This is the first part of ‘Blockchain Associations’ – the latest post by regular guest writer Eddie Mitchell. Eddie is a seasoned writer on all things Blockchain and crypto and we’re delighted that he has become a regular contributor to Rhetoriq.
Behind the scenes of typically flashy industry conferences, and the repetitive ‘blockchain solves X problem’ sponsored articles published daily by crypto-news media, there exist organizations and associations that are taking it upon themselves to represent and legitimize the tech in the eyes of world leaders; pushing for the new technological frontier ever onwards.
In doing so, such entities shoulder somewhat of a responsibility to represent the industry at large; often they are consortiums established by several blockchain firms, experts or other prominent figures who wish to bolster the nascent sector by means of education, support for startups, the promotion of blockchain, and so on.
Seemingly, the technology is coming up against significant barriers which are bringing this rocket mission to a slow crawl, all perpetuated by controversies, as well as ongoing complex debates that yield few results.
Form and Function
Due to the inherently international scale of blockchain technologies, there are a few associations that are comprised of many international businesses, organizations, and individuals. Notable worldwide organizations include the Government Blockchain Association (GBA) and the Global Blockchain Business Council (GBBC).
Other entities operate primarily on a domestic scale such as the British Blockchain Association or South Korea’s Blockchain Law Society. Naturally, some of these associations represent particular areas of an industry such as video games, or industries as a whole.
Data gathered by risk management and blockchain research solution firm ESG Intelligence displays that there are just over 90 blockchain consortia across many leading industries who all share a pro-blockchain agenda.
Whilst their presence is felt in the parliament halls of governments or at industry conferences, what have they managed to achieve?
Law in South Korea
Easily one of the most active areas of the blockchain world is South Korea; over the course of 2018, the nation has utilized and tested the technology with open arms, these experiments range from public sector applications to eco-friendly projects and this has all been done under the ban of initial coin offerings (ICOs), which is a serious point of contention in South Korea.
As bustling as the South Korea blockchain ecosystem may appear be, the nation’s recently established Blockchain Law Society is still pressing to reduce the potential impacts of over-regulation on domestic enterprises. Instead, they wish to introduce the “Blockchain Act” and apply special tax rules for blockchain based companies, or the trading of cryptocurrencies.
Actively tackling the issue of ICO legalization is the Korean Blockchain Association, who argued vehemently against the ban, touting innovation and job creation and economic benefits as particular areas that will suffer should the ICO ban remain.
These efforts have not gone without notice and at present, South Korea is poised to deliver a final decision on the ICO issue this month (November 2018); what impact this will have on domestic blockchain enterprises and startups is yet to be seen, though the crypto-markets are likely to react in one way or another.
SEC Crypto-Classification Battle
ICOs and digital assets are all too often a topic that resoundingly causes governments and policymakers to scratch their heads with skepticism and concern. Defining ‘what a cryptocurrency is,’ can be rather tricky; it is typically argued that tokens issued via. ICOs can be placed into three categories: Utility Tokens, Security Tokens or Equity Tokens.
However, in the United States, the Securities and Exchange Commission (SEC) have applied the classification of ‘securities’ to all ICO issued tokens. Due to the nefarious schemes associated with ICOs, investor protection came to the forefront much like it did in South Korea.
Speaking during a panel discussion at the Consensus blockchain conference, Valerie Szczepanik, Senior Advisor for Digital Assets and Innovation at the SEC said: “If you want this [crypto]industry to flourish, protection of investors should be at the forefront.”
The move to classify ICO tokens as securities has not been met well; if viewed from a moral perspective it could be considered a noble move, however, this does not bode well for startups, making the issuance of security token via an ICO extraordinarily tough. Because of the SEC’s relentless pursuit of ICOs, it is also feared that the pressure put on companies is “putting blockchain startups at risk”, this according to an investigative report made by Yahoo Finance and Decrypt Media.
To combat this, the Chamber of Digital Commerce (CDC) published a comprehensive white paper titled “Understanding Digital Tokens: Market Overviews and Guidelines for Policymakers and Practitioners”. The publication conceived by collaborative efforts through its members serves to provide guidance and promote “responsible growth” of digital tokens and ICOs.
The Chamber of Digital Commerce (CDC) is a Washington DC-based blockchain advocacy group which is comprised of numerous initiatives who are working to promote the blockchain industry, this includes the Blockchain Intellectual Property Council, the Token Alliance, and the Smart Contractions Alliance.
Though the efforts made by the CDC to broaden the classification range appears to have fallen short, the SEC has recently announced that they will provide a new, simplified set of crypto-guidelines, offering “plain English” regulatory guidelines for developers looking to launch an ICO.
These are just two relatively consistent examples that have cropped up again and again, displaying the slow crawling speed where conversations and debates eventually lead to action.
Blockchain associations are an essential part of the industry’s future, they offer a consolidated and experienced voice to an exceedingly disruptive new sector that required more understanding than most.
In part 2 of this series, we’ll be covering the pros and cons of associations and, whether or not they add any value to the industry or startups with commentary from the British Blockchain Association.