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Photo by Pascal Bernardon on Unsplash

We Need A Blockchain Act for Every Country

… to protect our citizens, stimulate innovation, and build an economy fit for the 21st Century

Over the past few months, I have signed so many DocuSign’s. Basically, I have no idea what the trust basis is for this, especially as I use differently generated wet signatures for each document I sign. Basically, it is not my signature, and, in fact, I don’t really know what my signature is any more, as I just stribble things now. I assume what they do is to provide a unique link for a user and then log their IP address on the signing. But, you can’t really assign a person to a link in an email address, nor to an IP address. It’s basically fake digital, and enough to get around laws that were created centuries ago, and which enabled commerce.

The worm is turning

But things are changing. And this week I was so pleased to see the advancement of a Digital Identity Service in Scotland:

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Background

In a traditional finance infrastructure, Bob trusts his bank (Bank A) and Alice trusts her bank (Bank B). A transfer of funds involves Bob finding out the identifier of Alice’s bank (such as the sort code) and her account identifier. The transfer of funds then involves him informing his bank that he wants to transfer the funds to Alice (Figure 1). Bob’s bank then checks the transaction, and if it is valid, his account will be debited by the defined amount. His bank will then forward the transaction to Bank B, and where Alice’s bank will credit her account. In this way, both Bank A and Bank B have a ledger which can be checked for the transaction. This method works well in investigating crime, as each bank must report on Bob and Alice’s transactions, especially if they see any unusual transactions.

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Figure 1
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Figure 2

Liechtenstein’s leads the way

Liechtenstein’s Government is the first in the world to aim to enact a Blockchain Act. This will support a legal infrastructure for blockchain technology, and to also support a token economy. Within tokens, we define applications which trade only with tokens. These tokens can then define costs of effort, and eventually could be “cashed-out” into fiat currency. Economic activity could then be enacted with tokens rather than currency — the creation of the token economy [details]:

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The Act

The consultation document [here] defines a trusted technology transaction systems (VT systems). For the first time, we see blockchain methods being translated into legal speak, with a token being defined as:

  • Utility tokens. This allows for a spend against a service.
  • Security tokens (equity and assets). These could define the ownership of an asset.
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  • Trusted technologies (Art. 3 VE-VTG): This defines the technology that is required to build a VT.
  • Definitions (Art. 5 VE-VTG): This defines a token as something that defines claims of a person to the rights to goods.
  • Rights of disposal (Art. 6 ff. VE-VTG): This defines the rights to transfer tokens, and is normally defined by the owner of a private key signing the transaction. A disposition is defined as the transfer of the disposition authorization on the token. Within the Act, it is defined that a buyer has the rights to dispose of a token, even if the seller was not authorized to dispose of the same token.
  • Requirements for VT service providers (Art. 13 ff. VE-VTG): This defines the entities who will perform services within the VT. These entities must provide an organisational structure, control mechanisms and a minimum amount of capital.
  • Basic information on the issuance of tokens (Art. 28 ff. VE-VTG): This defines the assurance in the issuing of tokens and their legal requirements. They must provide a minimum amount of information, such as the technology used, the purpose of the token, and any risks. There should be at least 10 years of issuance, and to also prevent token cloning, along with prevention of a token not being released with the same rights.
  • Obligation to register (Art. 36 ff. VE-VTG): This defines that service providers must register into the Financial Market Authority (FMA) before starting their commercial operation.
  • Supervision (Art. 42 ff. VE-VTG): This defines that the FMA implements the Act.
  • Penal provisions (Art. 49 ff. VE-VTG)
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The Future

And in the future, smart contracts could enact contracts. The following defines the provision of care services:

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Conclusion

In a decade’s time, our kids are likely to grow up without the requirement for physical cash, and where we trade in tokens, without banks required to be involved in our transactions (apart from a cash-in and cash-out). We will keep our tokens, and not trust others to hold them for us. That’s the world that our kids will grow up in. The concept of signing a bank card … or wet signing anything … will be alien to them. Things that not conducted in a digital manner, will seem alien to them. But we need safeguards!

Written by

Professor of Cryptography. Serial innovator. Believer in fairness, justice & freedom. EU Citizen. Auld Reekie native. Old World Breaker. New World Creator.

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