Cryptocurrency and the Importance of Self-Regulatory Policies

The year 2017 was a significant one for cryptocurrency. The most famous of these currencies, Bitcoin, progressively continued to break its all-time high in value throughout the year, with many in the industry speculating that it is on track to break the $20,000 mark, up from just under $1,000 this past January. In June, cryptocurrencies as a whole reached $100 billion in total market capitalization—a feat it accomplished over the course of nine years—only to top $500 billion about six months later.

To say that it was a banner year for cryptocurrency would be an understatement, and the digital currency shows no sign of slowing down in 2018. However, in spite of the burgeoning interest in cryptocurrency as an investment and its demonstrable success, it remains unregulated, which has sparked growing concern among many familiar with the industry.

On one hand, the simple fact that cryptocurrencies have been allowed to flourish in an unregulated environment has played a definitive part in their growth. Currently, there are over 1,100 cryptocurrencies for people to trade in within financial markets globally. However, since the total market value of all digital currencies recently surpassed that of JP Morgan in size, many believe that regulation within this sector is necessary to keep investors safe and prevent the failure of a market that is growing with each passing day.

While some argue that the regulation of cryptocurrencies will prevent them from serving their intended purpose, the case for regulation is strong. A lack of regulation enables a degree of systemic risk and opens the market up for exploitation, ultimately weakening the cryptocurrency market as a whole and causing many who invest in it to lose large sums of money.

One group leading the charge to introduce regulatory initiatives to the cryptocurrency market is the ICO Governance Foundation (IGF), a decentralized global group and Swiss foundation. The purpose of the IGF is to create an international body that performs self-regulatory processes for ICOs within a wide range of decentralized capital markets around the world. The group develops best practices and standards in line with those established by national organizations such as the SEC and China Securities Regulatory Commission (CSRC), among others, and works with the foremost blockchain companies to create a market where ICOs work fairly for investors.

The IGF recently came one step closer to attaining its vision, as it recently formed an alliance with several other organizations in the technology industry to act as an international regulatory body that evaluates the quality of ICOs. In conjunction with the blockchain group Waves Platform, open software platform Ethereum, and the global auditing services firm Deloitte, the IGF will work to provide tax and accounting, reporting, legal, identity verification, and due diligence services to companies holding ICOs and other firms related to the blockchain industry. The group, which will be based in Switzerland, will focus on developing guidelines for those undertaking ICO projects as a way to establish the industry’s professionalism and create a strong foundation for it to function and thrive into the future.

How Blockchain Is Relevant to the Future of Telcos

At the end of last year, Deloitte published an article that detailed the outlook for the telecommunications industry in 2017. In the piece, the author outlined those areas in which he saw an opportunity for growth, provided advice to businesses wanting to develop within the industry, and made note of sweeping, big-picture trends that he considered to be the most likely advancements within the sector.

What the article did not mention, however, was the potential impact of a subtle, yet revolutionary technology that many experts agree will change the way that companies across almost every sector conduct business. That technology is blockchain, a distributed ledger system that allows firms to conduct transactions and facilitate processes with a greater degree of transparency, efficiency, and security than ever before. In the near future, the telecommunications industry may provide services to customers more effectively and with a greater focus on the protection of personal data—an important quality in a digital age in which the general population continues to grow more concerned with institutions’ ability to keep their sensitive information private.

In order to understand what makes this possible, one must first understand the concept of blockchain technology itself. Originally established as a platform for the cryptocurrency Bitcoin by Satoshi Nakamoto in 2009, blockchain is a distributed ledger that facilitates the transfer of data through a shared database. While transactions on the blockchain are publicly viewable for the purposes of preventing tampering through public accountability and self-certification, the identity and specifics of all transactions made within the blockchain remain anonymous. Blockchain employs the use of encryption and algorithms to document transactions, while offering users more speed, efficiency, transparency, trust, and security than any other technology previously known.

While blockchain offers numerous benefits, there are legal aspects of the technology that have yet to be formally evaluated. Governments have yet to create laws or legal standards that outline regulations to keep the technology in check, nor have they established protocols or consequences in regards to how companies will be dealt with in the event that blockchain fails. While the United Kingdom has elected to operate with a “hands-off” approach to regulating blockchain, it allows companies in industries such as finance to test and innovate within a “regulatory sandbox.” Moreover, the United States have taken greater steps toward regulating blockchain.

Regardless of the country in which a telecom company operates, executives should approach blockchain from a standpoint of cautious optimism, keeping in mind that certain legal issues have the potential to arise as the technology becomes a larger part of the business world. Smart contracts, for example, have the potential to revolutionize the way that firms in many industries conduct business, and yet they must be evaluated for both efficiency and any potential flaws before they are adopted as part of a routine mode of operation. Smart contracts at their core are fixed and do not take into consideration the nuances between the parties, which may impact the strong, trusting partnership between two firms.

In addition, it is important to note the sweeping, positive changes that the technology has the potential to create within the telecommunications sector. One of the most important things that blockchain can do for telecom companies is to streamline internal functions and facilitate the creation of new products. Additionally, blockchain has the potential to open up streams of revenue for telcos in the form of new services, such as mobile wallets and 5G service. Other services that blockchain could enable include the provision of international mobile wallets and the creation of smart cities that operate on a large network of devices connected by IoT.

Many major telcos have already embraced blockchain, and are poised for further investment. In the last two years, firms such as Sprint, Verizon, Orange Silicon Valley, and NTT DOCOMO Ventures have involved themselves in this budding sector through activities such as investing in blockhain startups and launching their own blockchain initiatives. Some have filed patents for technology that will further the industry’s growth, such as Verizon and its patent for a blockchain that stores digital content passcodes.

4 Areas That Can Benefit from Blockchain Technology

Blockchain is one of the most exciting business topics of the year. Beyond its origins as a platform for cryptocurrency, the distributed ledger technology has earned recognition and praise from major corporations in a wide range of industries. A November 2017 Bloomberg article even confirmed that powerful banking magnates such as Goldman Sachs and JPMorgan have found the technology to be highly efficient and reliable for undertaking services such as equity swaps.

Although the banking and finance sectors are a natural match for technology originally designed to facilitate the transfer of cryptocurrency, they are far from the only areas poised to gain from all that blockchain has to offer. Following are four other areas that are also likely to benefit significantly from blockchain technology:

1. Government

In many countries, government processes are well-known for being long, muddled, and marked by the potential for corruption. However, blockchain may hold the key to significant improvements. One major benefit of blockchain is its ability to transform historically paper-based processes into a digital format, which could range from registering land to collecting taxes. The identity verification processes made possible through blockchain could expedite these transactions, along with many others. Countries such as Estonia and Dubai have already taken steps to using blockchain within their operations for the benefit of their citizens. Specifically, the government of Dubai is planning to move all of its documents to the blockchain within the next two years.

2. Voting

Another aspect of blockchain that could positively impact government operations is its potential to allow citizens of modernized countries to cast votes in political elections. In light of the accusations of voter fraud that have surfaced in the United States in the last year, blockchain may play a crucial role in maintaining the integrity of voting systems in the United States and beyond. Voter registration, identity verification, and electronic vote counting can all be conducted and confirmed through blockchain, which could prevent the rigging of election results. Startups such as Follow My Vote, based out of Virginia, have already begun a movement designed to help introduce US citizens to blockchain-based online voting.

3. Charity

While many people find joy in the spirit of giving, they also do not like the idea that their donations may not be going directly to the people or causes that they intend to help. The rise in popularity of rating sites for nonprofits such as Charity Navigator are a testament to this idea. Blockchain provides the technology for donors to track the money that they contribute to charitable causes and ensure that it ends up in the hands of those who will use it for the cause for which it was intended. Through blockchain-based charitable initiatives that rely on cryptocurrency, such as BitGive, those who donate funds can closely monitor where their money is going after it has changed hands through a distributed ledger.

4. Retail

Buyers and sellers in the marketplace could both benefit from the reduced fees associated with retail purchases made through blockchain — the technology cuts out the intermediary between two parties, allowing buyers to purchase directly from sellers without the need for a private third party, such as a bank. In addition, it holds the potential to create value-add services, such as rewards points in the form of digital tokens that can be used at any retailer that also uses blockchain-based technology. For retailers, blockchain helps to efficiently collect and store customer data, and it creates personalized rewards programs designed to motivate customers to return.