Blockchain Events
FTX’s decline shouldn’t invalidate blockchain.
The House Financial Services Committee held a hearing last week to investigate the collapse of FTX, displaying Congress’s dissatisfaction with the cryptocurrency business. Lawmakers on both sides of the aisle are fed up with cryptocurrency company fraud and misbehavior, making it almost guaranteed that Congress will take steps to regulate the industry next year.
But in the eagerness to call FTX founder Sam Bankman-Fried to account, Congress should take care to design legislation that distinguishes bad actors and frauds from the promise of continued innovation in blockchain technologies.
Bankman-Fried, once a darling of the business, is now accused of scamming millions of investors out of billions of dollars. Last month, it was revealed that FTX and Alameda Capital—another venture capital firm created by Bankman-Fried—were commingling customer cash, resulting in a run on the exchange and ultimate insolvency. Following the collapse, court documents and other watchdogs claim that he misused customer deposits to make ventures such as real estate purchases and options trading. Only a small portion of FTX’s assets have been secured, and millions of creditors are expected to suffer a catastrophic loss.
Lawmakers are rightly outraged and want answers concerning Sam Bankman-Fried, who has become the poster child for crypto sector hubris and fraud. Rep. Maxine Waters (D-Calif.) was among the first to respond, requesting that Bankman-Fried appears before the House Financial Services Committee, which she leads. Bankman-Fried agreed to testify until he was arrested by Bahamian officials at the request of federal law enforcement.
Fortunately, Bankman-Fried is not the only person who can provide Congress with information about the crash. The committee did hear from FTX’s new CEO, John J. Ray III, and his testimony was both eye-opening and scathing.
Ray has seen his fair share of corporate misconduct in his almost 40 years of expertise in corporate reorganization, including management of the Enron bankruptcy. “However, I have never seen such a complete breakdown of corporate controls at every level of an organization in my experience,” he told the committee.
Many committee members took advantage of the opportunity to condemn the crypto business and blockchain technologies in general. Rep. Jesús Garcia (D-Ill.) opined: “FTX isn’t an exception; its failure isn’t the situation of one crooked individual stealing money. It is about an entire sector that refuses to follow existing regulations and believes it is beyond the law.” Rep. Juan Vargas (D-Calif.) went further: “I just don’t grasp the value of blockchain and cryptocurrencies … other than if you’re a terrorist or someone who wants to hide money.”
Reports that the Department of Justice is considering charging Binance, another large cryptocurrency exchange, and its CEO, Changpeng Zhao, with money laundering and criminal sanctions violations only aggravate the industry’s image on Capitol Hill.
With multiple pieces of legislation currently circulating in Congress, the FTX collapse and possible fall of Binance increases the likelihood that lawmakers will take action to regulate cryptocurrencies and other blockchain-based technology next year. Unfortunately, Congress’ justifiable fury over FTX raises the risk that it will miss the forest for the trees.
The failure of FTX was plainly driven by corporate wrongdoing, which is hardly a crypto-specific crime. It seems appropriate that Ray is directing the reorganization of FTX given its collapse has been compared to that of Enron. The distinction here is that the Enron scam was “highly coordinated financial maneuvers by highly smart people, “whereas the FTX theft was “old-fashioned embezzlement and not sophisticated at all,” in Ray’s words.
This form of corporate misconduct can and should be addressed by targeted regulation. Setting new transparency standards for centralized exchanges and defining enforcement authority over cryptocurrencies and stablecoins would go a long way toward averting the next FTX. However, Congress must also identify bad actors and scams inside the crypto business from the fundamental technology.
The White House and Congress have both acknowledged that blockchain technologies offer immense potential for beneficial innovation. Ironically, the transparency of public ledgers makes it easier for Ray and his team to trace many of Bankman-activities. Fried’s Several members lauded blockchain-based technologies throughout the hearing for their ability to improve transaction efficiency, facilitate genuine cross-border payments, and develop unique organizational governance structures, among other things.
There have already been incidents of poorly crafted laws producing more confusion than clarity for the many players who construct, run, and enable the usage of blockchain technologies. Any new legislation should explicitly clarify which segments of the crypto economy are being controlled and avoid sweeping generalizations. Now, as politicians move toward regulating crypto, they should avoid unduly blocking the innovation that so many of them appear to recognize.
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DAVOS 2023: At #WEF23, policymakers and business leaders were eager to distinguish between distributed ledgers and cryptocurrencies. Not crypto, but blockchain.
From climate solutions to humanitarian aid to moving on from FTX’s stunning collapse, the second day of the World Economic Forum’s 2023 annual conference saw discussions focused on the promise of the technology underlying cryptocurrencies, rather than the often speculative financial assets themselves.
The day opened with a panel of traditional banking professionals seeking to draw a line under the FTX issue, noting that, while the cryptocurrency industry is in crisis, other products founded on distributed ledger technology are not.
“It’s critical not to mix cryptocurrencies with CBDCs, stablecoins, and DLT… they’re all quite distinct,” PayPal President and CEO Dan Schulman stated. Despite the bitcoin crisis, “the underlying tech has operated well,” according to Schulman.
“The promise of a distributed ledger is that it may be faster and cheaper to settle transactions concurrently with no middlemen. That is really significant.”
Importantly, unlike past waves of “blockchain, not bitcoin,” which generally referred to permissioned blockchains, the talks on Tuesday were OK with public ledgers such as Ethereum and the Stellar network. Lynn Martin, President of the New York Stock Exchange, seems to adopt a similar stance, citing the potential benefits of blockchain in making share issuance more efficient or allowing financial exchanges to be settled quickly rather than days later.
“Some of the technologies have now been embraced and used to truly make processes considerably more efficient,” Martin added.
Former Indian central bank governor Raghuram Rajan later repeated that promise of broader blockchain uses.
However, TradFi’s commitment to the industry may eventually be tested: When questioned, Schulman, Martin, and State Street’s Ronald O’Hanley all claimed artificial intelligence, not blockchain, was the most exciting technology.
Carmen Hutt, treasurer for the United Nations High Commissioner for Refugees, detailed such an application – a recently launched blockchain payment solution for distributing humanitarian aid in Ukraine – just across the street from the forum’s main congress center, in a historic church transformed into a neon hub for hosting discussions about the future.
Hutt revealed during a panel discussion hosted by CoinDesk chief content officer Michael Casey that the pilot project, which was launched in December using the blockchain platform Stellar network, is significantly more sophisticated than one might assume.
Donations via the blockchain promise “transparency and visibility,” and the Commission has a platform ready to send relief immediately, according to Hutt. “What an incredible offer… We can deploy $500 million today if we acquire $500 million. So this isn’t going to take weeks or months,” Hutt explained. (Later that day, Ukraine’s deputy prime minister praised the contribution of virtual money to the military effort.)
Further along the legendary “promenade,” industry heavyweights ranging from Solana and Ripple to the Global Blockchain Business Council teamed together to develop a climate project that would use blockchain’s transparent record-keeping to assist in improving carbon emissions and credit tracking.
Although authorities have mostly focused on the potential of crypto contagion to financial stability, a string of bankruptcies last year that wiped out billions of dollars in retail investments, most notably Sam Bankman-FTX, Fried’s may have underlined the need for a shift in their focus.
For the lone banker on the conventional finance panel, the events of 2022 must shift regulators’ focus away from the risk of lenders bringing down the whole financial system and toward the risk of individual customers being duped by crypto frauds. “It’s not that regulators have disregarded [financial innovations], but if it’s not going to generate systemic danger, I’m not sure why we should focus on it.” For More Blockchain News, Click Here.
Blockchain has become increasingly prevalent in recent years, with applications spanning from new cryptocurrencies to their potential uses in various sectors, making it important for business leaders, industries, and regulators to have a deeper understanding of the technology and its potential applications.
While blockchain has yet to achieve widespread acceptance, it has the potential to drive significant digital transformative changes and generate new possibilities throughout the corporate landscape, from banking and finance to infrastructure and healthcare.
Blockchain is defined as “a distributed ledger that records transactions chronologically and publicly,” according to one source. Its database is shared across a network rather than being held in a single location, which enables a high level of information control and transaction transparency.
However, there has been so much hype surrounding blockchain on all sides of the debate, that it has become increasingly difficult to separate fact from fiction.
A study by Vorhaus Advisors, a Los Angeles-based digital media consulting firm, found that only 25% of people in the United States understand what blockchain is.
According to the same poll, 62% of people believe blockchain is the same as cryptocurrency, and 48% believe it is the same as bitcoin.
This lack of understanding of blockchain has caused confusion, skepticism, and fear about its use, which spreads across all sectors of industry and government, influencing not only business but also policy.
The fact is that blockchain technology has the potential to fundamentally alter how organizations and individuals trade products and information, and part of that revolution is already underway.
Blockchain has the potential to improve any business in which transactions require a permanent record and the confidence of many parties. Furthermore, it has the potential to dramatically simplify paper-intensive enterprises that require an accounting ledger.
Here are three real-world blockchain use cases to illustrate how adaptive, widespread, and disruptive it can be:
- Banking and Finance: Finance and banking have received the most attention regarding blockchain and for good reason. It’s an entirely transactional industry. For example, blockchain can convert paper-based functions such as letters of guarantee (documents provided by a bank that assure suppliers be paid for the goods or services they supply in the event that the payor is unable to pay) into a totally paperless, digital, and transparent process, helping to eradicate fraud and forgeries.
- Rethinking Healthcare: The pandemic’s unexpected demand for remote healthcare and other medical-related activities has moved the emphasis on delivering clinical treatment in a virtual or data-driven manner. As a result, the various medical data silos across healthcare providers can be integrated into a single shared blockchain network for secure and efficient data sharing.
- Supply Chain: Blockchain can also be used to improve supply chain management. A blockchain network can provide a single source of truth for the entire supply chain, from the origin of raw materials to the final delivery of goods to the customer. This can help to improve transparency, traceability, and efficiency in the supply chain.
In conclusion, blockchain is a powerful technology that has the potential to transform many industries, but it is important to separate the hype from reality. It is essential for business leaders, industries, and regulators to have a deeper understanding of the technology and its potential applications to fully harness its potential.
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According to the findings of a recent survey that was carried out by CasperLabs, it is anticipated that business adoption of blockchain technology will increase over the course of the following year in the United States, the United Kingdom, and China.
This is the case even though there are knowledge gaps.
Despite the fact that the cryptocurrency and blockchain industries have undergone significant change over the course of the past year, people and companies continue to display an interest in the area.
The results of a recent poll that was conducted by CasperLabs and Zogby Analytics revealed that businesses had a particularly upbeat outlook on the potential applications of blockchain technology.
The questionnaire was sent to a total of 603 “decision makers” employed by a variety of commercial firms in China, the United Kingdom, and the United States of America, in that order.
Almost all of the businesses that were asked about their usage of blockchain technology responded that they did so in some form, and almost all of those businesses (87%) also stated that they intend to make financial investments in blockchain technology during the next 12 months.
This phenomenon is especially widespread in China, where more than half of the respondents want to put money into blockchain technology by the year 2023.
According to Ralf Kubli, a member of the board of directors for the Casper Association, businesses are continuing to look to blockchain technology for solutions despite the recent turbulence:
“It is incredibly heartening to see businesses recognize that blockchain technology is not a threat but rather a solution,”
Companies who are now implementing the technology are reaping the benefits of two of its primary characteristics, namely security (42%) and copy protection (42%), both of which are proving to be highly useful for these organizations.
Those who work in IT-based operations are using blockchain technology for a variety of reasons, including but not limited to improving the efficiency of internal processes (for which 40% of users employ it), improving the efficiency of supply chain operations (34% of users employ it), and improving the efficiency of software development (30% of users employ it).
According to Kubli’s projections, the year 2023 will mark a pivotal turning point for the widespread use of blockchain technology, particularly in terms of offering practical answers to real-world challenges and producing long-term value.
In spite of this, a significant study shed light on the flaws that are commonly seen in CEOs of corporations. The vast majority of respondents (73%) feel confident in their comprehension of blockchain technology.
Despite this, 54% of those who replied continue to regard the words “blockchain” and “crypto” as being identical. In spite of the fact that the vast majority of respondents feel positive about their comprehension of blockchain technology, this is the result.
In a similar vein, it has been argued that the most significant obstacles to adoption are a lack of developer talent, a lack of tools, a lack of interoperability, and pessimism regarding the industry as a whole.
All of these factors contribute to a general sense of pessimism.
In spite of this, practically all of the people who took part in the survey stated that they would be more receptive to embracing blockchain technology if they had a better grasp of how their coworkers are utilizing it.
Education, in addition to accessibility, has been a challenge and a barrier for a significant amount of time for those people outside the space who seek to interact with the technology and engage with customers. This has been the case for many different causes throughout history.
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