In the EU Blockchain Resolution we Trust

Bictoin EU

It was my name day on September 20th – a significant day for a Greek Orthodox – but I was by no means going to miss the “Blockchain: Building Trust in Society” event with Dimitrios Psarrakis, a Greek leading specialist in European regulatory policy. This was the first event in PwC Switzerland’s joint thought leadership series with the blockchain hub Trust Square. I was not disappointed; on the contrary, both the speech, the panel discussion with Daniel Gasteiger, Founder, Trust Square & Founder, Procivis, Doris Fiala, Chairwoman, Swiss Control/Parliamentary Oversight Committee & President, Swiss FDP Liberals Women, Guenther Dobrauz, Dimitrios Psarrakis; and the party; were unique.

Greeks built the principles of Democracy. Eva Kaili, is the Greek EU parliamentarian that is leading a team with a mission to raise awareness in the European Parliament on the revolutionary potential of Blockchain and how to grab the opportunity to lead in the 4th industrial revolution with relevant and powerful policies.

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At the opening of his speech, Dimitrios Psarrakis, spoke about their team work in the EU parliament to educate, raise awareness and understanding about blockchain. They slowly but surely managed to obtain nearly 750 votes in the parliament for the Blockchain Resolution, a long and detailed policy for the EU which is based on the principle that Blockchain holds the potential to build Trust in our society in a different and better way, at many levels.

Driven by the fact that the internet has been a technological development that has undoubtedly created more convenience and connectivity, but has fallen short in creating more fairness and trust; Blockchain presents an opportunity to build trust and fairness in a very different way.

Driven by the belief that Blockchain will restructure several sectors: energy, healthcare, capital markets, Intellectual property etc.; the EU wants to mobilize capital to fund this revolution – the 4th industrial revolution.

The Blockchain Resolution includes several articles and aims to be fully in place in 2019. It has no intention to regulate any instruments – like coins, tokens etc-. It will only regulate the use of them on the newly created platforms. The Blockchain Resolution sees these new digital assets as legitimate instruments and does not attempt to categorize them as securities or commodities. The Blockchain Resolution sees them as alternative investments or contractual arrangements. Therefore, applying the Regulation in the EU for alternative investments, which is fairly flexible, is appropriate. The due diligence process on the platforms should be similar to the due diligence process in crowdfunding.

In Europe there is no consensus on the definition of a Security. Europe has MIFID, without a standard definition of a Security.

The Blockchain Resolution sees digital assets as alternative investments and the regulatory framework that applies is fairly flexible. Europe, through the Blockchain Resolution, wants to create policies that will mobilize capital to fund the next wave of restructuring the way several markets / sectors function.

The view of the EU is to present regulatory principles that are Technology neutral, Business-model neutral, and pro-Innovation.

The main principle is to allow for Disintermediation Economics that build Trust. Such economics promise to (a) reduce transaction costs and create new efficiencies, (b) reduce operational frictions by increasing liquidity, (c) automate monitoring processes with limited informational asymmetries (e.g. agency frictions, moral hazard, adverse selection).

The Blockchain Resolution is brave enough to look into the promise of Blockchain for Public infrastructure. The view is to restructure (a) traditional public services like land registries, licenses, certificates etc. (b) ways to reduce tax evasion and fraud, (c) cross-border transactions, regulatory reporting, data transactions between European citizens via smart contracts.

The Blockchain Resolution just got support from the Strasbourg Plenary.

“Blockchain has united this House, as all the parties in the Committee on Industry, Research and Energy (ITRE) voted in favor of the resolution under the principle of being technology neutral and innovation-friendly in Europe.” “One of the core messages of our text was to signify that the European Union aspires to become the global leader in the fourth industrial revolution,” said Eva Kaili.

The European Commission will be next in November at the European Parliament Blockchain event. This will be followed by the Blockchain and international Trade Report. In December, the Crowdfunding Regulation will be updated.

Some of the recommendations that the resolution makes are[1]:

  1. For member States to establish non-profit “innovation hubs” to promote research, education and training among their citizens
  2. For the Commission and ECB to identify dangers for the public and incorporate cryptocurrencies into the European payment system.
  3. To develop technical standards for Distributed Ledger Technologies
  4. Conduct a clear analysis of legal enforceability of smart contracts among EU member States
  5. Decentralize the storage of EU citizens’ data in preventing the misuse of data
  6. Decentralize infrastructure to ensure no monopolies are held, for instance the storage of nodes and servers
  7. Use blockchain for tracking EU funding to achieve greater accountability
  8. Evaluate blockchain-based e-voting systems as a use case for the EU
  9. The creation of funding opportunities from the EIB, EIF and EFSI 2.0
  10. The creation of an Observatory for the Monitoring of ICOs and clarification of utility tokens and security tokens as unique asset classes
  11. For any regulations on blockchain to remove barriers and founded on principles of technology neutral and business model-neutral

In Q1 2019, the Blockchain Resolution will be seen and hopefully adopted by ESMA. Europe is leading the way.

We live a world in which Trust is lacking, Trust is being re-defined, Trust has to be re-built.

[1] Excerpts from EU Parliament Passes Blockchain Resolution

Efi Pylarinou is an independent trusted Fintech and Blockchain advisor

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

A Thinktank Fintech initiative out of Greece

“Necessity is the mother of invention” is an English proverb that is not at all outdated. Small countries are developing regulatory frameworks to embrace and take advantage of the so-called “future technologies” because it will enable them to play vital roles in the 4th and 5th industrial revolution. As tech accelerates, it is expected that one generation may actually live through two major revolutions.

Smaller countries, policy-making organizations and think tanks are actively building the next layer to welcome the socio-economic changes that are inevitable.

A Greek think tank, To Diktio, was founded in 2013 with a European focus. To Diktio (the network in the Greek) is a member of the Foundation of Progressive Studies based in Brussels and focused on proposing reforms in Greece and Europe. I would like to thank the President of To Diktio, Anna Diamantopoulou[1] for reaching out to me. We can only grow through collaboration – see partnerships of ToDiktio, here.

To Diktio hosted yesterday a Fintech focused event for its members during which a very thorough Fintech report was presented by Dr. Kourouthanassis, of the Ionian University and Dr. Doukidis, of the University of Athens; and several policy reforms were suggested. I had the honor and pleasure to review the report (in Greek) and also participate virtually in the event to share some of my insights on Fintech global trends and the first necessary steps for Greece to dive into the Fintech opportunity which is much broader than simply reforming banking services (see video here – in Greek only).

The 40-page report offered a thorough overview of Fintech subsectors and also of the policies that have enabled countries to become Fintech hubs.

Naturally, mentioning first the FCA as an early pioneer in the Fintech. Highlighting that the first European Union country that developed a regulatory framework for “specialized banks”, was Lithuania.

The UK and Japan, are the leaders in establishing frameworks to facilitate the Open Banking movement.

Regulatory sandboxes exist in the UK since 2016 and only this summer the Central Bank of Spain announced a Fintech sandbox to be launched.

In Europe, only the UK launched Project Innovate last year to facilitate the dialog between Fintechs and regulators to innovate in the interest of consumers. Only in Australia, there is a comparable setup of the Capital markets authorities who setup as early as 2015, an Innovation Hub program to encourage the cooperation of regulators and innovators.

Fintech pulse

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Based on the Greek Fintech report, already in 2018, the median size of M&A fintech deals in Europe has nearly tripled from last year.

 

 

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Challenger banks, a European specialty, are the ones that have absorbed large Fintech investments; Revolut, Atom Bank, and N26.

 

 

Revolut has already opened offices in Greece, this past Spring. The penetration in the Greek market is remarkable. By the end of 2017, Revolut had acquired 55,000 customers in Greece, making Greece the 4th largest country/client for Revolut after the UK, France, and Lithuania. Revolut is planning to triple the customer base in Greece.

The first homegrown Greek challenger bank is PraxiaBank. The two also homegrown e-money companies are Viva Wallet and Tora Wallet. Viva is already well established with 60k retails clients and 280k business clients and 30mil euros of transactions only for 2018.

As expected several payment Fintechs have presence and business in Greece. Payments are the most mature but thin margin Fintech subsector. From the 375+ payment businesses with EU passporting, ten have reps in Greece and 9 have licenses to operate in Greece. From the 170+ e-payment Fintechs with EU passporting, 3 have a presence in Greece.

The largest Greek telco, OTE, has a new subsidiary Cosmote payments with a plain vanilla topup card. But what is more interesting is to watch what OTE does with their dormant insurance license and their newly acquired full banking license.

Opportunity via Fintech

The low hanging Fintech opportunity in Greece lies in alternative funding for SMEs. Greece is one of the few EU countries that lacks a crowdfunding and P2P lending framework.

The Greek government needs to launch a Digital ID platform borrowing design elements and tech from Estonia and India. Combining this with a basic regulatory reform for alternative lending, would be a short and long-term strategic move. In a traumatized economy that is recovering from foreign investments in real estate, Digital identities and access to alternative funding would make magic.

[1] Anna Diamantopoulou, has served in the Greek parliament for 11yrs and as European Commissioner for Employment, Social Affairs and Equal Opportunities (1999-2004). She has served as Minister of Education, Lifelong Learning and Religious Affairs and as the Minister of Development, Competitiveness and Shipping. She active in several European think tanks.

Efi Pylarinou is a Fintech thought-leader, consultant and investor. 

Get fresh daily insights from an amazing team of Fintech thought leaders around the world. Ride the Fintech wave by reading us daily in your email.

On the anniversary of the Lehman collapse, Satoshi Nakomoto is finally revealed

bitcoin-white-paper

On this historic day, the story was finally revealed, on an obscure Fintech discussion forum.

Was that a good clickbait headline?

The Satoshi Nakomoto story starts in 2002, after the Dot Com crash, when Elon Musk created SpaceX. Believing that mankind was doomed unless we could populate Mars he took some of his winnings from PayPal to create the rockets to get us to Mars.

That part of the story is well known. What was revealed today is the part of the story that has so far remained secret. Musk also took an idea that was being hatched in the early days of PayPal, to create a digital currency that was Internet native, and brought it to life.

PayPal had discarded the idea, even though the founders were super excited by it, because the team had opted for the more pragmatic strategy of working within the existing bank payment rails.

This is where the story gets weird. 

When Musk dusted off the early plans for a cryptocurrency and exposed them to some serious cryptographers, they found some showstopper issues.

Musk is not a man who gives up easily. He also knew two things. The first is you cannot rush great software. The second is that timing is everything.

So he did a deal with the cryptographers – who agreed on condition of anonymity forever. The deal was that they would get first class tickets to Mars in return for creating a “purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution”. They could take as long as they needed and were instructed to release it when they could see an event back on earth that shook human’s faith in the existing financial system.

It took them 100 years. They finished it in 2102, in the MuskVille colony on Mars. Fortunately some colleagues on Mars had perfected digital time travel. So they programmed their AI machine to release the code just after the Lehman Brothers collapse. In the news release today, they also uploaded what looks like a documentary. It is the history of mankind on Earth after 2008 WITHOUT Bitcoin. It is tough to watch. 

So now we know! Satoshi Nakomoto is an AI program from the future sent back to help mankind during dark times, created by a new breed of Humano-Martians.

For more in our science fiction series please see:

https://dailyfintech.com/2015/04/22/grexit-bitcoin-april-fool-crazy-as-a-fox-story-wont-go-away/

https://dailyfintech.com/2015/06/12/the-pan-african-currency-union-based-on-bitcoin-replaces-us-as-reserve-currency/

If you want a more serious look at the next ten years of the global financial system, please come to the event called  Finance Disrupted 2018 (the next ten years) in New York, on 2nd October 2018. This conference is managed by the Economist and as I have been a subscriber to that publication for decades I am excited to attend. They have assembled speakers who really understand the intersection of tech and finance as it relates to major disruptions such as the Global Financial Crisis and what may happen in the next ten years. There is a 15% discount for Daily Fintech readers. Here is the link to learn more about the event. To get the 15% discount for Daily Fintech readers please quote: dailyfintech15

While there are still a few tickets to this conference, I am told that the first flight to Mars is fully sold out and non-millionaires need not apply.

Bernard Lunn is the CEO of Daily Fintech and author of The Blockchain Economy. He provides advisory services to companies involved with Fintech (reach out to julia at daily fintech dot com to discuss his services).