Contributed by: Show Editorial Team
Brad Staples, David Seigel, Peteris Zilgalvis, Catalin Ivan, Louis De Bruin, and Paul Astengo Discuss Governance and Blockchain at Blockchain for Europe Summit (Boston, MA)
-Decentralized identity without middlemen is going to be a fundamental pillar of the digital economy like Microsoft and United nations
-The purpose of governance in the EU should be to maximize the sustainable rate of economic growth
-Blockchain is actually the first the ideal technology for the European Union because it serves multilevel governance
INTERVIEW TRANSCRIPTS: Brad Staples, CEO of APCO Worldwide, David Seigel, CEO/Founder of Pillar Project, Peteris Zilgalvis, Co-head of Fintech Taskforce for European Commission, Catalin Ivan, MEP, Romania Economic Affairs Committee, Louis De Bruin, Blockchain Lead for IBM and Paul Astengo, Sr. Executive & Blockchain Lead for HM Government of Gibraltar
Brad Staples (CEO, APCO Worldwide): 00:00:00
Well, welcome ladies and gentlemen, it’s a delight to have you all with us this morning. I hope you’ve managed to find somewhere comfortable enough just to, to sit. We’re going to be quite a packed room I think today. My name is Brad staples. I am the CEO of APCO worldwide and we’re the hosts of this event blockchain for, for Europe. Thanks to the MEPs who are kindly hosting us here in the, in the European parliament today and to all of our speakers who are coming from, from far and wide to join us for this, for this session, we have an extraordinarily strong list of industry experts of policy experts regulators and those who just bring deep insight and extraordinary understanding of the developments that we’re going to be talking about during the course of the conversation.
Brad Staples (CEO, APCO Worldwide):00:00:54
For my part and for APCO worldwide. The emergence of blockchain into the mainstream of public discussion is exciting the potential impact disruption and the positive change that it can bring to our societies to our economies and to public life in general creates an extraordinary and stimulating context as we look as we look to the future for the public, though I think some of these developments can be overly complex. It can be tough to understand navigating the ups and downs of digital currencies, making sense of security issues that might be emerging around voting systems or privacy concerns in an age of big data and the emergence of new digital identities. In the end though blockchain itself is built on, on trust. In itself. The technology is neither good nor bad. It remains a human network and, and its success depends on the degree of trust that there is between all parties concerned and the quality of data that is that is inputted into the system to building trust between trust, between citizens, institutions, government is going to shape the future in this arena.
Brad Staples (CEO, APCO Worldwide): 00:02:08
And I think it’s an under underpinning for our conversation today. I think APCO particularly in Brussels realized some time ago that informed policy and progressive regulation is going to create a context in which this technology and these developments will thrive. And we’re going to talk today about everything from financial services to healthcare, transport and logistics to, to energy and to identity and, and governance. So we have a broad sweep of issues and we have a mix of speakers who represent all those specializations and those applications for this session. Our first panel, we are going to be talking about governance and blockchain, the implications of blockchain technology for government governance and citizenship across Europe. And each panelist is going to have five minutes to make a few remarks and then we’ll take some, then we’ll take some questions. Let me just introduce our speakers very briefly for you today.
Brad Staples (CEO, APCO Worldwide):00:03:07
Our host MEP, Catalin Ivan from Romania and member of the economic affairs committee. Thank you so much for, for hosting us today. We have Peteris Zilgalvis, head of unit for startup and blockchain Digi connect. Thank you so much, but for being with us. We have Paul Astengo, who joins us from her Majesty’s government in Gibraltar, who is the blockchain lead for the Gibraltar government. We have Louis de Bruin on my right who is a blockchain leader for IBM. Very good to have you with us. And I’m going to hand over to David Siegel who’s going to lead us off with a few remarks. Give us a keynote remarks. David is the CEO and the founder of the PLR project and many other things as well. And David, I’m going to hand to you. Thanks very much indeed. Thank you. Thank you Brad. Thanks to app code for hosting this blockchain to the European parliament and the members here for putting us together. I’m going to talk today about the nature of government
David Seigel (CEO/Founder, Pillar Project & 20/30): 00:04:13
Oh, great. That better? Okay. I’m going to talk today about the future of governance from the 10th to 15th centuries. During the high middle ages, Europe had its longest period of sustained economic growth during those years. The war. The weather was warmer than it is now. The population boobed. It was a time of dynamic invention, stunning architecture, huge improvements in agriculture and food production. The growth of sophisticated trading networks, larger, healthier families and improvement in the standard of living today. Europe is more or less asleep. For the past 20 years, the European economy has grown at an average rate of 1.8% lower than any continent. Save for Antarctica. Europe is driving down the road with one foot lightly on the gas and the other foot heavily on the brake. Some of that braking is being applied here in Brussels. In the next 16 minutes, I will present for governance problems and 12 ideas for discussion today. Number one, the great financial crisis from 1992 to 2007 the U S government incentivized banks to lend more than $4 trillion to low and middle income Americans so they could own their own homes. By 2008 about half of all American mortgages were categorized as subprime. These mortgages were very risky, made with very low lending standards. In 2008 when people started defaulting on their adjustable rate mortgages, banks were over leveraged and when they started to fail, the economy came to a stop.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:05:54
Then something important happened. The fed fearing inflation did nothing to stimulate the economy. The fed turned a banking liquidity problem on wall street into a worldwide financial crisis that put billions of people out of work for five years. Those who suffered the most during the recession where the very low income people, the government had been trying to help in Europe, things were even worse. European central bank reacted the wrong way to the U S liquidity crisis. They raised interest rates causing a European recession. They could have prevented. In fact, Australia was far more proactive, stimulated growth, and they did not experience the recession. What if fixing the banking system isn’t the problem? Banks just do what the rules allow. Banks are rent seeking middlemen. Who’s franchise is protected by law? What if half the problem is the governance of banks? What if the other half of the problem is the governance of our money supply to anti money laundering, anti-money laundering and anti-terrorist financing laws?
David Seigel (CEO/Founder, Pillar Project & 20/30):00:07:06
Do they really work? Here? In Europe we spend about 70 billion euros a year to seize about 1 billion in assets. That’s about 1% of all money actually laundered 70 billion euros a year to C’s. 1 billion AML is a barrier to entry. Removing small, nimble competitors. The largest banks love AML, yet it is a contender for the least effective Reggie regulatory intervention ever anywhere. What if the real reason for most regulation is to make politicians look tough on crime three GDPR, have you noticed that getting wifi at airports, hotels and cafes is now open? You don’t have to give your phone number and because there are too scared of GDPR, these open networks are now making the public easy prey for hackers to get their passwords and data. GDPR also threatens many other key parts of the internet and systems we use every day. Let me ask you seriously, how many EU governments are fully E GDPR compliant right now?
David Seigel (CEO/Founder, Pillar Project & 20/30):00:08:14
Can you name one EU government. It is fully GDPR compliant. How many EU governments will ever be fully GDPR compliant? What if regulation does more harm than good for voting? There are many ways to vote. People like me who study voting theory show that there are far better ways to vote. Then the mechanisms we use now, for example, there’s a new app that lets citizens give feedback on each issue as it comes before parliament. So members can take the pulse of the electorate before they cast their vote. Does that help make good decisions? Most people, including MPS, don’t even read the legislation they’re voting on. It’s very difficult to come to a balanced view of the facts. The details matter and the numbers are easily gamed. Blockchain will allow us to build tamper-proof voting systems yet digitizing and decentralizing existing voting methods will give us the same results we have seen in the past.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:09:15
What if voting isn’t the problem? What if representational government is the problem? I think if we were starting over, we wouldn’t design today’s these systems the way they are at all. I’m never going to give 12 new concepts that may help us take our foot off the brake and get Europe going again. The first is skin in the game and they seem to lab says bureaucracy is a construction by which a person is conveniently separated from the consequences of his or her actions without skin in the game, regulations and rules get more complex and less relevant. This collective complexity, everyone adding something in is choking our economy. We need a more competitive atmosphere. We must become more agile. We must do experiments, fail quickly, learn and adjust to new realities on the fly skin in the game, taking responsibility for successes and being penalized for failures.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:10:09
We’ll outperform rules and regulations that are hard to change. Now, let me give you an example. If you heard of quadratic voting, there’s a way to vote where everyone pays to vote. You pay two euros to cast a vote. Everyone. Now there are two interesting rules on top of this. The first is that every success of volt costs twice as much as the first as the one before. So the first vote will cost you two euros. The second vote will cost for the third vote will cost eight. The fourth vote will cost 16 and then your 10th vote will cost a thousand euros. Your 20th vote will cost a million euros and your 30th vote would cost a billion euros. Now that puts skin in the game. That means if you really care about something and you want to put some money behind it to try to influence it, if it wins, you win and if it loses, if it doesn’t pass, you lose.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:11:00
There’s one more rule. All the money that everyone contributes gets split evenly across all the people who actually voted. So if you do vote, if you pay your two year old, you’re going to at least get two euros back and this aligns all the incentives so that people who want to put their energy into influencing the vote have to do it with skin in the game. This is called quadratic voting. It’s just one new idea that lets us use smart mechanisms to more accurately direct policy decisions. There are several more in a fascinating book I recommend. It’s called radical markets and I hope everyone here will read radical markets. Second, self-sovereign identity. We need to design for the consumer. A self-sovereign ID means you own your own identity and you manage it. If you move to another country, you include the new details in your overall identity package.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:11:58
Decentralized identity without middlemen is going to be a fundamental pillar of the digital economy like Microsoft and United nations. We should create programs here that supports self-sovereign digital identity in Europe. Ownership. Many institutions today are designed simply to hold things for us and the law requires them to be middlemen in many transactions. Banks are middlemen for money. Stock brokers and settlement companies are middlemen for securities. Visa, MasterCard in Western union or settlement are middlemen for the transfer of money of payments. Mortgage servicers extract rent from mortgage payers. All of these middlemen charge huge fees, yet we now have the technology to own things directly and securely and payments can be made automatically using software without middlemen. The problem is that the law doesn’t let us. We need to redesign ownership from the bottom up. Market design. We need person to person markets rather than regulated markets with middlemen.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:12:58
Let me give you an example from insurance. Okay. And the way insurance works is we have investors on one side and natural buyers of insurance who want to transfer risk on the other side. In the middle we have insurance companies that make products in market and sell them. Okay, but what if we took out the insurance companies? What if we created a set of risk contracts that the investors could enter into and the buyers could just buy whatever contracts they need. They could buy any number of small, medium or large contracts. They could even adjust their risk exposure daily by going to this marketplace to pick up whatever insurance they want. Now by doing that, the market will shake out bad actors and clear prices. All the government has to do is enforce contract law and stay out of the insurance business. Another example is auctions.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:13:51
Auctions reveal preferences and allocate resources fairly. We auction spectrum. We should auction many more things that keeps government out of setting prices and lets markets determine the real value. For example, governments shouldn’t have cafeterias. They should just rent out the space every two years and let entrepreneurs serve the food. We should not have lifelong people working in cafeterias who don’t get fired. If the food is terrible, that’s another way we could use auctions and there are many other ways to use the auctions in government. We should have central bank, digital currency and automated monetary policy. In 50 years. We’ll certainly have central bank digital currency. I believe we are now on the verge of having the technology to transfer money to a new platform, one that will be cheaper, faster, and more secure. We should commit to central bank digital currency by the year 2025 along with that comes prediction markets.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:14:49
Prediction markets are not recreational prediction markets provide real time information about the future, yet they’re highly regulated and often illegal. We should enable markets to give us accurate predictions rather than paying experts to get it wrong. We could use a prediction market, for example, for GDP to predict the growth of GDP that would feed into an automatic monetary policy using an algorithm. Rather than using old survey data and human judgment, governments should start using prediction markets immediately to get better information and set policies accordingly. Personal data, we shouldn’t be regulating. Third party handling of personal data. We should be creating a new framework that allows people to collect and use their own personal data for their own benefit on their terms. We should be designing incentives to encourage people to learn to manage their own data and be responsible for that use. We shouldn’t be trusting all our data to large corporations and governments today. The Chinese government is already using personal data to censor people, preventing them from getting access to good schools, hotels, airplane tickets, visas, and even dating sites. That’s happening right now in China. We must work hard to reverse these trends.
David Seigel (CEO/Founder, Pillar Project & 20/30): 00:16:09
Adaptability, the world is moving faster and faster. Algorithms are already making many of our decisions for us in the future. Algorithms will help us learn what to buy, what to learn, what to watch, where to go, whom to meet, what not to do and much more. They will drive us around and take care of our kids. The best algorithms will do the most for us with our own data, giving us time to do other things. We will want a free market for algorithms and third parties who can verify that those algorithms are safe. We will need to learn how to govern algorithms, mechanisms and incentives. An example of mechanisms is data markets. We could create markets for all kinds of data from personal to corporate and industry to government. Data markets will let us exchange value by exchanging data, so one of those mechanisms would be income tax.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:17:05
If we tax income, people naturally are incentivized to earn less if we tax spending. On the other hand, people will be incentivized to earn, save and invest more governance. Governments can still get the money they need and people will still buy goods and services, but the incentives will now be properly aligned with making money rather than putting on the brakes. And we will spend far less collecting taxes because smart contracts can collect taxes for us. In fact, we could reduce the cost of tax collection by 90% using software and a consumption tax simplification. We have to make it profitable to eliminate and reduce the number of words in legislation and contracts in regulations. We should focus on higher out level outcomes and evidence rather than processes in paragraphs. We should make all machine doll documents are machine readable immediately. Right now, there’s every incentive to add more and no incentive to subtract.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:18:07
And finally, and I think by far the most important thing I want to say today, we should maximize the sustainable rate of economic growth. The purpose of governments in the EU should be to maximize the sustainable rate of economic growth. The difference between 2% per year and 3% per year compounded over decades is staggering. China has been growing at nine and a half percent for 25 years will soon be the world’s largest economy. You understand that 20 years from now China will be the larger, larger than all the rest of the world’s economies combined. If it keeps growing at that rate, you don’t have to manage the details if you have a growth rate like that. So, to wake up from our long economic map nap, I argue that almost all European government officials and offices should have the annual APR, the growth rate of the economy, of the GDP on the wall in front of them.
David Seigel (CEO/Founder, Pillar Project & 20/30):00:19:07
EV updated every two weeks and they should be focusing on sustainable economic growth of 3% per year. If Europe can grow at 3% per year, we will automatically have better schools, better transportation, better health care, live longer lives, have cleaner air, more sustainable food and energy, safer cities and low income people will enjoy a higher standard of living across the continent. Immigrants are actually part of the solution. So are the technologies we’re here to discuss. There are risks if we don’t go down this path, but I believe the risks are greater if we don’t, we must take our foot off the brake and embrace new ideas before we embrace cool new technological solutions. If we can do that, if we can learn to think new thoughts before we design the next generation of systems, we can have the Europe we want for the 21st century. Thank you.
Brad Staples (CEO, APCO Worldwide): 00:20:09
Thank you, David. I think that was provocative and, and comprehensive and it’s exactly what we needed in terms of introductory marks to get us to get us started. I’d like to turn to our host next if I can to Catalina Yvonne to say a few, say a few words in, possibly give a slightly different perspective.
Catalin Ivan (MEP, Romania Economic Affairs Committee): 00:20:30
Thank you very much. I will be very short because I’m just hosting the event. And I’m a politician. I am supposed to be here to learn more from you and to understand better technology in order to create a proper roles. So we’ve had a long list of debates here in the European parliament about blockchain and we try to understand it. We had discussions about democracy in digital era in order to understand how public institutions should look like in the future. The general idea was that if we don’t need blockchain, if we want just to improve our institutions as we have them right now, but if we get to the conclusion that we really need blockchain and we want to use blockchain, that means we need to reinvent everything. So, the first question is do we need blockchain?
Catalin Ivan (MEP, Romania Economic Affairs Committee):00:21:35
Because if the answer is yes, the second question is, are we prepared to reinvent ourselves, to reinvent our institutions to, to reinvent the way we live our lives on databases? I think for the moment, we are not yet there and we should create a small pilot projects to understand better that technology, to see how it works. And nevertheless, to build trust on this technology. As a politician, I can do only my Pat in this matter. So, we created, in Romania, I created with some friends, a political party or political organization on blockchain. We reinvented political parties. And we use blockchain to, to work insight to, to introduce meritocracy through technology. We say we gave to all our members a voice, a voice, which is a different, naturally we have different voices, but this voice inside the parties built is calculated by algorithms and the AI in having two pillars, let’s say one is a political activity the member is doing on daily basis. And the other one is his professional performance, his relevance in different topics because some are engineers, some are doctors, some are very good professionals on education and things like that, things like that. So we don’t have the same, our voice is has he has not the same relevance on all the topics we’re discussing inside the party. So the vote inside the part is not equal, equal, depends on the topic we are discussing and depends also on there. So it depends basically on their voice. If they have a stronger voice, they have a strong guy activity inside the party then their vote will mean much more. But if the topic is on health, those having a more relevant voice on health will have a bigger both to cast. So we try to play with the ideas to think new thoughts like you just said. And we’ll see how it works. We have elections next year for the European parliament. We want, we want to bring this new political organization on to win elections, to help to get the into the European parliament and to have it here to fight for blockchain for a new Europe. As we talk about it right now. So I will end my intervention saying that we need more pilot projects. We need more small projects in different fields to understand it better to, to, to, to build trust on a, on this technology. Thank you.
Brad Staples (CEO, APCO Worldwide):00:25:18
Thank you so much. So we had a vision of what your it might look like with radical and profound change and then a question about whether or not we’re ready and ready for pilot projects. I’d like to move onto our third speaker if I can. So, Peteris, regardless if you could say w he was from the commission’s perspective, that would be fabulous.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission): 00:25:38
Gladly. I mean, our approach is that a blockchain is actually the first the ideal technology for the European union because it’s multilevel governance as our system is. So with the European blockchain services infrastructure, we’re going for a big project, a cross border across the continent, all members States infrastructure, which should launch already next year with connecting Europe facility money. We’re going to start with nodes and the for the moment, 28 member States and the commission. And then it would move to within the future vision nodes in all the regions and all the cities. So it would be a permissioned but decentralized blockchain utilizing also something that was just announced on the 20th of November by our commissioner Maria Gabriola, blockchain round table, a private stakeholders Alliance to put forward blockchain. Also, the permission, less completely decentralized ones as well as looking at the permission ones and interoperability questions with them to have a whole system of blockchains, which could be part of the next generation intranet.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:26:47
We have a vision for a dynamic ecosystem. This started with the FinTech action plan, which had a actions on a FinTech lab for introducing more rapidly financial innovation in the EU. Obviously in the aftermath of the financial crisis. I mean we think FinTech is one of the answers and have been behind that. Since these developments started, you could say 2013 2014 obviously earlier in, in many cases and depending on what the definition is. Also working on standardization in the same blockchain. Along with these, how to say more rapid actions. We’re working actively in technical committee three Oh seven at ISO, which on a global level is looking to deliver blockchain standards. But I mean, I think the first will be about 2021 which is why we already want to work with private stakeholders on informal approaches. In the meantime, we’ll have this blockchain services infrastructure or we’ve already chosen a use cases which will be primarily in the reg tech and in the certification and notarization of documents such as diplomas and work qualifications and the reg tech area.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:27:57
It’ll be sharing of regulatory registers across all the member States. And it’s not only an exciting, you could say if I can use the term an industrial policy and an innovation policy for Europe, but it’s also a very efficient, we have a proof of concept which shows 30% savings per each member state. We have 61 regulatory registers. So if we move in the cases where this is justified to have those on the blockchain, it’s already a great savings. As I said at decentralization, this is an approach that we don’t have silos of data in Brussels, which is something that has a single point of failure or cybersecurity is not ideal. And it’s also not ideal with our political philosophy because where I’d say for a United Europe, but not for a centralized Europe and certainly not in Brussels, the power lies with subsidiarity, with the peoples of the, of the EU.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:28:50
So, what do we have coming up? We should be finalizing the functional specifications and the governance of this European blockchain services infrastructure. 26 member States and Norway who are involved. I think Lichtenstein is about to sign up as well, so we have more E a countries who it’s open to signing up a. As I said, we would be in the connecting Europe facility next year there would be a call, there’s a research call open right now on Eid. The ones only principle and blockchain are about 10 million euros, so take a look out for that if you’re, if your researchers are linked to stakeholders who would like that. We also want to improve the capacities of the blockchain with things like the consensus mechanisms, time stamping, scalability, so there’ll be another 16 million or so of research money coming up after that and in the digital Europe program we are putting also more money behind blockchain which we see as again, one of the ways that we can better deliver digital services but also collaborate better with the private sector.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:29:51
One of the first things that came from this round table as it was well mentioned is that a, especially the banking and the finance sector would be interested in reporting on, for instance, anti-money laundering and know your customer, perhaps collaborating in this area, utilizing blockchain and utilizing collaborators with the with the regulator on the chain. You could say another thing which is in the future, the blockchain, the e-government blockchain would in the future probably not with these first use cases, but fully be utilizing smart contracts and probably tokenization, which could be a digital Euro either issued by commercial banks or by even central banks on the chain. Though that might be a further development. We have a discussion very actively all the time on that. And then finally, and which is also good and an audience like this of many esteemed experts and stakeholders, we are looking for the next commission when we have a new parliament and a new set of political leaders what some of the options might be on the table for the legislative area.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:30:58
Firstly, and most importantly, removing barriers to blockchain. If in the sectors that you’re working there is legislation or requirements that have a single monopoly way or a single way to register transactions, which would put a barrier in the place of having a blockchain competitor and blockchain option. We’re trying to identify all these cases. Again, it’s always up to the next political leadership of whether to act or not, but we’re analyzing it right now. Also, smart contracts in the interest of having recognition across borders. Also questions like revoke ability if there’s forced measure things happen in the world, which physically may impact on that. But again, in a pro innovation enabling way. Also and finally in the tokenization, especially the so-called utility tokens and consumer tokens, how we could make those work for decentralized systems to work better in Europe. Also, how investment could happen in those more easily.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:32:00
And then finally, just on that subject, we are not where I am in my part of the a FinTech task force, the digital single market. We’re not addressing the security tokens that’s being looked at right now by the European security and markets authority and the member of state security regulators who are going to issue an opinion. I understand on the 18th of December and Peter Kirsten’s this afternoon, my co-chair for the FinTech task force might say a little bit more about that.
Brad Staples (CEO, APCO Worldwide):00:32:35
Wonderful. Thank you. Peteris for that. I’m going to get the last perspective from, from the, from a government point of view and turn to Gibraltar if I may to one of the economies is perhaps the most dynamic in services in Europe. Very small but dynamic economy and Paul I ask you to say a few words.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 00:32:49
I’m going to touch on two things initially if I may. Cause I think we’ve got a lot of stuff to good stuff to debate as the morning progresses. But certainly just to give you a little bit of an outline of where we are, where we’ve come from and where we intend to go and underpin in that I think is, you know, we, we have to consider at the very highest level what makes humans great. And one of, one of the aspects that makes humans great is the fact that they can look at innovation, they can look to change and, and dynamically alter their circumstances to what may be needed at different times. All forms of innovation are disruptive by their very nature.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar):00:33:23
So, there’s a lot of fear words that center around this this particular space that I think could be applied to. Absolutely anything that’s happened in the history of math. And I always look at the in particular, one of the examples I give is the kitty Hawk, the first plane manned flight. You know, if you were looking into the business case and saying and you’re standing there when, when it took off and you say, would you pay some money to go on this? I certainly wouldn’t. And most people wouldn’t die suspect. And then when it went the a 200 feet or 300 feet than it went, you’d say, well, what was the point of all of that? But if you then jump forward to where we are today with aviation, you can see that there were innovators who are trying to disrupt, have achieved something that started something.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar):00:34:06
And to see that as has ended up in something that’s been very, very worthwhile. So, you know, when, when we started with this and people say, Oh, the blockchain isn’t advanced, it’s nascent, it’s new, it doesn’t do anything. It’s slow at stake. It all in perspective and let’s, let’s nurture this and see where it takes us. So about four years ago, we I was hounded in, in a, in a conference in London, which was about the payments and he money. And I spent two days with a queue of people wanting to speak to me and want to know what the government’s position on Bitcoin was. We didn’t have a position on Bitcoin and heard about Bitcoin, but very little. So and the guidance from one of the people there, I went back to the hotel at the end of the first evening, Googled Bitcoin as we all do.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 00:34:52
And audit was, was bad news, people hanging themselves and hacking them back and Oh, terrible stuff. So I went back and I saw the person very early in the morning in fact, and I said, you know, what, what did you try and tell me yesterday? What have you trying to show me? Cause this is all I can find is bad news here. So, I got some guidance from the person and started looking in the right places to see what happened. So, after a while, the minister for commerce, which includes financial services for the government to set up a working group, a, I co-chair that working group and it started off as the cryptocurrency working group that has now evolved into the DLT working group. The first thing that we realize is that none of us knew anything about all of this.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar):00:35:38
So, we had to go through a journey of learning. So we reached out to the private sector. We’d reached out to where there was some information on the public sector, but more importantly, we reached out to the innovators all over the world and said, what are you, what are you people doing? What are the benefits, why you’re doing it, et cetera, et cetera. So I thought maybe there’s better. So we learned, we went on a long journey that resulted in after a number of public consultations, a regulatory framework for DLT firms or DLT providers. Licenses is what is offered. If you’re going to look in, if you’re looking to use DLT to store or transfer value belonging to others. So that’s the very concise definition of what we’re doing. That legislation came into effect in January 2018 it is the first of its type and it has three main three main points to dispose.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar):00:36:31
It’s a principle based for legislation rather than a confident type of legislation. So those principles would allow us to mold this and grow it and change dynamically as the, as the industry changes. But the three things that we’re looking at is very important to us to protect the, the reputation of, of the jurisdiction. Ah, the second thing is to protect the consumer. And the third thing is to give the platform to those very, very clever people who can create this technology who can develop blockchain and other elements to that and create something that’s good for everybody. So that could be within financial services, which is where it first started. But through that journey, we realized that there’s a huge amount of potential benefit across our social lives across philanthropy. And we think that it’s something worth investing in and supporting those that are trying to create something from this new technology.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 00:37:25
So, we have a regulatory framework. We now have licensed firms. We’re still part of the EU. Yeah, so I suppose we’re the first in the EU to do that. We looked at it partly defensively because there were people transaction transacting in Gibraltar and we had no handled on what they were doing and who they were. So we now have some an ability through the licensing process to see exactly what they’re doing and, and bring them in within a framework. Like I say, that is both supportive to them, but it allows us also to make sure that we get the, keep the bad actors out of that quality, not quantity, although there’s a large quantity of very good quality. We wouldn’t say no to that at all, but certainly we’re looking at a, in keeping with the our past performance and the game inside.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar):00:38:11
For example, looking at us for number of very good companies that are very good ideas that can give a wide range of benefits. We are just about to publish a bill which will cover token events, so ICO is or whatever, however you prefer to, to describe them. And that will once again be a framework within that space and bring some control in order within that space whilst supporting what is a very, very good form of firms raising money in order to fund their innovation. Following that, we’re going to take a close look at the crypto fund space and see whether there’s anything that we need to do as far as that is concerned. And in terms of the overall structure within the government, once again, working with the private sector and people that are very knowledgeable. We have started a, a working group, which I also sit on, which has just delivered its first courses.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 00:39:07
And it’s a combination between the government, the department of education and the university, Gibraltar working with some of those firms that are licensed or being liked and the process of being licensed. So we’re delivering education across all the different ranges for all types of blockchain types of subjects as well. And the final thing that, that that we’re doing in terms of creating that environment, that ecosystem is we will have on Thursday the first meeting of something that’s called Gant, G a, N. T. it’s not the clothing from although that makes the merchandise and very easy for us. It’s the Gibraltar association for new technologies. So, once again, it’s a private sector representation of firms that are either in new technologies or advisors to firms that are in new technologies in order for them to create this think tank so they can make representations to the government. They can look at how we market this, how we, how we grow and make this an even more successful part of our, what our part of our day to day lives moving forward.
Brad Staples (CEO, APCO Worldwide): 00:40:08
So, thank you. Thank you very much, Paul. I mean, I think we’ve saved our corporate perspective to, to, to the end. I think we’ve heard from governments in different forms all suggesting that they’re innovating, trying new things, trying to trial and create a new context for this technology to thrive. What’s it like from the business point of view in your eyes Louis.
Louis De Bruin (Blockchain Lead, IBM):00:40:33
Thank you. And this was these were some very interesting views and very valuable insights in what’s happening in countries on the NLT, European level. Of course. Very, very happy with those developments as well. And I’m very much a in line with the, with what we’re from a, from a business level and are seeing happening and, and, and are needing. 19, 16, 1970 to 2016, 2017 were at the years of developing technology and doing pilots who are still doing a lot of proof of concept, but we now also see in them in 2018, lots of operational of blockchains were coming alive. And we have, we have these straight lens initiatives on and the supply chain area food trust that it’s coming up in the trade is another way of developments that are really operational, blockchain’s taking shape.
Louis De Bruin (Blockchain Lead, IBM): 00:41:28
And this is also the moment that there has to be the framework for, for governments and at the super national level to make that possible. So things are coinciding and the views that we see are, are very important for that because now the truth of a, of a is of course in a of the pudding is in the eating. And that’s what we’re seeing happening now. There are enormous potentials. David also says we have to be bold and we have to look up for, for address, dramatic new changes to, to keep up with, with international development, go beyond Europe. And blockchain offers indeed a very good potential for that. There are also major issues to be addressed for, for individuals that we of course have, have seen the dramatic developments with, with platforms that have done a lot of damage due to trust that the individuals have in how their data is being managed.
Louis De Bruin (Blockchain Lead, IBM): 00:42:28
And self-sovereign identity using blockchain technology for that can bring enormous advantages. So the GDPR laws that are going have come into place needs support for that. And the developments that also Peter has mentioned, it could be very good systems and foundations to make that really happen and really may understand for citizens that I’m the European union and technology like blockchain can really bring a, a much more faith in what we’re doing and how we can live. So, so the corporates are also seeing that that opportunity and that value and importance for acceptance for these new technologies. At the same time, it’s a like a, like a just being mentioned by poll a thing go from, from the Gibraltar Vic events happening. And if there’s one technology that can help us to across all over jurisdictions and have seamless trait a that that’s possible across your jurisdictions where trust is inherent to the system and not something just that you have to have in each other, but that this really system provided blockchain is the technology for that.
Louis De Bruin (Blockchain Lead, IBM): 00:43:41
So, I think that is something that the infrastructure that’s being built on in Europe and in various countries that can enable can also facilitate that these changes will come about as smooth as possible and we’ll deliver also an enormous opportunity forward. That 3% growth that our neighbors had. I think you’re, you’re absolutely right, that we have to strive for, for growth. And these sorts of technologies aren’t, are perhaps not the drivers, but they are absolutely the facilitators to make that possible. So algorithmic implementations and also on blockchain with smart contracts are absolutely required for that. Interoperability. It was mentioned also before absolutely important. We work with various technologies, open technologies, mainly permission technologies, but interoperability and whatever we do is essential to make this all work, not just between blockchain but also between other technologies.
Louis De Bruin (Blockchain Lead, IBM): 00:44:43
So, these are very promising and good developments from, from a corporate perspective. And also what we see is now that in the blockchain projects that are becoming operate operational at the moment, we see very close cooperation between government institutions and, and commercial institutions commercial companies just like, like IBM and they are at an Eva footing there. It’s extremely important that parties understand that you have to work together, that it’s only a blockchain only a, I’ve worked. If it’s an ecosystem that’s supporting it, that’s also very interesting. I think somebody mentioned are you, you managed to pull about. Why would you get on the plane when, when, when, when it doesn’t do anything, when it doesn’t add any value. We even see an ecosystems parties participating with fervor that even have a negative a negative return on investment that they first see.
Louis De Bruin (Blockchain Lead, IBM):00:45:47
They’ve guys, they see this is a tsunami that’s coming. We have to change our business models and this is actually an enormous opportunity to do that. And by closing your eyes and saying, what’s happening here in this ecosystem is at first look not good for us, maybe a tremendous opportunity and do so. So, all in all what’s happening here in Europe is extremely promising and IBM was very happy to see that the blockchain approach that we are very much shoved behind is taking off by business and by government. So, all in all, good stuff over here.
Brad Staples (CEO, APCO Worldwide):00:46:20
Wonderful. Thank you. Great. Well, I think a lot of lively presentations from all quarters. I like to open up the floor for some, some questions and invite anyone who answer a perspective they want to put across for our panel. We’re a little over time, but we’ll take a few minutes to take some questions. So any questions from the floor? I knew you’d all be shy. So, I’ve had one prepared as is often the case with these things. I think something that David said at the beginning sort of caught my eye or we talked about it a little bit, is this whole issue of the need for individuals to assume responsibility for their own data and design systems for personal data management. And that seems to get right to the heart of the trust issue and it’s possibly a place where Europe can play from a point of principle and values and really meaningful role in creating a framework in which individuals can build trust. But how do we go about that? That, that the threat you mentioned from China is very real for them. For their own citizens, if not for others in time. Where do we begin? David with that challenge and maybe others would want to contribute to that as well.
David Seigel (CEO/Founder, Pillar Project & 20/30): 00:47:38
Yeah, I’ll be quick. It has to be bottom up. It has to be decentralized. So we, so government’s role is to enable it, not to hand it down and formed and created and dot, you know, ship it. So, its self-sovereign identity means you here’s the tools, you know. And so, it’s really, I think every bit as much about education as it is about tools and infrastructure.
Brad Staples (CEO, APCO Worldwide):00:48:00
Any other perspectives on this issue from the panels, maybe from the commission? Where does the commission begin to shape a context for this to become manifest through new principles or frameworks for legislation in the future?
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:48:15
I mean, one aspect of it is applying the existing framework in let’s say, a general way to not simply to blockchain but to the decentralized technologies. I mean, we also have decentralized machine learning, decentralized big data things with three D printing. Obviously. What this enables for micro manufacturing and design. On the one hand you can take the existing, especially principle-based legislation and you can apply it. You can look for regulatory access points where you don’t have, let’s say a single controller of an enterprise or an initiative. Now, on the other hand, especially in a pro innovation spirit, and this is what we’re looking at for the next commission, perhaps you need something to clear the way to lower barriers. And perhaps you need something to give legal clarity for a new way to utilize decentralized systems perhaps with smart contracts. And with a, with tokenization.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:49:15
And I’m talking again more to run a decentralized system, utility tokens now rather than the investment ones, which will come probably in one way or another under investor protection legislation and markets legislation. That will be a political decision made under the next commission as we emphasize. I mean, we are a political institution. I’m a civil servant and we prepare the analysis, but it be the next parliament, the next set of commissioners and the next president that will take the decisions in that direction. But right now we’re very much also utilizing tools like the blockchain observer to inform them 12th of December meeting open registration on smart contracts and legal frameworks and in Paris. So, we’re very much looking and analyzing and I mean we have, you can look for my own name of publications in the European law Institute, IEEE and so on, on the subject how we’re proceeding with our evidence-based and the way forward. Hopefully.
Speaker 1: 00:50:15
Could you say something about as you say that it’s an important technology that we could get a fast lane for financial, for my proof of concept things because otherwise if we just follow the normal way to go, then we will be too slow anyway. So, if we really want this, we probably need in certain areas fast lane to do this. Is there a way to go this way?
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission): 00:51:01
Okay. I mean a, a tool that we’re very much in favor with of course with the caveat of subsidiarity, not to force it on an every member state, but we had it and the startups and scallops communication as well as the think tech action plan is a tool of a regulatory sandbox where appropriate. And actually, I mean we’re moving beyond proof of concept or a small pilot. I mean we’re moving to implementation next year with a regulatory registers sharing on the EU level a reg tech. So this is in a regulatory sandbox. There was a proof of concept by the colleagues at DG texted with help from various other parts of the commission, like the joint research center and DG digit. We’re moving to a next year. It is an approach that is also a fast track. It’s obviously not foreseen to use blockchain for sharing regulatory registers.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):00:51:50
It’s not prohibited. But it is an experimental approach moving forward as we are doing it. We’re also trying to collect evidence of barriers to rolling out blockchain. Actually, so far, thankfully they have been actually relatively few. So that’s why we’re coming with the how to say a great a deal of questions to the sectorial players who might have identified something but a a sandbox approach or innovation hub approach. This regulatory experimentation, let’s not say if something’s not foreseen in the legislation or hasn’t been used before that it’s prohibited. Obviously we do need a little bit of art in applying things like consumer protection and investor protection, which we’re not giving up. And this next block chain infrastructure is a foreseen to be fully in line with the general data protection regulation and network information security. This is also why we’re intervening a little bit in the market to shape the market to make sure that at least governments and those players who do have to comply with this legislative framework as it is now, we’ll have tools available at least for their regulatory reporting and other, how to say a public service type of requirements.
Louis De Bruin (Blockchain Lead, IBM): 00:53:05
At the same time as you’re from industry. I would wear much affricate not, not to wait for government issues. It’s wonderful. What’s, what’s happening here, what’s being facilitated that like IBM, we started with this years ago when it was no regulatory framework or anything available and not even inside.
Louis De Bruin (Blockchain Lead, IBM): 00:53:25
I would start already, there’s nothing stopping you doing that. That technology is freely available.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 00:53:34
Can only concur with what they were saying earlier. The government’s role is not to necessarily impose any solutions, not to come up with all the answers, but to create the right environment. So there’s a framework that those that are looking for the fast lane or whatever it is that they’re looking for, have the ability to, to, to do that within certain parameters. Yeah. But the idea is to let those that can innovate, those that are the technologists that have the clever people, let them get on with it and let them do what they do and we’re there to support.
Brad Staples (CEO, APCO Worldwide): 00:54:05
Let me invite another question from the floor. Yes. Gentlemen, on the far right, you can just say where you’re from as well. That’d be, that’d be fabulous.
Speaker 2: 00:54:13
Good morning. My name is a Tumera and get, now I’m working for aim and the international association of mutual benefits societies. So basically I’m not for profit healthcare insurance. I’ll try to familiar my question in a clear way. When I started to read about blockchain, I was thinking and I was understanding that it was all about actually connecting individuals and people so that they could actually sort of not get treated. But I mean, okay, let’s get rid of all these middlemen, as you said before. And now what I’m noticing on this panel today is that it’s diverse organizations that’s ablation only to actually get rid of that hire. Here we are, we see governments, we see companies, we see the commission, we see all these public authorities. But I just don’t see the individuals in here. So I was, and I didn’t actually also hear much about them in all your presentations. So where are they now? I mean, now where are the, in the process? This is the first thing. I would, I would also think that maybe it would have been good to have a time invited here maybe as a quick consumer organizations to have a bit there at their point of view on the whole development. The second thing is that if you want to address and to have individuals jump into the blockchain trail, how did you go about, I mean having them be literate about this thing which is highly complex and highly sophisticated. Is there any way to actually just explain this to people?
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission): 00:55:44
I mean in our long-term vision, exactly. When I mentioned these diplomas and the work qualifications, this would go to the individual. A couple of the other speakers touched upon it. A precursor to getting there is the implementation of Eid and self-sovereign identity, which for us are complimentary. Our government will accept official government issued ID but for other things you can use self-sovereign identity, you can control your, your own data. So, I mean this is an a government services contact context to the individual further with the stakeholder initiative that we have now, which will be run by the stake holders but which strongly encouraging. Then this would be also for the permission list, peer-to-peer blockchains. We look to have a very active dialogue with them, how they can be enabled, how this innovation can happen in the EU and a dynamic echo system as I say, but not thrilling consumer protection or its investor protection out the window. I mean we don’t want to a complete wild West, but we are very open to new ways of working together with these, with these organizations. I mean of course we are a government and working in e-government services. So serving the citizen is important. But we want to have this massive creativity and innovation coming. Also peer to peer, which obviously if it doesn’t impinge on anyone’s rights, can all also happen without us and without our supervision and without our control. And we only encourage this.
Louis De Bruin (Blockchain Lead, IBM): 00:57:19
Yeah. And to answer this it’s, it’s a very, very good question actually. And that’s it is all the people here at a table are individuals. They are also and we all went into this business because we felt something for that. And now we’ve bid, we went, we, we went into blockchain that because we feel the same things that, that you feel now that blockchain can be good for the people and offline we could come together greatly. And I can give you some examples of references that we already have with the nongovernmental organizations that actually use blockchain to, to make to benefit those sorts of organizations. But I think it’s important that it’s driven from our own ambitions as well. And not just from the corporates and the governments.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 00:58:06
Okay. What I’d just add to that is that obviously I’m not here representing anyone other than the government. That’s what I’m here for. But when we launched the regulatory framework in January, since then, we’ve had about 40 applications for firms who want to be licensed. And those firms are full of people like you described. They’re the people that are trying to change things that have worked on peer-to-peer, et cetera, et cetera. And for example, David gnosis who are a prediction market one of those one of those firms. So we have number of firms that represent blockchain, that represent the people that created all of this. And they accept that in order to take this up to the next and the following steps that it needs to come, needs to become a mainstream. It needs to have a set of rules that support it, that give it, that legal certainty that is missing without that. And that then allows them to properly plan the growth and development of their businesses, whatever that may be.
Brad Staples (CEO, APCO Worldwide):00:59:13
Can I just ask for it? Whether there’s a perspective from a member of the European parliament on the panel, because I think you’re here representing the constituents who are grappling with this change. And probably hearing a lot from individuals that just have reflected.
Catalin Ivan (MEP, Romania Economic Affairs Committee):00:59:32
Of course, there, there is not so much literacy, digital literacy. But we, we discuss, we’ve discussed a lot about FinTech and how blockchain can help financial industry. And we need to talk also about financial literacy. We need to educate people to understand technology, to understand and to take profit of opportunities. But there is also a lot of danger. There is lots of bad things can happen. And we saw with ICO S a young people investing a lot their money in the different projects and they lost their money. So of course we need to discuss about the literacy, digital literacy, financial literacy. But also this technology can solve many problems we have in our society. We can fight better against corruption, having more transparency through blockchain. We can have better he presented thieves if we have a better voting system and we have more competence politicians are presenting us. I think through transparency and through a meritocracy we can, using blockchain and decentralizing public institutions, opening them to, to the public, to the citizens, we can have a better life for everyone. So, I think it’s in interest of everyone to find the new ways to improve to events, institutions and the, and everything we have right now.
Louis De Bruin (Blockchain Lead, IBM): 01:01:20
Yeah, I totally concur with that. Then to that extent on one hand, blockchain can, can change the lives of, of, of, of millions of people. And I’m better at but also in the way of seeing blockchain simply as a business process reengineering tool on steroids. It just makes processes much more easy. So it’s not, it’s, it’s not a, as, as, as, as dramatic a as, as, as changing everybody’s life from, from the bottom. But it’s also making a, taking out a lot of energy cost an inefficiency. So that’s also a tremendous value for all of us, for all European citizens.
Brad Staples (CEO, APCO Worldwide):01:01:56
Thank you for a great question. Any, any other questions from the, from the room? I’d, I’d like to shift us for a moment with another question. And David, you mentioned this directly and Christie Lagod said it just last week that there’s a place for central banks to, to, to engage and to, and to adopt their own cryptocurrencies. At the same time the innovation that we’ve seen the privately managed to digital currencies that have created this energy in this. And there’d been almost a response to their lack of trust in large financial institutions in order for us to really progress in terms of crypto currency. What’s the role for central banks and when should that and when should we start to see their engagement? Peteris?
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):01:02:56
One brief comment that I forgot to make on the previous comment that I think individuals will only start working with the blockchain when it’s as simple as pushing a button on your, on your smart phone. People are not going to learn all the details of the blockchain. And then that’s also a little bit related to this question as well. I mean, I would make the legal note that these would be digital currencies. Cryptocurrencies rely only on the cryptography, something that would be issued by the central bank. Bank of Sweden for instance, would be, it would be a digital currency, but what it opens up for a very interesting possibility is to put money directly into the financial system for the central bank, which is exactly the reason that at least in Europe, the central banks are I think a little bit hesitant because we have had a fairly fragile situation with the commercial banking sector.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):01:03:49
And it’s a question whether this is a step that they, that they want to take. On the other hand, you could design something that again keeps the central commercial banks in the system. If this is the policy making West [inaudible] central bank policy maker, I’m just speaking technologically. So it was very interesting that the IMF made, made this point technologically. I think it can be done for systems like the one that we’re working on would require a digital Euro. But you could also do that through commercial banks. You don’t have to have the set commercial, the central bank doing it directly. But I mean, it would be a radical disintermediation to have the central bank coming in, which is why then it becomes a very big policy question and a political question. But I mean, we’ll see how this, I think the technology is there, the possibility is there, but it will be depending on the way that our fiscal and economic policy develops in the, in the upcoming years and also with political leadership.
Brad Staples (CEO, APCO Worldwide): 01:04:48
Any other observations? Dave? David on this one?
David Seigel (CEO/Founder, Pillar Project & 20/30): 01:04:53
That dress has it framed correctly. Central banks are worried about narrow money. They’re worried about issuing their own, that you have an account with the central bank rather than with, you know, Barclays and that’s a worry. But it’s one we can get over. I think it’s a matter of education. I think there’s always demand for credit. A credit makes the economy work. So credit multiplies base money into broad money. And even if you make all the base money, you know, available to everybody, there will still be demand for credit to, to provide that multiplying factor. So I’m not worried about that. And some economists I speak to you are not too worried about that. They are also worried about technology. Fair enough. We don’t want to burn down. You know, that many forests trying to protect our money supply. I also, I also recommend looking at how much energy we expend right now protecting the Euro, you know, so it’s not free.
David Seigel (CEO/Founder, Pillar Project & 20/30): 01:05:51
It’s not cheap. It’s not no energy. But we don’t want to use proof of work to protect the Euro that that would be the wrong footing. But now we have new technology that is starting to come out of the woodworks. That is, it is calling is also showing that we can do it for like almost no money and make it safer. Here’s something I just want to add, and I can, if I can borrow your phone for a second, just as a prop not going to send any messages. We could put an entire country or, or continent money supply on the phones of its own people and just by transacting every, for example, every time you send money you validate 10 other transactions. And in this way using a technology similar to Collins and others you know, that that costs about the same as sending a cat picture to somebody else. There’s not really much energy or bandwidth being used and, and we could forget about all the mechanics of central banks and just have the, the population protect its own money simply by using it. That is possible. So again, thinking these new thoughts and getting central bankers to think about automating their decision making process. This is something I talk about called nominal GDP level targeting rather than mysterious meetings and pronouncements in rate hikes could actually give us algorithms that would prevent recession.
Speaker 3: 01:07:25
Good morning everyone. My name is Paul Rexam from Portugal entrepreneur in the blockchain space with a background in banking and payments. I would say that the, there is a parallel between the internet and blockchain in a sense that internet was kind of like the internet of data and now we have the internet of value and it would be a naive approach if we consider that the governance that we have for internet would be the same kind of governance that we have for blockchain. Because one thing is data. Another thing is digital assets. It’s money, it’s our own digital economy. So how would you say that governance could play a role? Because we’re talking about governance here. Would it be a light approach, kind of like what we did back in the 90s with the internet? Or would it be a more enforced kind of governance in order to protect the rights of the people?
Brad Staples (CEO, APCO Worldwide): 01:08:19
Thank you. It’s a, it’s a great question. I think the way we will answer it is we’ll get a point of view from everybody across the panel because I think you’ve all got something to add on this one. So Peteris, I’ll start with you.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):01:08:28
I mean light governance though. I mean the internet had eCommerce, it has the federal trade commission working to protect consumers in, in the U S and I always say it’s not a how to say anything, anything goes as we well know in this case, I mean we do have hope that initiatives like this, a private sector round table that we started off would be a layer or layers of governance for interoperability between the different blockchains. And we definitely want to see this. I mean the one that we’re answering for where the governance is the commission and the member States is the European blockchain services infrastructure. We want to work with the other ones. We have no ambitions, Machiavellian or otherwise to run that, but we need someone to talk to. So, we very much have high hopes for stakeholder cooperation and ensuring interoperability standards both formal and informal in addition to what’s happening at the international standards organization at and the perspective on the pole.
Catalin Ivan (MEP, Romania Economic Affairs Committee):01:09:30
As I said from the beginning, it’s about building trust. It’s about understanding technology. And I think we need to be responsible when we do to have a responsible approach when we discuss about regulations. So we need to understand first what we will regulate and we need more discussions, more debates, more small private pilot projects as I said. And together with you and with the European commission, with the national governments, we can create a framework that would prevent any kind of the bad effects of this technology.
David Seigel (CEO/Founder, Pillar Project & 20/30):01:10:12
I think we have to actively disenfranchise middlemen.
David Seigel (CEO/Founder, Pillar Project & 20/30):01:10:18
And for an example is there’s a land rush right now to build the cooled crypto custodian service of the future. And I keep saying, why do we need custodians? That’s what the blockchain is a custodian. So if you want a custodian, fine, but why does it have to be required to be in the middle are we’re in the FCAs pant sandbox right now, one of my companies is in the FCA fan sandbox and we have to have an old fashioned custodian to manage private keys that people can manage on their own. So this is the stuff, I think it should be an option rather than required. And that could change a lot.
Louis De Bruin (Blockchain Lead, IBM): 01:09:59
The comparison is very with internet and blockchain. That is, is a very good one. And we see what the internet did for communication is what blockchain is going to do at the same time if we see what the, how do you, internet has developed a, I don’t want to be too gloomy, but it is not exactly what we envisaged 25 years ago that’s been like that. So there are very, very good lessons to be taken from that. We should do something like a technology assessment as, as blockchain develops a, have a finger on it all the time and then are we doing the right things? And, and therefore government facilitation is, is, is very good and, and oversight at the same time. It shouldn’t be stifling, eh, you don’t want to have rules that stop innovation. But a very good balance between these two things are required. And I think that’s what’s happening at the moment. I think we’re much more aware because how the internet has developed that blockchain should go in a, in a very good direction in the future. Sure.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 01:12:11
I suppose the short answer, like in my own personal view, I don’t, I don’t fully understand what light touch regulation means and I don’t understand how you can have something, a set of rules that you can’t enforce. So perhaps it’s a description that’s wrong. So we had a lot of discussions about the style of regulation that we would bring in. And we used all the words include in lights and codified and all sorts of stuff like that. And we ended up with a principles based approach. And why did we end up with that? We ended up with that cause we felt that this space is changing and evolving very, very quickly and we needed to be able to bring in something that would keep up with that. And if we had a very clear, very standard set of rules that didn’t move, that we will be left behind very, very quickly and we’d have to then be in ourselves over and over again.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 01:13:16
So, we have something that is certainly is not my touch. The rigorous process that firms who are looking to be licensed have to go through is there a lot of the stuff that they do and a lot of stuff that they satisfy the regulator with are things that we’ve are very commonplace. So AML and proper governance structures, et cetera, et cetera. All very normal stuff that, that we deal with in the traditional world. So not light-touch. And is it enforceable? It has to be enforceable to be of any value. We don’t have any voluntary code, which is another thing that we, that we looked at and I know has been discussed in, in, in other areas. You know, either you decide you want to do something or you don’t do it, but the cop out middle of the road, I don’t think works and doesn’t give that, once again, regulatory certainty to the firms that are looking for that.
Brad Staples (CEO, APCO Worldwide):01:14:12
Well, it’s great to still be getting into grips with the, with the big questions and we’re getting the entrepreneurs tackling the regulators, which is exactly what we wanted in this room. So thank you for that question. We have one more from the, from the room in the bank. Thank you.
Speaker 4: 01:14:30
Hi. my name is dr Alex Cahana. I’ll be on the next panel on digital health. I’m listening to the conversation. I’m wondering what would be considered a positive outcome of this discussion now. What are we besides exchanging you know, knowledge and doing some IP transfer and maybe for some in the room kind of a deepening our understanding of distributed ledger technology? What would be considered a good outcome of this meeting or this day or this their report that we want to come out or there’s some general guidelines is there’s some traction that’s going to come out in the future?
Brad Staples (CEO, APCO Worldwide): 01:15:12
Let me give a view first of all from our perspective and why we wanted to convene this session. This happens far too rarely. This group of people with this diverse range of perspectives that you all represent in your hair during the course of the different sessions, who’s here? Having this kind of engagement in anticipation of setting a framework for regulation or really trying to define and engage with consumers in the population at large is exactly the way to build strong and sustainable outcome. And I think free determining the direction we’re going in would be a mistake, but having greater understanding and connectivity and a real awareness of one another’s challenges is why we’re here. So I think it’s essential that this is an inclusive conversation where people speak up and we hear as much from that side of the room as we do from, from this side.
Brad Staples (CEO, APCO Worldwide): 01:16:05
You raise a provocative question, but I don’t think there’s a singular answer, at least from not from our perspective and the association that we’re bringing together as part of this overall effort is to make sure that all voices are heard equally and that we don’t see established institutional faces repeating conversations based on past practice and behaviors that may be entirely irrelevant for new technology that can completely redefine the economy of the future. That’s my point of view. I don’t know about others. Do you answer? Okay. I think I, I don’t think that’s what we’re really about. And so that encourages one or two more questions before we wrap up. And anything else from the floor? Yeah. Yes, absolutely.
Speaker 5: 01:16:50
Register sharing. Can you tell us more about that?
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission): 01:16:54
I mean, this is, this is reg tech. It’s important to say that we’re not carried away about the hype that blockchain is the solution for everything. At the same time, we are very positive. We think it’s an excellent tool for a lot of things, especially where multiple partners need see the same information more or less. At the same time with assurance as it as to its veracity and it hasn’t been changed. So the European union has some 61 registers that it shares between the still 28 member States and the European commission. And this entails big data transfers and archiving and processing and so on. And this is where one of our first proofs of concept was that sharing such a register by publishing on the blockchain on a node would be much more efficient and would have also other, how to say lower maintenance costs and other benefits.
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission): 01:17:48
So, this is one of the first use cases that will start within this European blockchain services infrastructure next year. And where justified will look at how many of these shared registers should be moved to the blockchain. We’ll look at each one individually. Again, not carried away about the hype. I would imagine that many of them would be justified by being on this a permission but decentralized blockchain. So I mean, the reg tech is something that we’re also very much encouraging also in the interaction with the, with the private stakeholders. Because one thing that we are very sure of that while compliance to protect an investor or integrity of markets, et, the environment maybe needed that there are compliance costs. If these compliance costs can be lowered to the minimum possible while compliance still happens. I mean, this is a, one of those rare win-win. So, we’re definitely on this route.
Speaker 5: 01:18:41
Which, which registers are yours?
Peteris Zilgalvis (Co-head of Fintech Taskforce, European Commission):01:18:43
First ones are a one under Digi, Digi tax, which is a thing to do with a value added tax and customs.
Louis De Bruin (Blockchain Lead, IBM): 01:18:54
And this is just wonderful because it’s really wonderful because imagine at the moment you have 27 or 28 registries that means that they can in principle have 28 times 28 minus one in directions and this becomes 28 times one through the distributed ledger. I mean, it, this, this is wonderful news. Right?
Brad Staples (CEO, APCO Worldwide): 01:19:18
Any other questions from the floor? Great, thank you.
Speaker 6: 01:19:24
Hi, my name’s Peter Moritz. I’m also an investor and entrepreneur in the blockchain space. So David, you made some good points about European union falling behind. They’re not lagging, but you have to remember that 2008, we have quite a bit of crisis with Greece and everything come along. So it takes a long time that you have a 420 million people in one spot to grow. You cannot really compare it to Australia down on there. And you know, the housing market, what’s going on down there. GDPR came before blockchain came along, so we’ll probably, sure have a updated version soon enough. I think Peter and Eva and other people is going to be in the European union parliament. They’re really pushing this space to go forward. And I think that took the long, the rise space. You just sit back and watch, see how thing comes around.
Speaker 6: 01:20:15
I think SMA coming out with STR regulations later on or some kind of things are going to help out. So I can see what you’re saying about maybe 10 years down the line what is going to happen. But I think with the European union, with the people, quite traditional and I think the government needs to have some kind of guiding light for the people to understand. That’s not a question, but it’s more about getting back to what you were saying that European union is lacking behind. What they behind you see it in the next five years. You think that’s going to be possible to get done in the European union, in your mind?
David Seigel (CEO/Founder, Pillar Project & 20/30):01:21:05
I don’t think about your work. Oh, it’s a fairly Peter, I, I think we need, I think that European central bank caused the recession in Europe because, so I’m talking about four or 500 billion euros last forever. And I have evidence for that. And I think so I think actually comparison to tell Australia or app because it’s a matter of managing your money supply. So yeah, I think there are a lot of amazing opportunities here, but we maybe have to get a bit out of the traditional mindset. You can’t just say, well, we have an aging population, so we’re not going to grow that fast. That’s not going to help the next generation.
Brad Staples (CEO, APCO Worldwide): 01:21:49
Okay. I’m going to draw us to a close with one last question because we’ve been sitting here for a little over an hour or so and nobody’s mentioned Brexit. So it is my obligation to do that as a Brit who started working here, actually straight out of university in the European parliament, and this may be the last time I am here as a EU citizen, which is very sad, but nevertheless in, in the context of the disruption that Brexit represents, is there anything in this technology that gives us hope in terms of improving and creating a, a borderless kind of trading environment with that disruption, anything that the new digital or crypto currencies are going to give us potentially in the future that will alleviate the disruption and the uncertainty that we’re getting with this and other events at the moment. And maybe that’s a question for Gibraltar.
Paul Astengo (Sr. Executive & Blockchain Lead, HM Government of Gibraltar): 01:22:24
Borders are created by people. So if people don’t want to create borders, they won’t. And if this, that means that this moves forward within certain parameters but in a different way. And that’s what the people want. That’s what will happen.
Brad Staples (CEO, APCO Worldwide): 01:22:59
Any others? Any other last remarks from the panel
Louis De Bruin (Blockchain Lead, IBM): 01:23:04
Yeah, yeah, I, I something about it earlier actually a and D I think we already see for instance, the trade lands initiative, which is a blockchain about that that does dealing with international transportation of shipping transportation [inaudible] that goes across borders already. It involves it’s international. It’s not limited to the European union or anything like that. It involves ports and port authorities in, in I think about a hundred countries already and it, and it works. So, and that’s only a start. It’s only a few months or a year or longer at that. We’re busy with that. So if that’s the start, we can have tremendous possibilities. And also for Brexit where trust will be inherent to the system where it’s no, no, no negotiation anymore required. And do I do I really trust, you know, the trust is in the system. So lock chain is going to be an essential way forward to make a, to make the new relationship between the European union and the United Kingdom as success.
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