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BLOCKCHAIN
REVOLUTION
IN REGULATION
S A F B C , J o h a n n e s b u r g , A u g u s t 2 3 , 2 0 1 7
@JuanLlanos
“ UN EXPIRED
G OV ERN MEN T - ISSUED
PHOTO
ID ”
REGULATION
market failure prevention?
catalyst for progress?
instrument of power?
© 2017 Juan Llanos
PRUDENTIAL
LAW
ENFORCEMENT
POLICY
• National Security
• Crime Fighting
• Consumer/Investor Protection
• Safety & Soundness...
RISK AREAS
• operational
• credit
• money laundering
• terrorist financing
• information loss
• counterparty
• fraud
• ide...
R e g u l a t i o n à Inevitable, yet valid
today…but
not necessarily tomorrow
C o m p l i a n c e à Onerous, yet valuable...
t o d a y v s t o m o r r o w
l a w e n f o r c e m e n t v s c i v i l l i b e r t i e s
p r i v a t e v s p u b l i c
c ...
r eg/ t ec h
mismat c h
PRODUCT-FOCUSED
ACTIVITY-BASED
INDUSTRY-SPECIFIC
JURISDICTION-DEPENDENT
INTERMEDIARY-ENFORCED
© 2017 Juan Llanos
permissionless-/limitless-ness
borderless-/jurisdictionless-ness
(pseudo) anonymity
peer-to-peer
(in)fl...
© 2017 Juan Llanos
© 2017 Juan Llanos
Quorum is an enterprise-
focused version of
Ethereum ideal for any
application requiring high
speed and...
permissioning +
privacy +
performance +
configurable Consensus +
settlement finality +
© 2017 Juan Llanos
today…but
not necessarily tomorrow
© 2017 Juan Llanos
N O C E N T R A L A U T H O R I T Y
O P E N + P R O G R A M M A B L E
D I S T R I B U T E D C O N S E N S U S
N O D O U B ...
© 2017 Juan Llanos
anonymity =
anathema
• Anonymous identification
• No value limits
• Anonymous funding
• No transaction records
• Wide geographical use
• No usa...
F AT F R e p o r t o n N e w P a y m e n t M e t h o d s ( 2 0 1 3 )
F AT F R e p o r t o n V i r t u a l C u r r e n c i e s ( 2 0 1 4 )
© 2017 Juan Llanos
A M L / C F T
TODAY
- national security and crime deterrence are top public policy priorities
- unintended consequence → s...
I D E N T I T Y
TODAY
- Countries have the monopoly over a person’s identity (mostly, for
fiscal and law enforcement reaso...
WHAT IF…?
WHY NOT…?
© 2017 Juan Llanos
Source: ID2020
Source: ID2020
© 2017 ConsenSys
KYC Challenges
K Y C i s s l o w, r e p e t i t i v e , a n d e x p e n s i v e
A M L i s p r e d o m i n a n t l y r e a ...
`
© 2017 ConsenSys
• Regulator y/LE expectations promote the
replication of identities (1-to-1 between
regulated entity & regulator)
• Regula...
RETHINK
REDEFINE
REINVENT
© 2017 Juan Llanos
(SELF-)REGULATION BY
design feature
crypto-economics
© 2017 Juan Llanos
DISTRIBUTED LEDGER
SMART CONTRACTS
CRYPTO TOKENS
© 2017 Juan Llanos
L AW M A K I N G
R U L E M A K I N G
B U S I N E S S C R E AT I O N
VA L U E C R E AT I O N
M A R K E T C R E AT I O N
B L...
PRUDENTIAL REGULATION
PRE-BLOCKCHAIN
PRUDENTIAL REGULATION
POST-BLOCKCHAIN
a) Paper-based rulemaking
b) Ex-post-facto moni...
FINANCIAL CRIMEFIGHTING
PRE-BLOCKCHAIN
FINANCIAL CRIMEFIGHTING
POST-BLOCKCHAIN
a) Intra-company analysis only (silos)
b) D...
V I N A Y G U P T A
Te c h n i c a l c a p i t a l i s m ( ” Te c h C a p ” ) à v a s t
d e c i s i o n s m a d e b y s o ...
N I C K S Z A B O
S o c i a l s c a l a b i l i t y : h u m a n b r a i n s à f l a t o v e r
h i s t o r y. N o t c o m p...
SPIRIT OVER LETTER
o u tco me s a nd p o l icy g o a l s firs t
SUBSTANCE OVER FORM
stre ng the n p ro d u ct a nd o rg a ...
© 2017 Juan Llanos
@JuanLlanos
Johannesburg - South Africa Financial Blockchain Consortium - August 2017
Johannesburg - South Africa Financial Blockchain Consortium - August 2017
Johannesburg - South Africa Financial Blockchain Consortium - August 2017
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Johannesburg - South Africa Financial Blockchain Consortium - August 2017

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The impact of blindly following a regulatory framework created decades ago to deal with problems observed years before then. The amorphous term "regulation" disaggregated into a simple taxonomy to facilitate analysis and communication. The enormous gap between today's regulation and the challenges posed by open blockchain technology. The challenges and opportunities of self-sovereign identity. Financial KYC's spaghetti problem and how to solve it. The opportunity to leverage the design features and crypto economics attributes of open blockchains for self-regulation. The leading thought leaders in regulation for the blockchain age.

Published in: Technology
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  • DOWNLOAD FULL. BOOKS INTO AVAILABLE FORMAT, ......................................................................................................................... ......................................................................................................................... 1.DOWNLOAD FULL. PDF EBOOK here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL. EPUB Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL. doc Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL. PDF EBOOK here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL. EPUB Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... 1.DOWNLOAD FULL. doc Ebook here { https://tinyurl.com/y8nn3gmc } ......................................................................................................................... ......................................................................................................................... ......................................................................................................................... .............. Browse by Genre Available eBooks ......................................................................................................................... Art, Biography, Business, Chick Lit, Children's, Christian, Classics, Comics, Contemporary, Cookbooks, Crime, Ebooks, Fantasy, Fiction, Graphic Novels, Historical Fiction, History, Horror, Humor And Comedy, Manga, Memoir, Music, Mystery, Non Fiction, Paranormal, Philosophy, Poetry, Psychology, Religion, Romance, Science, Science Fiction, Self Help, Suspense, Spirituality, Sports, Thriller, Travel, Young Adult,
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  • gracias Juan por una presentacion tan interesante
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Johannesburg - South Africa Financial Blockchain Consortium - August 2017

  1. 1. BLOCKCHAIN REVOLUTION IN REGULATION S A F B C , J o h a n n e s b u r g , A u g u s t 2 3 , 2 0 1 7 @JuanLlanos
  2. 2. “ UN EXPIRED G OV ERN MEN T - ISSUED PHOTO ID ”
  3. 3. REGULATION market failure prevention? catalyst for progress? instrument of power? © 2017 Juan Llanos
  4. 4. PRUDENTIAL LAW ENFORCEMENT POLICY • National Security • Crime Fighting • Consumer/Investor Protection • Safety & Soundness • Systemic Risk • Job growth & wealth creation • Development & sustainability • Taxation • Trade • Monetary POLICYMAKER ( S T I M U L A T I V E ) ( P R E V E N T A T I V E ) ( P U N I T I V E ) REGULATOR LAW ENFORCER policy supervision enforcement © 2017 Juan Llanos
  5. 5. RISK AREAS • operational • credit • money laundering • terrorist financing • information loss • counterparty • fraud • identity theft STAKEHOLDERS • federal agencies • state agencies • investors • consumers • employees • society GOALS • safety • soundness • security • privacy • crime prevention • health • integrity R e g u l a t i o n à Inevitable, yet valid Risks & Stakeholders C o m p l i a n c e à Onerous, yet valuable © 2017 Juan Llanos
  6. 6. R e g u l a t i o n à Inevitable, yet valid today…but not necessarily tomorrow C o m p l i a n c e à Onerous, yet valuable © 2017 Juan Llanos
  7. 7. t o d a y v s t o m o r r o w l a w e n f o r c e m e n t v s c i v i l l i b e r t i e s p r i v a t e v s p u b l i c c e n t r a l i z e d v s d e c e n t r a l i z e d a u t h o r i t y - d e p e n d e n t v s s e l f - s o v e r e i g n c o n s e r v a t i v e v s p r o g r e s s i v e l e t t e r v s s p i r i t n e a r v s f a r CONTRASTS © 2017 Juan Llanos
  8. 8. r eg/ t ec h mismat c h
  9. 9. PRODUCT-FOCUSED ACTIVITY-BASED INDUSTRY-SPECIFIC JURISDICTION-DEPENDENT INTERMEDIARY-ENFORCED
  10. 10. © 2017 Juan Llanos permissionless-/limitless-ness borderless-/jurisdictionless-ness (pseudo) anonymity peer-to-peer (in)flexibility radical transparency/translucence probabilistic finality DECENTRALIZED PARADIGM
  11. 11. © 2017 Juan Llanos
  12. 12. © 2017 Juan Llanos Quorum is an enterprise- focused version of Ethereum ideal for any application requiring high speed and high throughput processing of private transactions within a permissioned group of known participants.
  13. 13. permissioning + privacy + performance + configurable Consensus + settlement finality + © 2017 Juan Llanos
  14. 14. today…but not necessarily tomorrow © 2017 Juan Llanos
  15. 15. N O C E N T R A L A U T H O R I T Y O P E N + P R O G R A M M A B L E D I S T R I B U T E D C O N S E N S U S N O D O U B L E - S P E N D T R A N S F E R W I T H O U T I D E N T I T Y B L O C K C H A I N R E V O L U T I O N © 2017 Juan Llanos T R A N S PA R E N T L E D G E R
  16. 16. © 2017 Juan Llanos anonymity = anathema
  17. 17. • Anonymous identification • No value limits • Anonymous funding • No transaction records • Wide geographical use • No usage limits Cash features F AT F R e p o r t o n N e w P a y m e n t M e t h o d s ( 2 0 0 6 ) © 2017 Juan Llanos
  18. 18. F AT F R e p o r t o n N e w P a y m e n t M e t h o d s ( 2 0 1 3 )
  19. 19. F AT F R e p o r t o n V i r t u a l C u r r e n c i e s ( 2 0 1 4 )
  20. 20. © 2017 Juan Llanos
  21. 21. A M L / C F T TODAY - national security and crime deterrence are top public policy priorities - unintended consequence → strict identification standards facilitate fiscal surveillance but create financial exclusion of underprivileged - stick over carrot (heavy hand) TOMORROW - carrot over stick (lighter hand) - measure proportion and results - layered, zero-knowledge-based, identity systems could meet both law enforcement and civil liberties goals © 2017 Juan Llanos
  22. 22. I D E N T I T Y TODAY - Countries have the monopoly over a person’s identity (mostly, for fiscal and law enforcement reasons) - Not all countries have reliable identification systems - Government-issued IDs are not necessarily effective in deterring crime/unmistakably identifying humans TOMORROW - Alternative identity systems that transcend borders and facilitate identification of previously disenfranchised persons - Identity systems that balance both transparency and privacy and are controlled by the user (self-sovereign) © 2017 Juan Llanos
  23. 23. WHAT IF…? WHY NOT…? © 2017 Juan Llanos
  24. 24. Source: ID2020
  25. 25. Source: ID2020
  26. 26. © 2017 ConsenSys
  27. 27. KYC Challenges K Y C i s s l o w, r e p e t i t i v e , a n d e x p e n s i v e A M L i s p r e d o m i n a n t l y r e a c t i v e , o n l y i d e n t i f y i n g d a m a g e a f t e r t h e f a c t Client challenges ● Repeat onboarding ● Processing delay ● Lack of portability and control ● Varying verification levels Service Provider challenges ● Customer acquisition costs ● Compliance / due diligence risks ● Data cleansing and integrity ● Watch lists and monitoring Security & Privacy challenges ● Data privacy requirements ● Cyber-attacks and identity theft ● Personnel permissions ● Customer consent Slow ReactiveExpensiveRepetitive Error-prone © 2017 ConsenSys
  28. 28. ` © 2017 ConsenSys
  29. 29. • Regulator y/LE expectations promote the replication of identities (1-to-1 between regulated entity & regulator) • Regulators should allow for shared platforms (‘clearing houses’) (logically centralized but functionally decentralized solutions) © 2017 Juan Llanos
  30. 30. RETHINK REDEFINE REINVENT © 2017 Juan Llanos
  31. 31. (SELF-)REGULATION BY design feature crypto-economics © 2017 Juan Llanos
  32. 32. DISTRIBUTED LEDGER SMART CONTRACTS CRYPTO TOKENS © 2017 Juan Llanos
  33. 33. L AW M A K I N G R U L E M A K I N G B U S I N E S S C R E AT I O N VA L U E C R E AT I O N M A R K E T C R E AT I O N B L O C K C H A I N D E M O C R A T I Z E S © 2017 Juan Llanos
  34. 34. PRUDENTIAL REGULATION PRE-BLOCKCHAIN PRUDENTIAL REGULATION POST-BLOCKCHAIN a) Paper-based rulemaking b) Ex-post-facto monitoring and auditing c) Analog enforcement d) No feedback on impact or proportion e) Over-regulation f) Us vs Them a) Digital rulemaking b) Real-time monitoring and auditing c) Algorithmic enforcement d) Feedback on impact or proportion e) Optimized regulation f) Private-public collaboration
  35. 35. FINANCIAL CRIMEFIGHTING PRE-BLOCKCHAIN FINANCIAL CRIMEFIGHTING POST-BLOCKCHAIN a) Intra-company analysis only (silos) b) De jure (analog) Information sharing c) thick (upfront) KYC d) anonymity = anathema e) deputized financial institutions (lopsided allocation of liability) f) subjectivity a) inter-company analysis (network) b) (digital) information sharing by default c) thin KYC (just the proofs) d) pseudonymity/privacy = standard e) distributed allocation of liability f) objectivity (minimized subjectivity)
  36. 36. V I N A Y G U P T A Te c h n i c a l c a p i t a l i s m ( ” Te c h C a p ” ) à v a s t d e c i s i o n s m a d e b y s o f t w a r e . I n 1 5 y e a r s , s o f t w a r e c o u l d h a v e c o d i f i e d t h e e n t i r e U C C a n d h u m a n s ( l a w y e r s ) o n l y m a n a g e t h e e x c e p t i o n s . P r e c o g n i t i v e c o m p l i a n c e à c h e c k s t h a t e v e r y a c t i o n i s l e g a l b e f o r e e x e c u t i n g i t ; p r e d i c t s o u t c o m e s a n d p r e v e n t s m a j o r i t y o f t r a n s a c t i o n s f r o m e n d i n g i n c o u r t . ” “automate away the cost of running civilization” mechanize rules & compliance remove the need to remember the law provide freelance governance-as-a-ser vice produce smar t statutes / digital law create software definitions of law © 2017 Juan Llanos
  37. 37. N I C K S Z A B O S o c i a l s c a l a b i l i t y : h u m a n b r a i n s à f l a t o v e r h i s t o r y. N o t c o m p u t e r s : t h e y k e e p g r o w i n g . We ’ r e b e i n g a s u r p l u s o f r e s o u r c e s , b u t w e ’ r e s t i l l d o i n g t h i n g s w i t h h u m a n b r a i n s . C a n w e t a k e a d v a n t a g e o f t h i s g r e a t s u r p l u s ? ! A r e t h e r e w a y s t o m a k e t h e m a c h i n e l e s s e f f i c i e n t , b u t a l l o w i t t o p r o v i d e a c a p a b i l i t y t h a t s o l v e s a b i g h u m a n p r o b l e m ( e f f e c t i v e l y u p g r a d i n g t h e h u m a n b r a i n ) ? à Tr a d i n g c o m p u t a t i o n a l s c a l a b i l i t y f o r s o c i a l s c a l a b i l i t y. “lower our vulnerability to the whims of strangers” " w e t c o d e , " i n t e r p r e t e d b y t h e b r a i n v s . " d r y c o d e , " i n t e r p r e t e d b y c o m p u t e r s ” ’ S m a r t c o n t r a c t s ’ a r e a b o u t v e r i f y i n g a p e r f o r m a n c e , a n d t h e n a u t o m a t i n g i t . T h e n t h e r e ’s t h e c o n d i t i o n s i n t h e m i d d l e . ” © 2017 Juan Llanos
  38. 38. SPIRIT OVER LETTER o u tco me s a nd p o l icy g o a l s firs t SUBSTANCE OVER FORM stre ng the n p ro d u ct a nd o rg a niz a tio n fro m within ENGINEERS OVER LAWYERS to cre a te a l g o rithmic o ve rs ig ht s y ste ms
  39. 39. © 2017 Juan Llanos @JuanLlanos

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