that offers services to local fintech and blockchain organizations.

Estonia is one of the countries that has actually been trying to make blockchain feel welcome for some time now. The government even went as far as to digitize its services by using blockchain technology. This appreciation of the potential of blockchain has made it easier for startups to build their own innovative projects.

John Smirnov, CEO of Block-chain.com, explained how Estonia’s reputation of a digitalized and forward-thinking country made it easy for them to register in Tallinn, the country’s capital.

“Timing was also crucial for us when we made a decision [of] which the country to start our company in. Estonian law is very user-friendly for blockchain projects that are holding all activities in cryptocurrency. That is why we are registered in Tallinn. It took us about a week to complete the process of company registration.

“With most regulators making some form of comment or direction for the present looking to the future of crypto, there are few actually enacting any laws. The crypto market is in the midst of an important transition. The likes of the SEC have made sweeping statements — catching the whole market in a difficult position, as far as the U.S. is concerned. Others merely state they don’t currently regulate crypto but will be announcing something soon, like the U.K.’s FCA.”

Still space to pick and choose

It is clear that there is certainly no global standard, which allows companies to pick and choose the places that are most suited for them.

The G20 might be looking to gathering data about cryptocurrencies in order to potentially put forward a united force for regulations, but it sounds like it still has a long way to go — and is not even guaranteed that everyone will agree.

However, what is clear, is that there are countries that are striving to let Blockchain flourish. A few islands, like Malta and Bermuda are changing their legislation to make their country more attractive to fintech companies, and other European Nations, like Switzerland and Estonia believe that they have the right laws to protect against the negatives of crypto while still encouraging its growth.

The UK and the USA have adapted their rules to encompass cryptocurrency into standing legislation, and while it seems quite stringent at the moment, it is a working system. In the end, there is no one place that is offering total freedom for blockchain projects, but along the spectrum, there is a lot of options for innovation.

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Most ICOs Retain Centralized Control, Break Whitepaper Promises, Academic Report Shows

Initial Coin Offerings (ICO) “failed” to provide protection against insider trading or stick to their whitepaper promises, a new report from the University of Pennsylvania Law School released July 17 reveals.

The lengthy study of the ICO phenomenon, dubbed “Coin-Operated Capitalism,” begins with a frank appraisal of investor expectations versus reality, the four contributing professors finding basic inconsistencies in the behavior of a “significant” number of projects.

In the introductory comments, they state that their “inquiry reveals that many ICOs failed even to promise that they would protect investors against insider self-dealing. Fewer still manifested such contracts in code.” The paper continued,

“Surprisingly, in a community known for espousing a technolibertarian belief in the power of ‘trustless trust’ built with carefully designed code, a significant fraction of issuers retained centralized control through previously undisclosed code permitting modification of the entities’ governing structures.”

ICOs continue to generate mixed reactions amid recent scandals afflicting some of 2017’s most lucrative token sales.

Bancor, which became famous for raising $153 mln in three hours last July, saw a hack worth $12 million this month result in wide-ranging criticism of its decentralization and fair governance claims.

In their paper, the UPenn law professors use Estonian financial institution Polybius as an example of promises made in the whitepaper against real progress post-token sale.

According to the paper, Polybius, who raised $31 million through their ICO in June 2017, included in its whitepaper “several claims that would lead us to expect certain features directly coded into tokens or other smart contracts,” continuing,

“Beyond ERC-20 compliance and the presence of a modification feature, we did not verify that any of these features are present, largely because Polybius’s coded governance exists in bytecode ([…] the Ethereum machine language). Without spending a large sum of money purchasing the time and know-how of a very motivated and talented reverse engineer, an investor would be restricted to relying on vernacular promises.”

Cryptocurrency industry figures have meanwhile continued to defend ICOs as a legitimate fundraising model, even outweighing the benefits of more traditional means.

In May, Binance CEO Changpeng Zhao determined that “raising money through ICOs is about 100 times easier than through traditional VCs, if not more.”

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US Ranks as ‘Most Favorable’ Country for ICOs in Recent Report

The U.S., Switzerland, and Singapore were ranked as the top three “most favorable” countries for Initial Coin Offerings (ICO) in a recent report, according to a press release the researchers shared with Cointelegraph July 14.

Analysts associated with the Crypto Finance Conference compiled the research based on publicly available data of the top 100 ICOs by country in terms of funds raised and ranked them by number of projects launched.

The report highlights the U.S. as the most favorable country for ICOs with a  total of 30 companies launched in the field. The second country is Switzerland, which is responsible for half as many of the projects, while Singapore is ranked third place with 11 projects.

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Top ‘favorable’ ICO countries from Crypto Finance Conference’s study

The report also features Russia, Estonia and the UK as some of the most promising countries for crypto project funding.

As Cointelegraph reported last week, the largest ever month for ICO investment took place just four months ago, and 2018 has also seen the time taken to complete and ICO, and success of these projects, shift significantly since last year.

Cointelegraph also recently reported that ICO volumes reached new records in the first half of 2018, amounting to already twice as much as it was during the entire year of 2017.

As a top location for conducting biggest ICOs and crypto projects, the U.S. continues to combat cases of illegal activity in the sphere. Earlier this week, the Texas State Securities Board (SSB) issued an an emergency cease and desist order to a network of cryptocurrency-related firms allegedly accused of offering fraudulent crypto investments to state residents.

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Smart Cities and Blockchain: Four Countries Where AI and DLT Exist Hand-in-Hand

Have you ever heard about smart cities where traffic, public services and document circulation are fully automated? The smart city concept integrates big data and the internet of things (IoT) to optimize the efficiency of urban processes and services and connect to residents. One example of this innovation could be light sensors that save electricity and road surveillance costs.

The basis for how automated systems and infrastructure sensors will coordinate their activities and communicate with each other is currently being tested in Dubai, some cities in China and the US.

The future is now

McKinsey analysts predict that by 2020 the number of smart cities will reach 600 worldwide, and 5 years later almost 60 percent of the world’s GDP will be produced in them. Digital technologies could become the engine of economic progress, and blockchain, without a doubt, could be one of them.

Let’s imagine how far we can progress if the following innovative inventions are united. What aspects of a city would be run by IoT and blockchain, say, in ten years? Unmanned cars and trains can run in the cities and control over airspace no longer requires dispatchers. Products do not deteriorate, sellers do not drive up prices, and medical cards do not disappear. Does it sound like a utopia? Not exactly.

It could be surprising to know that somewhere, this ‘smart future’ is being built right now. And it’s not just about cryptocurrencies or payment services, but about whole cities with all processes controlled by blockchain. These are the cities of the future, and they are already being created.

United Arab Emirates

Today, Dubai is considered one of the most digitally progressive cities in the world. With unmanned trains, automated sensors, flying taxis, solar panels, and Wi-Fi benches, perhaps it has everything that an avid futurist needs. The authorities of the Emirates are not stopping at what has already been reached and are actively implementing the most innovative ideas in order to turn the city into the first blockchain-based smart megapolis by 2020.

In terms of the number of projects being implemented, including those where blockchain is used by Google, Uber, Amazon, IBM and other corporate giants, Dubai ranks first in the world, thanks to the government-supported Smart City program. The Smart City program, launched in 2014, involves the phased implementation of more than 545 projects that will change the way residents and visitors of Dubai interact with the city. The local authorities plan to create a paperless digital space in the private and public sectors. All document circulation will be conducted in electronic form, and launching a business will become more simplified for citizens.

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Source image: Thairath.co.th

In particular, a pilot program is being developed to track, ship and deliver imported and exported goods using blockchain technology. The main idea of its integration into the foreign trade of the city is to create a single safe and transparent platform. The implementation of a blockchain system into the urban structure is projected to save about $1.5 billion and 25.1 million man-hours due to increased efficiency in the processing of documents, which is supposed to set government institutions free from queues.

Blockchain will be also applied in logistics and storage. This will help create an entire system of smart unmanned trucks for the transport of products or materials.

Estonia

It would interesting to know that blockchain was used in Estonia before it became mainstream, and even before Satoshi Nakamoto invented Bitcoin.

They say that the reason for such progress was the cyber attack of 2007, when — at one point — the websites of state services and the government went offline because of heavy DDoS attacks. This caused Estonia to reconsider its attitude toward data security and reach out to what we are now calling blockchain.

Since 2012, distributed ledgers have been used in Estonia’s national health, judicial, legislative, security and commercial systems. The technology has already gone beyond the scope of experimentation and has reached mass adoption. In particular, the Estonian government has introduced blockchain to provide its citizens access to control their personal data. Due to this, Estonians can control, view and, if necessary, challenge illegal access to their information. Moreover, from now on, citizens have the opportunity to check medical specialists or civil servants who looked through their medical card, insurance or driver’s license. Any official who accesses personal data without permission can be prosecuted.

The government seems to be sensitive to its citizens data security and integrity. Perhaps it’s one of the remedies the value of which is hard to underestimate, not only in terms of comfort, but also in terms of preventing irreparable consequences, such as the tragedy in Haiti in 2010, when an earthquake destroyed the archives containing land records, leaving residents having to challenge their real estate ownership.

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Source image: Quedeus

China

Chinese authorities plan to create 1000 smart cities, where technologies and data collected should improve the lives of every resident, Deloitte reports. In January 2013, the Ministry of Housing and Urban-Rural Development formally announced the first list of national pilot Smart Cities, referring to this technology as a “sector that should be strengthened and encouraged.”

The first city of the future is supposed to be Yinchuan, where they have already abandoned traditional payments. Now, instead of tickets, passes and documents, it is enough to simply show one’s face! And no more tiresome shopping — products are ordered through a mobile application.

Despite the negative attitude of the authorities toward cryptocurrency, they still believe in the technology. The country’s digitalization strategy, identified in the 13th Five-Year Plan for National Informatization in December 2016, states:

The Internet, cloud computing, large data, artificial intelligence, machine learning, blockchain… will drive the evolution of everything — digital, network and intelligent services will be everywhere.

In April 2017, the Wuzhen Think Tank released a white paper on the development of China’s blockchain industry. The paper introduced global and domestic blockchain-industry trends and provided valuable knowledge for research entities and related enterprises. A few months later, the National Committee of Experts on Internet Financial Security Technology published its Compliance Blockchain Guidelines.

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Image source: Gatecoin blog

Currently, Chinese authorities are actively studying blockchain in terms of more orderly data storage. On April 24, the National Audit Office of China discussed the use of the technology to solve problems inherent in centralized storage infrastructure.

Li Ming, an official working with the Ministry of Industry and Information Technology, has revealed that the Chinese national standard plan for blockchain has been completed and is to be announced publicly soon. It’s already known that blockchain national standards include data security, business and application standards, and other credibility and interoperability standards.

It is planned that each separate office and accredited auditor will be assigned a separate node, which will help reduce the burden on the government, while providing a trackable ledger that will record each transaction. However, despite the green light given by the government, it is not yet known how soon the discussion of the project will go into the implementation phase.

Nevertheless, this is an official recognition of the beginning of a new digital era in China, which gave a big impetus to the development of blockchain technology. And again, as in the case of Estonia, blockchain has become a solution to the security problem. In 2014, one of Hong Kong’s largest banks, Standard Chartered, lost nearly $200 mln as a result of credit fraud. Scammers used duplicate invoices for the same goods to get money from banks. To prevent more financial frauds Standard Chartered, together with a government agency in Singapore, utilized the blockchain and developed a unique cryptographic hash for each invoice. Companies managed to create an electronic ledger of invoices that uses a parallel platform to the blockchain employed in Bitcoin transactions. This ensures that no double operations are carried out and banks do not lend money for fake invoices.

The US

Blockchain technology in the US is not just a tool for operating cryptocurrencies or managing databases. Local authorities recognized the potential of blockchain in the provision of public services and launched a number of projects currently in different stages of implementation.

The state of Delaware was the first to announce the Delaware Blockchain Initiative in 2016. This comprehensive program launched by then-governor Jack Markell is designed to stimulate the use and development of blockchain technologies and smart contracts in both the private and public sectors of the state. It’s worth noting that the authorities officially recognized electronic transactions recorded in blockchains as verifiable data, and the bill was signed in order to legalize blockchain transactions for accounting and other business records for local companies. The initiative was supposed to become a step in preventing future taxation-related problems and records manipulations. But recently, expectations of Delaware’s blockchain supporters appeared to have been dashed, as the current administration under the governor John Carney has shown more caution than its predecessor.

The new authorities are slow in the mass adoption of blockchain, being more focused on traditional models of economics and business management. Yet Symbiont CEO Mark Smith, whose company Symbiont partnered with the ex-administration to move state archives into blockchain, is optimistic in relation to the future adoption of the technology:

The Blockchain Initiative partnership between Symbiont and the state of Delaware continues to be a positive one. We strongly believe private-public relationships bringing blockchain technology to state infrastructure will create advancements that benefit everyone involved.

Perhaps the current government of Illinois will work faster than its predecessors. In 2017, the state announced the Illinois Blockchain Initiative, which calls on the consortium of state agencies to cooperate in exploring innovations presented in distributed ledger technology. The authorities of the state also intend to promote the use of blockchain “to transform the delivery of public and private services, redefine the relationship between government and the citizen in terms of data sharing, transparency and trust, and make a leading contribution to the State’s digital transformation.”

Who’s next in the blockchain queue? West Virginia will launch the blockchain-based pilot version to conduct mobile voting in 2018 regional elections. And let’s not forget about New York, with its Microgrid project being developed specifically for households who want to buy and sell electricity produced by solar panels. Ethereum-based contracts are supposed to solve citizens’ old problems — they finally use electricity exactly where it is produced, and, within a day, can exchange solar energy with neighbours, depending on which side of the street is currently better illuminated.

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Image source: Kashmirnarrative

Alibaba Cloud & Waltonchain signed an agreement on strategic cooperation aimed at using blockchain technology in the field of smart cities. The results of the partnership are designed to address the problem of limited resources and services caused by the rapidly-growing megapolis population.

Other countries

Other countries have also put a tag on the map of blockchain globalization. However, many projects are at the planning stage, rather than the exploitation stage. For example, the German energy company RWE is working on the creation of an Ethereum-based network of charging stations for electric vehicles. Drivers will be able to control the charging process using a special application, and blockchain registry will be responsible for calculating the energy spent, making payments and identifying users. Another outlandish idea is to create a “charging on the fly” opportunity, when the electric car is charged directly during the trip.

The Australian government announced a grant of $8 million for a blockchain project to create ‘smart utilities’, and the Tokyo Electric Power Company (TEPCO) plans to use the technology to prevent a recurrence of the disaster in 2011, when a leak at the Fukushima Daiichi nuclear power plant caused significant and widespread disruption.

A new life of blockchain

The life of metropolises does not stop for a minute, and the launch of new technologies takes time. It may take years before blockchain, which will interact with IoT, artificial intelligence and big data, will be integrated to manage urban services and public infrastructures.

However, many countries in the world have already embarked on the path of a digital economy and very soon we could see qualitative changes in social, economic and environmental aspects of life, without piles of papers, giant traffic jams, documentation errors and double transactions. Look around you — maybe the city you live in is one of them.

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Estcoin Update: Estonia Bows to Pressure from EU, Banks, Scales Down National Cryptocurrency Project

Estonia will significantly scale down its national cryptocurrency plans after sustained criticism from both the European Central Bank (ECB) and local banking authorities in the country. Consequently, the proposed digital asset called Estcoin will be employed in Estonia’s e-residency program.

Estcoin Will Not Be a National Cryptocurrency

In August 2017, state officials in Estonia revealed plans to create Estcoin, a national cryptocurrency for the country of 1.3 million people. According to the information at the time, Estcoin would be tethered to the Euro, the single Eurozone currency. By so doing, the tokens would become virtual stablecoins tied to the Euro fiat currency. Many hailed the decision as another proof of Estonia’s forward-thinking status. However, the plans drew a lot of criticisms from the ECB and even from the banking industry in the country.

It all began with ECB president, Mario Draghi who said:

No member state can introduce its own currency; the currency of the eurozone is the euro.

ECB governor, Ardo Hansson also shared Draghi’s sentiments, accusing Estonian state officials of spreading false and misleading reports. According to Bloomberg, the country has announced that it will no longer move forward with its Estcoin national digital currency plan.

Estcoin to be Used for E-Residency Program Only

The other Estcoin use case has always been in the notarization of documents in the country’s e-residency program. All indications now point to that being the focus of the proposed cryptocurrency. Estcoins serve as an incentive to foreigners and e-residents to sign documents using the country’s electronic identification paradigm remotely. The government-sponsored e-residency project has so far issued 35,000 identification cards to foreigners. The majority of the ID card recipients are from Russia, Ukraine, and Finland.

Commenting on the development, Siim Sikkut, Estonia’s chief IT strategist speaking to local media in Tallinn said:

We agreed in discussions with politicians that Estcoin will proceed as a means for transactions inside the e-resident community. Other options aren’t on the table. We’re not building a new currency.

According to Estcoin creator, Kaspar Korjus, the token will only be utilized within the e-residency ecosystem for the time being. The Estcoin white paper author also poured cold water on any plans to use the token as a national cryptocurrency. He, however, revealed that other use-cases for the coin were still being debated.

Blockchain Adoption in Estonia

Estonia was one of the first countries to adopt blockchain technology for administrative purposes back when the viability of the technology was still being debated. It is considered to be one of the most technologically developed countries in the Eastern European sub-region. Apart from the e-residency program, a lot of the country’s administrative activities exists on fully digitized infrastructure. Estonia has already applied blockchain in areas like healthcare.

Will countries like Sweden and Norway face the same EU backlash for their national cryptocurrency plans? How long do you think it will take for countries to launch their own state-issued digital currency tokens? Keep the conversation going in the comment section below.

Images courtesy of Shutterstock and Pixabay.