85 Percent of Developers Can Alter Their Cryptoassets’ Protocol, Research Shows

CryptoCompare’s yearly report indicates a tendency to centralize crypto assets, as 85 percent of their developers can change protocols at any time.

Cryptocurrency tracking resource CryptoCompare’s recent study has shown that 85 percent of crypto assets allow development teams to alter their platforms. The report was published Wednesday, Oct. 17, on CryptoCompare’s website.

To create the report, CryptoCompare reviewed hundreds of crypto and blockchain projects, with experts detecting a tendency towards centralization set by utility tokens that are running on controlled servers.

According to the research, as many as 85 percent of developers can change the protocol on their projects at any moment at their own discretion.

Source: CryptoCompare

The yearly taxonomy of cryptocurrencies also revealed that 55 percent of existing crypto assets are actually centralized, while 30 percent more are semi-decentralized. As a conclusion, only 16% of all existing crypto assets are considered to be a fully decentralized ecosystem. However, CryptoCompare’s total amount equals 101 percent instead of 100 percent, which might indicate a reporting error.

The situation is slightly less decentralized with tokens utilized as a method of payment. As per the report, almost 41 percent of them are centralized, while another 22 percent are centralized to some extent.

CryptoCompare’s study also reveals that most cryptocurrencies can technically be classified securities. To prove this point, they apply to the guidelines established by the Swiss Financial Market Supervisory Authority (FINMA).

Following FINMA’s guidelines, Bitcoin (BTC) and Ethereum (ETH) are not securities due to the lack of an identifiable common enterprise and a high level of decentralization. However, 55 percent of crypto assets could be treated as securities and fall under existing regulation, CryptoCompare states.

As Cointelegraph previously wrote, Canadian mass media and information company Thomson Reuters — which owns major international news agency Reuters — has recently partnered with CryptoCompare. The resource will provide trade data on 50 cryptocurrencies for Reuters’ financial desktop platform, Eikon, which was developed for institutional investors.

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CME Report: BTC Futures Trading Keeps Growing in Q3, Average Daily Volume up 41% Over Q2

Bitcoin futures trading at the CME has continued to grow in Q3, with average daily trading volume up 41% over Q2.

Bitcoin (BTC) futures trading at the Chicago Mercantile Exchange (CME) has continued to grow in Q3, the U.S.-based exchange reported in a tweet Wednesday, Oct. 17.

The CME has revealed that the average daily trading volume (ADV) of Bitcoin futures has increased by 41 percent in Q3 over Q2, while open interest (OI) — or the number of open contracts on Bitcoin futures — has risen by 19 percent in the third quarter.

CME Bitcoin Futures ADV and OI in Q1, Q2, and Q3 2018. Source: CMEGroup

Compared to the results of the second quarter over the first quarter, the trading dynamics have now been growing at a slower pace than in Q3. On July 20, the CME reported that Bitcoin futures trading in Q2 had seen a large increase, with ADV and OI up 93 and 58 percent over Q1, respectively.

CME Group is one of the biggest global exchanges and the largest options and futures contracts OI of any futures exchange in the world. The company had also launched Bitcoin futures trading on Dec. 17, 2017, shortly after the launch of BTC futures by the Chicago Board Options Exchange (CBOE) on Dec. 10.

In early October, crypto analyst and host of CNBC’s show Cryptotrader Ran Neu-ner had predicted that Bitcoin price is “about to explode” in the wake of the upcoming decision on several Bitcoin Exchange-Traded Fund (ETF) applications by the U.S. Security and Exchange Commission’s (SEC).

In his prediction, Neuner compared ETFs with Bitcoin futures, claiming that the expectation of BTC futures contracts allegedly made the major cryptocurrency rally last year from “$6,691 (Nov. 11) to $20,000 (Dec .17).”

Recently, Bloomberg reported that the CME was not planning to introduce futures on any cryptocurrencies other than Bitcoin in the near future. Terry Duffy, chief executive officer of CME, had reportedly revealed that the company should first work on the approach to Bitcoin futures, since it “might have been the most controversial launch of a product.”

Earlier this year, the Federal Reserve Bank of San Francisco alleged that a sharp decline in the  crypto markets in 2018 had been caused by the Bitcoin futures launch. The bank stated that it considered that the “subsequent fall in the price” after BTC futures trading did not appear to be a “coincidence.”

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Redditors Accuse Amex of Sponsoring Anti-Crypto Tweets, But Proof Inconclusive

Cointelegraph investigates Redditors’ allegations that American Express has sponsored crypto-skeptical content on Twitter.

Reddit users have alleged that American Express (Amex) has sponsored crypto-skeptical content on Twitter, according to a popular forum thread opened Tuesday, Oct. 16.

The tweet in question was allegedly circulated through Bloomberg’s Twitter network “TicToc” on Oct. 11, and was reposted as a screenshot to Redditor u/Alexsayzz’s thread titled “Anti-crypto propaganda… promoted by American Express,” which has had 4,100 upvotes and drawn 437 comments as of press time.

As the screenshot reproduced below indicates, the tweet appears to have the hallmarks of a promoted post, and is recorded as having 42,000 views at the time the screenshot was taken.

Alleged AMEx-sponsored tweet posted to Bloomberg’s “TicToc” Twitter feed. Source: Reddit thread, user: u/Alexsayzz

The allegedly sponsored tweet contains a multimedia article — referring to “estimates” from Bloomberg’s energy industry research team, Bloomberg NEF — that contends the crypto industry “is using more energy than all the world’s electric vehicles.”

The tweet plays into the notion that the high amounts of energy needed to power the mining of cryptocurrencies such as Bitcoin (BTC) is the coin’s “achilles heel” — a long-standing, if frequently contested, argument.

Titled “Crypto’s Hidden Costs,” the piece covers the controversial energy-intensive Bitcoin (BTC) mining process. It frames two interviews with figures from the blockchain space, who give their opposing views as to the benefits of using clean energy to fuel crypto mining.

The tweet’s alleged promotion by a major card payments industry player such as Amex has been lambasted as “propaganda” by the thread’s contributors, who view Amex’s position as being in direct competition with the emerging cryptocurrency sector, and therefore as having an arguably vested interest in promoting crypto-skeptical content.

Cointelegraph’s investigation into the Reddit allegations did not lead to the allegedly Amex-sponsored content itself. A tweet containing the same multimedia article is still to be found on the TicToc feed here, dated Oct. 10, but without the “promoted by American Express” included.

However, an anonymous source at Twitter has confirmed in private correspondence with Cointelegraph that the tweet in question was indeed promoted for some period, although they could not identify the sponsor.

In order to confirm whether or not the tweet was indeed Amex-promoted content, Cointelegraph used a tool Twitter provides that enables users to retrieve tweets that have been promoted by a specific account. However, entering either TicToc or Amex fails to retrieve the relevant tweet.

As of press time, Amex has not responded to Cointelegraph’s request for comment.

While the alleged sponsor of the tweet cannot be confirmed via the platform itself by Cointelegraph’s methods by press time, it remains possible that the tweet in question may have been deleted, or that Twitter’s transparency tool for promoted content may be unreliable and fail to comprehensively retrieve all tweets.  

Another possibility is that the Redditor’s image was fabricated to create the false impression that Amex has been involved in the promotion of anti-crypto material, in an attempt to quash competition from the emerging sector.

In June, the temporary failure of Visa’s transaction service in Europe — a competitor for MasterCard — highlighted the 99.98 percent functionality of Bitcoin’s decentralized network since its inception on Jan. 3, 2009.

Cryptocurrencies and advertising have sparked controversy in the past, notably with tech giants’ bans on crypto-related advertising. Google, Facebook and Twitter have all in the past banned crypto ads, although Facebook has since reversed its ad ban for pre-approved crypto firms, while still maintaining a ban on Initial Coin Offering (ICO) advertisement; Google made a similar move several weeks ago.

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Binance Increases Anti-Fraud Measures With Chainalysis Partnership

Binance is using Chainalysis’ AML/KYC product to grapple with multiple international jurisdictions’ regulations.

Crypto compliance provider and research firm Chainalysis announced it had partnered with exchange Binance in a press release Wednesday, Oct. 17, in order to improve its detection of suspicious transactions.

Binance, currently the world’s largest cryptocurrency exchange by volume, continues to expand into various international markets, being required to comply with each jurisdiction’s anti-money laundering (AML) and know-your-customer (KYC) rules.

Chainalysis eases this process, the firm claims, through the use of real-time monitoring to track the provenance of each transaction made on Binance’s platform.

The solution, known as know-your-transaction (KYT), saw its initial release in April, the press release notes.

“Cryptocurrency businesses of all sizes face the same core challenge: earning the trust of regulators, financial institutions and users,” Jonathan Levin, co-founder and COO of Chainalysis commented in the press release, adding:

“We expect many to follow Binance’s lead to build world-class AML compliance programs to satisfy regulators globally and build trust with major financial institutions.”

2018 has seen various well-known exchange platforms — including P2P ecosystem Localbitcoins — introduce additional compliance measures, some of which have jarred with cryptocurrency users that value anonymity. As well, in September, crypto exchange ShapeShift introduced a membership program that will gradually become mandatory and require the provision of “basic” personal information.

Explaining its own implementation of AML and KYC rules, Binance implied such measures were necessary to permit further expansion.

“Our vision is to provide the infrastructure for a blockchain ecosystem and increase the freedom of money globally, while adhering to regulatory mandates in the countries we serve,” Binance CFO Wei Zhou said.

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Untethered: The History of Stablecoin Tether and How It Has Lost Its $1 Peg

Stablecoin Tether has dipped below its 1:1 ratio with the US Dollar after a year of uncertainty regarding its fiat currency reserves.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Tether, a cryptocurrency that has long been a point of contention in the community, has seemingly been uppegged from the US Dollar.

The stablecoin, by virtue of that very description, was linked to the US Dollar at a 1:1 ratio. Simply put, every Tether token that was minted had to be backed by a US Dollar.

Concerns around the validity of Tether’s reserves of fiat currency corresponding to the circulating amount of tokens seem to have taken its toll. On October 15, the cryptocurrency dipped below the $1 mark amid a wave of negative sentiment that has led to an apparent sell-off of Tether tokens.

Another factor that may have influenced the drop in value of Tether was a report at the beginning of the month which stated that both Tether and Bitfinex, the exchange responsible for issuing the tokens, had parted ways with Noble Bank in Puerto Rico.

This was followed by Bitfinex temporarily suspending fiat wire deposits – with no specific reason given for the decision. It could well be that the closure of its Puerto Rican bank account has exacerbated the situation.

Tether is still trading below $1 according to data from CoinMarketCap.

Image source: CoinMarketCap

A history of Tether

Tether, as it is known today, was launched in November 2014, after it was rebranded from the original project Realcoin.

The project was initially founded by Bitcoin Foundation director Brock Pierce, alongside software engineer Craig Sellars, and entrepreneur Reeve Collins. The RealCoin startup laid the foundation for Tether’s operation before the name change came about.

The premise of the cryptocurrency was simple, to provide a utility token that represented certain fiat currencies at a 1:1 ratio, with the benefits of cross-border payments facilitated by blockchain technology.

The cryptocurrency was built and operated using an OmniLayer platform, a software layer built on the Bitcoin protocol. Thus, every time new Tether tokens were issued, these could be tracked on the platform, allowing the wider cryptocurrency community to keep tabs on how many new Tethers were released.

Tether and Bitfinex

Tether has had an interesting association with Hong Kong based exchange platform Bitfinex. The exchange integrated Tether into its operation in January 2015, but the relationship has come under intense scrutiny over the last few years.

According to Tether’s official website, the company shares the same leadership as Bitfinex. JL van der Velde is CEO of both companies, and Giancarlo Devasini is the chief financial operator of both operations as well.

The main reason for this has been spikes in the value of Bitcoin and other cryptocurrencies following the periodic issuance of new Tether tokens. Critics have claimed that the newly minted tokens were being used to prop up or manipulate the value of other cryptocurrencies.

While there is nothing to stop people from buying Bitcoin with fiat currencies or various cryptocurrencies on a multitude of exchanges, the use of Tether to do this has been disconcerting for one major reason.

Since its inception, Tether has asserted that it always has the necessary fiat reserves to back all circulating tokens in the market. The website even provides a real-time ledger of Tether tokens in conjunction with their underlying monetary reserve.

Tether’s account balances according to the ‘Transparency’ page on its website. Source: Tether

However, there have been claims that not all Tether tokens which are issued, have the necessary fiat currency reserve to back it up.

No official audit

While Tether’s balance sheet on its website claims to provide a transparent reflection of its accounts, Tether has failed to complete an audit of its accounts by a third-party – which was promised in 2017.

The crypto community began to put pressure on the company to conduct a full audit to allay fears of inadequate cash reserves to the number of Tether tokens. To this end, Tether acquired the services of Friedman LLP to conduct a short review of its account balances.

Following that, the company published a memo of a short report from Friedman LLP with the company’s accounts – in the hopes of appeasing the concerns of various parties online:

“We hope that the community considers the attached memorandum for what it is: a good faith effort on our behalf to provide an interim analysis of our cash position and our issued and outstanding tokens, as part of ongoing efforts to further professionalize the transparency mechanisms of Tether Limited.”

As various critiques came out in public, Bitfinex eventually threatened legal action against parties that were questioning the authenticity of their operation in November 2017.

Both Bitfinex and Tether then received government subpoenas in December 2017 from the Commodity Futures Trading Commission (CFTC) in response to the concerns raised towards the end of the year.

With the pressure firmly on, Tether got Friedman back to conduct a full audit in January 2018. But less than a month into the process, Tether stopped the auditing process, claiming that it wouldn’t be completed in a reasonable period of time, according to Bloomberg:

“Given the excruciatingly detailed procedures Friedman was undertaking for the relatively simple balance sheet of Tether, it became clear that an audit would be unattainable in a reasonable timeframe.”

Conflicting reports

Following the dissolved relationship between Tether and Friedman LLP, Bitmex released a report that speculated that Tether had the necessary cash reserves in a bank account in Puerto Rico.

While that report may have settled some concerns around the validity of Tether’s claims, a research paper published in June from the University of Texas blamed Tether for Bitcoin price manipulation in 2017.

By using algorithms to analyze market data, the report claimed that purchases with Tether were timed after downturns in the cryptocurrency markets which resulted in price increases in the value of Bitcoin.

In the same month, a law firm in the US released a report stating the Tether did actually have the adequate reserve of fiat currency to back tokens in circulation. Law firm Freeh Sporkin &  Sullivan LLP had access to two of Tether’s bank accounts to release its findings – which were not an official audit.

In response to the report, Tether’s general counsel Stuart Hoegner told Bloomberg that mainstream accounting firms would not conduct official audits on companies working with cryptocurrencies:

“The bottom line is an audit cannot be obtained […] The big four firms are anathema to that level of risk. We’ve gone for what we think is the next best thing.”

New Tether continues to be minted throughout 2018

Despite all of this media attention, Tether tokens have continued to be issued through the year, according to data from Omni Explorer.

Source: Omni Explorer

In August, more than $500 million worth of tokens were released, but the focus of many reports was on the apparent lack of effect this had on market prices these issuances were having.

Major stablecoin competitors launched

While Tether has long been hailed as the original stablecoin pegged to the US Dollar, its duopoly with TrueUSD, has been disrupted by the approval of two new stablecoins linked to the Dollar.

In September, Paxos and Gemini launched two new stablecoins called the Gemini dollar (GUSD) and the Paxos Standard (PAX), which are both backed by the US dollar on a 1:1 ratio.

Both stablecoins are based on the Ethereum blockchain using ERC-20 token standards, which also ensures full transparency of these coins, as Ethereum can verify the smart contract of both ERC-20 tokens.

This should also rule out the need for third-party service providers and exchanges in order to make transactions with these stablecoins.

Crypto community wants transparency

An overarching theme of the Tether saga has been the lack of trustworthy transparency when it comes to the necessary reserves of fiat currency to back-up newly minted coins.

To date, Tether has not undertaken or released an official third party audit of its accounts. While the community would love to give them the benefit of the doubt, hundreds of millions of dollars have been spent on Tether tokens and this necessitates a transparent and trustworthy audit.

If the company had carried out this process, at whatever cost and given timeframe, all fears could have been allayed. The failure to do so has led to serious uncertainty, the consequences of which are apparent in the current valuation of Tether tokens.

The launch of new stablecoins by highly reputable service providers has the potential to provide a viable alternative to Tether. The pressure is firmly on the company to prove it is running a transparent operation.

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Russian Startup to Create Blockchain-Based Copyright Network in Uzbek Capital

The Uzbek city of Tashkent has signed a deal with a Russian startup to digitize patent records and make intellectual property profitable.

A Russian intellectual property startup has signed a memorandum with officials from Uzbek capital Tashkent to integrate blockchain for use in copyright, Russian state news agency TASS reports Tuesday, Oct. 16.

The president of the Russian National Intellectual Property Transactions Coordination Center (IPChain), Andrey Krichevsky, met the head of Tashkent’s department of innovations Jasur Zakhidov during the Open Innovations Forum in Moscow. Both parties agreed to implement decentralized solutions to protect copyrights in different areas, such as intellectual property and patent records.

Zakhidov further explained that blockchain could help develop the whole copyright sphere and make it profitable, noting that “scientists, inventors and creators do not usually understand how to monetize their intellectual property,” and adding:

“Our partnership […] will likely give an impetus to the development of intellectual property area in Uzbekistan. From now on they are going to know that the copyright actually works and is profitable. As a capital, we have to help authors and to show them ways to earn money.”

As per IPChain’s press release, the program will start with digitizing Tashkent’s patent records, likely deploying the IPchain ecosystem on the basis of the local patent office.

As Cointelegraph reported in April, IPChain signed a deal to digitize patent records and create a blockchain-based database for the State Patent Office of Kyrgyzstan. According to the head of IPchain, similar projects have already been discussed with Armenian officials as well.

Uzbek president Shavkat Mirziyoyev has recently taken several important steps to promote blockchain technology in the country. In July, he signed a document called “On measures for digital economics development in the Republic of Uzbekistan,” which stated that a blockchain integration program for international clearing facilities as well as lending and trade finance should be introduced by 2020.

In September, Mirziyoyev ordered the establishment of a state blockchain development fund called the “Digital Trust.” According to the plan, decentralized solutions would be implemented in healthcare, education, and cultural areas.

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Rwandan Government to Use Blockchain Tech to Track Conflict Metal Tantalum

Rwanda’s tantalum mining traceability will be improved by British blockchain startup Circulor in tandem with Rwanda’s government.

Rwanda has partnered with a U.K.-based blockchain startup to trace the mining of the conflict metal tantalum in the country, according to the startup’s press release, published Oct. 16.

Rwanda is the world’s leading producer of tantalum, the mineral used in consumer electronics such as smartphones and computers. By using blockchain technology in partnership with startup Circulor, the Rwandan Mining, Petroleum and Gas Board plans to make the production of tantalum more transparent.

The press release states that blockchain tech implementation will help “companies comply with the internationally mandated efforts to eradicate sources of funding for conflict minerals.”

According to Reuters, mining company Power Resources Group (PRG) — whose listed partners include Kemet, an Apple supplier — has run a pilot for tracing the metal and is now “using the production system.” PRG’s CEO, Ray Power, told Reuters that he has been hearing “criticisms on traceability” for minerals since 2015.

The companies have partnered to use Circulor’s blockchain platform, built on the Hyperledger Fabric, an open source enterprise-focused digital ledger software hosted by the Linux Foundation, for tracing the tantalum’s supply chain.

Douglas Johnson-Poensgen, Circulor CEO, underlined that the new technological application will “dramatically reduce costs for miners who current shoulder a disproportionate share of the cost of compliance.” He also added:

“Our blockchain platform will empower consumers to understand where the materials in the products they buy come from and also make it harder for materials that are not ethically sourced to pass through the supply chain.”  

This spring, Circulor had partnered with the German car manufacturer giant BMW “to track so-called ‘clean’ cobalt supplies in order to ensure their ethical provenance,” Cointelegraph reported March 6.

Also this spring, De Beers, the global diamond producing giant, had announced the use of blockchain technology for digital tracking diamonds “from mine to retail.” The company’s goal was to increase efficiency in the supply chain and to support consumer and public trust in De Beers’ non-conflict diamonds production.

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UK-Based Industry Group Develops Blockchain Tool to Track Firms’ Sustainable Commitments

The UK-based industry body RFI Foundation plans to develop a blockchain tool to track firms’ sustainable commitments.

A U.K.-based industry body for the responsible finance sector revealed plans to introduce a blockchain tool to monitor firms’ sustainable commitments, Reuters reports Wednesday, Oct. 17.

The Responsible Finance & Investment (RFI) Foundation is developing a blockchain-powered tool to track companies’ sustainable commitments and to detect those entities who do not comply with their ethical credentials.

The new system is expected to enable the industry group to reduce so-called “greenwashing,” a practice that implies firms claiming that they are more ethical or ecologically friendly than they are in fact.

The RFI Foundation’s initiative comes as a part of a plan to expand activity beyond its main centers in Europe and North America, with governments such as Indonesia releasing green bonds for the first time in 2018. The industry group will collaborate on the project along with 23 other participants in order to introduce the tool in the 2019, chief executive Blake Goud revealed to Reuters.

Goud claimed that while a number of financial institutions are “taking advantage of the opacity of commitments and actions,” the new blockchain-powered system will allow them to identify companies’ practices in responsible finance “in real time,” as well as will assist new entrants to the sphere.

According to Reuters, other participants include Belgium-based European Partners for the Environment and U.S.-based Magni Global Asset Management.

In April 2018, 22 countries, including 21 EU member states and Norway, signed a declaration to set up a European Blockchain Partnership in a move to become leaders in digital technologies and to provide high standards of blockchain uses in Europe, as well as to improve the quality of cross-border standards and regulatory reporting.

On Oct. 14, Cointelegraph reported on the increasing size of the European Blockchain Partnership — with latest entrant Italy signing the declaration in late September — underlining its commitment to assist in identifying an “initial set of cross-border digital public services” that can be potentially implemented through the European Blockchain Services Infrastructure.

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UK-Based Industry Group Develops Blockchain Tool to Track Firms’ Sustainable Commitments

The UK-based industry body RFI Foundation plans to develop a blockchain tool to track firms’ sustainable commitments.

A U.K.-based industry body for the responsible finance sector revealed plans to introduce a blockchain tool to monitor firms’ sustainable commitments, Reuters reports Wednesday, Oct. 17.

The Responsible Finance & Investment (RFI) Foundation is developing a blockchain-powered tool to track companies’ sustainable commitments and to detect those entities who do not comply with their ethical credentials.

The new system is expected to enable the industry group to reduce so-called “greenwashing,” a practice that implies firms claiming that they are more ethical or ecologically friendly than they are in fact.

The RFI Foundation’s initiative comes as a part of a plan to expand activity beyond its main centers in Europe and North America, with governments such as Indonesia releasing green bonds for the first time in 2018. The industry group will collaborate on the project along with 23 other participants in order to introduce the tool in the 2019, chief executive Blake Goud revealed to Reuters.

Goud claimed that while a number of financial institutions are “taking advantage of the opacity of commitments and actions,” the new blockchain-powered system will allow them to identify companies’ practices in responsible finance “in real time,” as well as will assist new entrants to the sphere.

According to Reuters, other participants include Belgium-based European Partners for the Environment and U.S.-based Magni Global Asset Management.

In April 2018, 22 countries, including 21 EU member states and Norway, signed a declaration to set up a European Blockchain Partnership in a move to become leaders in digital technologies and to provide high standards of blockchain uses in Europe, as well as to improve the quality of cross-border standards and regulatory reporting.

On Oct. 14, Cointelegraph reported on the increasing size of the European Blockchain Partnership — with latest entrant Italy signing the declaration in late September — underlining its commitment to assist in identifying an “initial set of cross-border digital public services” that can be potentially implemented through the European Blockchain Services Infrastructure.

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US CFTC Official Tackles Accountability in an Era of Smart Contracts

The CFTC’s Brian Quintenz has addressed the question of accountability in an era of disintermediated finance and smart contracts.

The U.S. Commodity Futures Trading Commission (CFTC)’s Brian Quintenz has addressed the question of accountability in an era of disintermediated finance and smart contracts. The commissioner made his remarks at the 38th Annual GITEX Technology Week Conference in Dubai Tuesday, Oct. 16.

Broadly, the commissioner proposed that when it comes enforcement actions, not only users, but the coders themselves may be held to account. Quintez explained:

“The appropriate question is whether these code developers could reasonably foresee, at the time they created the code, that it would likely be used by U.S. persons in a manner violative of CFTC regulations.”

Quintenz framed his discussion by noting the complications that arise when applying traditional legal paradigms to “the disintermediated world of blockchain,” emphasizing the challenges that the emerging sector poses to the CFTC’s particular role, which is intermediary-focused and centers on preserving market integrity through oversight.

In the case of disintermediated finance, however, the key players are instead the core developers of a given blockchain network, its miners and users, all of whom operate in an “anonymous, decentralized” framework.

To tackle the regulatory concerns raised by this context, Quintenz focused in particular on smart contracts, which function on a blockchain and are programmed to interact according to binding, pre-specified rules.

As Quintenz noted, these contracts are “self-enforcing,” and “operate without further intervention.” However, he rebutted the well-known crypto adage “code is law,” arguing that even though smart contracts complicate existing frameworks and the question of accountability, they nonetheless fall subject to regulations and particular legal precedents.

In many cases, he argued, the basic nature of such contracts can be identified as having the “essential characteristics” of traditional derivatives products: they may resemble a swap, or have “exchange-like functions by facilitating trading.”

One such example would arise with individuals who develop “predictive data about future financial events, like a stock’s performance […] [and] offer their data for purchase via smart contracts.”

The offering of this data could fall under regulators’ purview either through being deemed “investment advice,” or even, “given the anonymity of the predictions,” being considered to be “nefariously” enabling ”insider trading.”

In other cases, smart contract protocols enable “individuals to bet on the outcome of future events, like sporting events or elections” using crypto, which he suggested can in some cases resemble what the CFTC considers to be a “‘prediction market,” noting that:

“In the past, the CFTC has generally prohibited prediction markets as contrary to the public interest, only permitting them in limited circumstances when it has found that they operate on a small-scale, non-profit basis, and serve academic purposes.”

As reported yesterday, former CFTC chairman Gary Gensler emphasized that most tokens sold through Initial Coin Offerings (ICOs) should be classified as securities, and be brought under the regulatory purview of the U.S. Securities and Exchange Commission (SEC).  

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