The DRC Foundation hosted a meetup on Blockchain Regulations and Governance on 19th October in Science Park, Singapore. Four professionals delivered speeches: Prof. David Lee, FinTech and SUSS blockchain professor (Singapore University of Social Sciences); Prof. Pei Sai Fan, visiting professor at the National University of Singapore and Renmin University of China; Dr. Li Yan, Senior Lecturer at Nanyang Technological University; and Selina Lin, Chairman of the DRC Foundation.
The recent issues concerning the blockchain industry, including smart contracts, STO, token regulations, FinTech, and ICO regulations were discussed.
David Lee:
Blockchain is Coded Governance
Prof. Lee spoke on smart contracts, the difference between security tokens vs. token security, and value of the blockchain, laying out the blueprint for blockchain’s future development.
1 A Smart Contract is not a Contract
According to Prof. Lee ,recent social media postings have suggested that a smart contract is not an appropriate name due to its functions and role .A contract is enforceable by law, such as security or commodity law, but the open blockchain is not bound by any of those in the existing economic system. "Token Law" within blockchain, and "Coded Governance" within nature, is what we should consider. For instance, how do we achieve consensus? When disputes arise should a third-party arbitrator such as a federated chain be involved or should the transaction automatically roll back with time lapse or penalty?
Prof. Lee categorized blockchain governance as on-chain or off-chain. On-chain governance relies on technology to further decentralize and add transparency to the chain, thus achieving distributed trust, which avoids any complete system failure due to a dysfunctional single node, while centralized off-chain governance facilitates effective regulations from existing regulators. Therefore, blockchain governance involves multiple parties both on-chain and off-chain, and combines centralized and decentralized governance.
2 Token Security is the Future
STO (Security Token Offering), due to its supposedly “ease of compliancecompliance, has recently become the talk of the town since ICO . However, even though STO tokenizes securities, its underlying legal entity is still bound to existing laws, and its application scenario is still securitizing traditional assets, where blockchain social scalability does not take full effect.
Professor Lee proposed Token Security, which is the securitization of tokens, as a future mode of the token economy. He argued that STO, as another form of the traditional economy, is fundamentally identical to IPOs and may even culminate in an even larger bubble. By contrast, Token Security to tokenize dead capital, such as cattle and sheep, enables the owner to insure against digital assets, thus securitizing dead capital. The main characteristic is that the underlying “asset” does not have a legal entity and bounded by existing law.
3 Blockchain Protects Privacy
Blockchain has great potential to empower the digital economy. Professor Lee suggested focusing on blockchain’s functions instead of existingregulation system. Blockchain in nature is a distributed ledger and public chains do not run with much operating efficiency or benefit. Under these circumstances why do so many people expect so much of it? Besides token that enhances collaboration, the answer lies within the "smart contract", which is the coded governance that continuously pushes system decentralization to form distributed trust, where data is tamper-proof and privacy is well protected with cryptography. In the digital economic era, private data, if managed by a centralized institution, could be more vulnerable to attacks and data breaches. Imagine how scary it would be if the centralized institution was taken over by AI and humans lost their privacy and independence.
Therefore, the blockchain is not a tool for rent seeking. Instead, it is a new economic form for financial inclusion, deleveraging, expansion, and scalability. According to Prof. Lee, the Singaporean government has realized and embraced the advantages inherent in blockchain technology. A strong and open government has no fear of being replaced, thus it is willing to promote and embrace decentralization technology like blockchain. Singapore is ready to implement centralized governance with decentralized technology in various industries including payments, securities, trading, transportation, and real estate. Blockchain is neither to compete with nor replace, but to boost and expand financial capacity.
Dr. Pei Sai Fan:
Regulations in Place to Impel Innovation
Professor Pei, former senior officer of The Monetary Authority of Singapore (MAS), introduced the basic supervisory thinking on Fintech regulation of MAS – the need to balance between development and regulation. The four principles of regulation are risk-focused, disclosure-based, stakeholder-reliant, and enterprise supportive. Its supervision is risk-focused, and the weight of regulation must match the potential risk and impact of the Fintech activity. The MAS is tolerant of risks from technological innovation, as failure is part and parcel of learning and development. At the same time, MAS closely watch and take timely measures to address risks affecting consumers and financial stability.
1 Regulation Must Run Alongside Innovation
First, MAS is alert to technology trends and understand their implications, and hence can take timely measures to harness their potential by setting common standards and promoting inter-operability for various digital solutions to enhance efficiency and optimise benefit to consumers.
Secondly, as timing and proportionality is important for regulation, the MAS follows the principles of "materiality" and "proportionality". Regulation should come in only when risk posed by the new technology becomes material, and weight of regulation must be proportionate to the risk posed, e.g. P2P lending platforms are lightly regulated as they do not take deposits and are not large enough to pose any significant macroprudential concerns.
Finally, the MAS weighs on how new technologies impact risk. Regulators should encourage the mitigation of existing risks and constrain new risks that may arise.
2 MAS Regulatory Sandbox
In Singapore, normally a license from the MAS is required if one wants to provide financial services. With Fintech fast evolving, because of possible non-compliance of regulations, new innovations may not have the chance to be experimented and applied, result in missed opportunities. So, MAS launched “Regulatory Sandbox” in Nov 2016.
The regulatory sandbox is designed to encourage innovation, shorten “time to market” for product commercialization, reduce cost of failure (as the experiment in the sandbox is time-bound and conducted within certain boundaries), and provide learning opportunities for regulators and technology entrepreneurs.
3 MAS Regulations on Crypto Currencies and ICO
MAS views crypto currencies as a "virtual commodity". It currently does not regulate crypto currencies directly but regulate activities that surround crypto currencies if these activities pose specific risks, e.g. intermediaries in crypto currency services will be subject to AML/CFT requirements. MAS categorises crypto currencies into payment tokens or virtual currency, utility tokens, and security tokens. As for ICO, the MAS currently does not directly regulate the issuance and trading of crypto currencies but monitors closely the impact of such activities on financial stability, money laundering, investor protection, and market operation. The MAS is currently considering new regulatory requirements to put crypto exchanges that provide trading platform for virtual currency and security tokens under its supervision, but not a licensing system.
Prof. Pei also provided a comparison of regulations on cryptocurrency among some countries: China, South Korea, the US are the strictest; the Switzerland, Gibraltar, Malta, Estonia, etc. are more very supportive and open-minded; and Singapore, Hong Kong, and Japan are relatively cautious and balanced.
Prof. Pei noted that the current quality of ICO whitepapers are far below that of IPO prospectus. He noted class action lawsuits against ICO launchers in the US are rising. He therefore urged the relevant ICO players to pay more attention on ICO governance. Good governance structures and practices are conducive to the long-term success of token projects, such as good project oversight with a view to token holders' best interests, appropriate structures that align developer and token holder incentives, reasonable token holder contractual rights, clear and fair disclosure protocols and fair token sale practices.
He felt that the current ICO down and gloom period is an excellent opportunity for all stakeholders to focus on the improvement of the governance structure and practices of ICO funding. Prof. Pei believes that a distributed community like the DRC plays an instrumental role in promoting healthy and sustainable development of the blockchain industry. The DRC Community is home to top contributors and benefits from distributed collaboration as well as brings together people that hold a common belief and together discover, invest in, and create value. In addition, through the community governance like DRC platform, Prof Pei supports ICO as an innovative financing method for young techno-entrepreneurs and at the same time democratise the rights of venture capital and private equity investing which is up to now a privilege to institutional investors to the public.
Selina Lin:
Distributed Autonomous Organization Model Blockchain Regulations and Governance
Selina Lin, Chairman and CEO of the DRC Foundation and Fellow of SUSS, introduced DRC’s work in blockchain regulations and governance.
1 DRC Distributed Autonomous Organization Model
After a year of research and exploration into the distributed organization model, the DRC Foundation has realized that blockchain regulations and governance mechanisms have factors that determine whether a blockchain project succeeds or fails, and lacking a governance mechanism has posed a challenge to project parties, investors, and regulators in the token economy.
Selina presented the DRC Distributed Autonomous Organization Governance Framework, which comprises 6 mechanisms and 12 criteria, including decision-making mechanisms, incentive mechanisms, financial management, information disclosure mechanisms, risk control management, and community governance.
The DRC believes that blockchain technology is decentralized, while governance is centralized, and the combination of distributed decision-making and centralized governance is the cornerstone to blockchain governance. Moreover, the DRC has audaciously attempted to balance efficiency and democracy and adopted a voting mechanism in the DRC Community after reviewing EOS, BTS, and other distributed communities. First, 101 voting nodes are elected by the Community, from which 11 decision-making committee members, including advisers, investors, community representatives and contributing nodes, are decided for final decision-making. The DRC will continue fine-tuning their mechanism.
The DRC, as a practitioner of the token economy, adopts a "POC" mechanism and "3C, 5D, 7W, LASIC", advocated by Prof. Lee, and will continue building a community that popularizes benefits from distributed collaboration.
2 DRC Distributed Professional Service Platform : Wall Street for the Digital World
As a practitioner in the token economy, the DRC has become deeply aware that blockchain projects are indivisible from their ecologies, and the value of an excellent blockchain project depends largely on the degree of openness, inclusiveness and decentralization inherent in its ecosystem. The DRC ecosystem that we have built is a community of top contributors, a community that benefits from distributed collaboration that publicizes its benefits to its members and brings together people that hold a common belief that these are necessary to be successful, explores application scenarios for blockchain technology as representative of innovative technology combined with traditional industry in the token economy and together discover, invest in, and create value.
The Distributed RegTech Collaboration Platform (DRC) is a distributed professional service platform which leverages FinTech to establish a mechanism of mutual trust among investors, and innovative technology projects, e.g. blockchain projects, regulators, and third-party professional agencies. DRC, fully utilizing the collective wisdom of its community members, will enable a transparent and open blockchain ecosystem that can govern itself and promote the steady, regular and sound development of the blockchain sector. The DRC offers professional services on blockchain regulations and governance, due diligence and ratings for blockchain projects, and assets tokenization consultation.
3 DRC Welcomes Field Experts and Organizations to Participate in the Blockchain Standards and Norms Alliance
The development of blockchain is more than a mere technological reformation. It also involves a comprehensive understanding of multiple disciplines: economics, sociology, behavioral science, and psychology. Moreover, blockchain investigates a variety of fields, such as regulations and governance, digital assets management, security compliance, and token economy design. “Blockchain is an integration of multiple disciplines, including economics, behavioral science, psychology, and its development calls for input from them all.”
Selina welcomes all who are concerned with the blockchain industry to participate in the Blockchain Standards and Norms Alliance, initiated by the DRC.
DRC will initiate a series of research topics, including blockchain foundation governance mechanisms, token governance mechanisms, financial management mechanisms, consensus mechanisms, incentive mechanisms, community governance mechanisms, legal compliance, security controls, and more. The DRC welcomes field experts and organizations to participate in the Blockchain Standards and Norms Alliance. We look forward to discussing these issues with our allies, building an ecosystem with manageable risks and transparent regulation, and promoting the steady, regular and sound development of the blockchain industry.
At the end of the meetup Dr. Yan hosted a discussion on topics concerning the attendees, such as stable tokens and STO.
The meetup is a prelude to the DRC’s serial research. The DRC will continue to invite industry experts, academics, and practitioners to participate in blockchain regulations and governance meetups on a monthly basis; covering both theoretical and commercial practices, exploring blockchain development; and promoting industry compliance, transparency, and self-discipline.
Pictures
网友评论