On August 2, 2016, I volunteered to help register attendees at a blockchain conference in Washington, DC sponsored in part by Fintech Worldwide, Ltd. I was looking forward to learning about engaging blockchain product solutions, but this being a DC conference, there were only a few commercial and non-profit business early adopters sprinkled among the lawyers and regulatory agencies. It was very well attended and the speakers sincere and considerate. In between my volunteering obligations, I was able to listen to some of the panel discussions and what follows is the result of my cursory note taking and impressions.
The first panel discussion to which I was able to pay full attention was called “Smart Contracts and Decentralized Autonomous Organizations (DAO)” The moderator was Luis Carrazana, a founder of the Blockchain Conference. The panelists were Michael Abramowicz (George Washington University School of Law), Drew Hinkes (Berger Singerman), Jenny Cieplak (Crowell & Moring) and Jacob Dienelt (Brian Kelly Capital Management). The panel discussion description stated that the purpose of the panel was to “look at the implications of (“sic”) some of the brightest minds in this emerging industry are doing and dreaming up.” In addition to the general fear-tinged commentary about technology and its potential illegal uses, such as money laundering, the discussion included the failure of The DAO (the business entity) to prevent several million dollars from being withdrawn from owners’ accounts, even when the organization became aware of the problem. The immutable/unchangeable nature of Ethereum smart contract code was at fault [Author’s note: The code was written in Solidity programming language by a company called Slock.it. There was a flaw in the program that allowed a known Ethereum user to move money from other Ethereum accounts to its own.] Jacob Dinelt appeared to be the only panel member who felt that the software code error result should have been left to stand and that the financial losers be left to lick their wounds because “the code is the law” in this particular software development environment.
[Author’s note: The code is not the only law. Laws exist even in the absence of or intentional waiver of them under many circumstances. If the parties had agreed to permit this sort of transaction, however, who is harmed? Specifically, was there any fraud? In the alternative, depending on where you live, the Uniform Commercial Code or its international equivalent, the rules set forth under the United National Convention on Contracts for the International Sale of Goods may apply if, as many have suggested, cryptocurrency is not currency, but a good. Is this distinction really a marketing/trade name problem? Would any of the cryptocurrency controversies have happened if, for example, the commodity was called “Purple” and an exchange was created for aficionados of baseball playing cards? How is this commodity different from, as another example, buying antique Pennsylvania currency on eBay?]
Drew Hinkes was asked to enlighten everyone about a recent Florida case where a bitcoin exchanger had money laundering charges against him dismissed. [Author’s note: Michael Espinoza was accused of selling Bitcoin for cash when the sale was conducted with undercover police officers. Florida has had its share of bitcoin related criminal activity, which suggests that the state has a general crime problem and not just a bitcoin currency problem.]
The next panel discussion, “Blockchain Use Cases in Commerce” moderated by Mr. Carranza with panelists Conan French (International Institute of Finance), Douglas Pearce (World Bank) and Tori Adams (Booz Allen), brought some social policy as well as possible applications to the discussion. Mr. Pearce pointed out that the technology could be used to bring money access to those who are “unbanked” and initiate a financial inclusion opportunity. According to Mr. Pearce, a significant problem for those with limited resources is lack of proof of collateral for purposes of credit assessment, and he is hopeful that blockchain technology will help remedy this problem. [Author’s note: Ms. Adams talked about The Smart City – which to this privacy and private property advocate brought to mind a parade of horribles where individuals could sell personally identifiable information in exchange for services. How a person could, on the fly, make sure that the information would not be resold and thereby immediately diminish the value of that information to the human was not mentioned. In addition, what guarantee would that person have that the information would not be used subsequently for identity theft? Needless to say, I am not a fan.]
The following three panels were populated significantly with attorneys and government agencies, including the U.S. Commodity Futures Trading Commission, the Federal Trade Commission, and the National Institute of Standards and Technology, as well as a few businesses. One standout from this bunch was Natalee Binkholder from the office of Representative Mick Mulvaney who recommended that there be regulatory restraint, such as “safe harbors,” for this new technology. Unsurprisingly, the agencies were concerned about cryptocurrency users entering into fraudulent transactions.
The keynote speaker was Stephen Taylor, DC Commissioner, Department of Insurance, Securities, and Banking. He envisioned a blockchain movement that would support economic inclusion for the unbanked, as well as an opportunity to enable microinsurance offerings.
The last panel was moderated by Joe Colangelo (Consumers’ Research) with panelists Yorke Rhodes III (Microsoft), Meeta Yadav (IBM), and Brian Hoffman (Open Bazaar). The panel talked about connecting legacy computer systems to the blockchain and how this could be accomplished. They also talked about how blockchain technology could reduce fraud because everyone along the blockchain would have an identical copy of the transaction terms and conditions. All of the panelists expressed their dedication to blockchain’s future and appeared genuinely excited. [Author’s note: If any combination of legacy systems and future technology innovators could devise a worldwide infrastructure enabling the best each could offer, these folks could. Indeed, Mr. Rhodes is dedicating eight years to the blockchain project.] The optimism and excitement on the panel created a perfect end to the conference.
The Blockchain Revolution by Don Tapscott and Alex Tapscott, 2016
The Age of Cryptocurrency: How Bitcoin and Digital Money Are Challenging the Global Economic Order by Paul Vigna and Michael J. Casey, 2015
Cynthia M. Gayton is an attorney, educator, and speaker. Contact her at firstname.lastname@example.org. See the Contributors page for more about Ms. Gayton. Nothing in this post is purported to be legal advice.