The Crypto Valley Association (CVA) is aware of the legal matter involving Envion, a Swiss-incorporated, Berlinbased blockchain company. Envion is not a member of the Crypto Valley Association. However, in the interests of our ecosystem, we are conducting an internal investigation. Should we find any members related to Envion that have breached our Code of Conduct, we will take disciplinary measures as laid out in our statutes. This can include expulsion from the CVA.
Our member Bloomio is performing a survey on crowdfunding and would like to ask other members of the Crypto Valley Association to participate. Bloomio will make a 1 CHF donation to the Ocean Cleanup charity for each of the survey responses it receives, so please take a moment to participate here.
Here is some more information about Bloomio and the survey:
Bloomio, as a winner of 2017 IMD competition, is cooperating with an IMD MBS class and one of the outcomes of this joint effort was an analysis of the current venture capital landscape. To enrich this study with quantitative data we developed, with the IMD students, the survey we are now publishing.
The objective is to gather insights about the current VC landscape and understand the investor’s pain points and areas for improvement of the existing options for investing in startups.
The results of the survey will be published as part of the overall study conducted in Q3-Q4’18 on the Bloomio portal. The proof of the donation will be announced on Bloomio socials and to press and it will be sent to the respondents who will leave their email contacts.
The survey will remain accessible until it reaches 1K respondents.
By Vasiliy Suvorov, Vice President of Technology Strategy at Luxoft, Vice President, Crypto Valley Association
Today’s identity management poses a problem. Highly centralized and siloed, it forces us to create new accounts, provide personal details, and generate login credentials each time we decide to consume services from a different provider. At the same time, we blindly trust each service provider to manage the provided data carefully, hoping hackers will not steal it. This forces companies to become identity and security experts in order to avoid any security breaches, taking on an unnecessary financial burden and deviating funds that could be used elsewhere.
We’ve just grown too accustomed to it – and that needs to change.
One way to tackle this issue would be to decentralize identity management, which gives identity ownership and control to individuals. A connected identity system would enable any person, organization, or thing (IoT) to have an identity relationship with another – without authorization from a third party.
The above presents the idea ofself-sovereign identity (SSI), where anyone can use these identities and the resulting relationships without an intervening authority.
Introducing the Sovrin Foundation, Crypto Valley Association and Luxoft
The Sovrin Foundationis a non-profit organization that launched and oversees a specialized global distributed ledger: a blockchain that enables SSI. It provides the basis for easier and more secure identity management and new, more democratic decentralized business models.
Similarly, the Crypto Valley Association (CVA)is an independent, government-supported group aimed at building a thriving blockchain ecosystem in Switzerland – a country known for its strong, direct democracy, personal privacy and innovation.
When we first learned about Sovrin’s technology and mission, it was clear Sovrin’s goals, Swiss values and the CVA’s objectives aligned fundamentally. Through our Technology Working Group, we reached out and started to explore ways to enable Sovrin’s blockchain in Switzerland and explore various use cases that would benefit CVA’s members and the overall Swiss ecosystem. As a result, we announced an official partnership in 2017.
Initially, the partnership focused on operating the first “validator node” – nodes that achieve consensus – of the Sovrin ledger in Switzerland. Two of the founding members of CVA, Lucerne University of Applied Sciences and Arts (HSLU),and Luxoft worked together to make it possible. The dedicated server running Sovrin’s node is hosted in an award-winning, minimum energy design data center facility of HSLU in Luzern, and is operated jointly by the experts of HSLU’s Department of Informatics and Luxoft. The teams are now exploring self-sovereign identity use cases and are working on onboarding new applications.
Blockchain for e-government…and beyond
Ever since the announcement of the partnership, the Swiss blockchain ecosystem has developed more rapidly than ever before. Governments across the federal, cantonal and city levels have expressed support and announced plans to make blockchain technology an integral part of Switzerland’s future. Projects on implementing electronic Identity, company registration and even eVoting on blockchain technology are well under way.
All these applications require a robust identity management foundation that is secure, scalable and futureproof – which blockchain can provide.
More and more frequent breaches of personal data are reported each day, even though the data is stored in supposedly “safe” central systems. And revelations on non-transparent and unexpected (and often not consented to) use of our online data accumulated by multiple centralized web businesses makes the need for SSI even more urgent. As we head into the future, I hope more will understand the identity management issue so teams can take on many more projects – in order to give the power of identity ownership back to the people.
Be sure to join us at the Crypto Valley Conference June 20-22 and learn how you can use decentralized identity management and other applications of blockchain and distributed ledger technologies to their full potential.
By Erhan Cakmak, CEO and co-founder, Pavo
By 2050, the world’s population will exceed 9 billion people, some 20 percent higher than today. Most of this population increase will occur in rapidly-urbanizing developing countries. About 70 percent of the world’s population will be urban by 2050, compared to roughly half today. To feed this larger, more urban, and richer population, food production must increase by 70 percent. Annual cereal production will need to rise 50% to support population growth, despite the fact that yield growth has been steadily declining. Blockchain-enabled applications will play an important role in addressing this challenge.
This has important implications for Turkey’s agriculture industry; the majority of Turkish people still work, one way or another, in agriculture. Like the United States and Canada, Turkey, thanks to its fertile soil, favorable climate and plentiful rainfall, is food self-sufficient. Some 36 percent of the country is arable land, and Turkey is the world’s biggest producer of hazelnuts, figs, apricots and raisins and the fourth largest producer of fresh vegetables and grapes. The Turkish government has set a goal for 2023 of USD 40 billion in annual agriculture exports. The country has a significant role to play in addressing coming global food and caloric demand challenges, and technology can help.
Food supply chains are inefficient and suffer from quality control problems, especially in developing nations. One of the clearest real-world applications of blockchain technology is to add greater visibility and efficiency across supply chains. Although agriculture is a $5.5 trillion-dollar global business, employing over a billion people, it remains highly inefficient. For many smallholder farmers in developing countries, affordable access to capital remains a huge challenge.
Blockchain solutions can solve these financing difficulties. As it stands, farmers often wait weeks or months for payment after delivery, forcing them to deal with large incumbents with greater bargaining power. This directly translates to lower income for farmers, as they do not receive their fair share despite being the most important part of the chain.
Further, as the world urbanizes and becomes more conscious of the carbon footprint of transporting goods over long distances, indoor farming is playing an increasing role. Blockchain solutions and smart contracts allow for careful management of water and energy. Automated data collection and analysis creates the ability to better manage crop inputs, like water and energy, and corresponding automation of indoor farming operations. For example, a farmer using indoor hydroponics and a closed loop system may be able to reduce water usage by up to 90 percent. Increasingly, global food demands will be met by crops grown indoors, in environments more efficient and more controlled than the outdoors. By moving plants indoors, traditional dependence on the weather can be eliminated. With sensor arrays, plants can “communicate” precisely what they need 24/7.
Blockchain solutions and the “Internet of Things” (IoT) will save time and money for farmers, and increase yields. Despite a common belief that farmers are slow to adapt, they have always been eager adopters of technologies that make sense and deliver genuine value. Data democratization of the food chain will increase efficiencies, reduce waste, and increasingly transfer remuneration to the stakeholders delivering the greatest value.
Blockchain solutions allow to build a new model of trust in agricultural supply chains. Under the old Information Technology paradigm, agricultural, environmental, and regulatory data is stored on centralized computer servers, and managed by administrators trusted to maintain data integrity, security and access authorization.
This centralized data administration is a source of risk – crop safety and quality data can easily be corrupted. Data can be lost due to failed or absent backups. Centralized administrators may act on their own agendas, with their own interests in mind, impacting decisions related to data access and security.
Applying blockchain technology to crop data ensures that information about our food and its sources is incorruptible. Blockchain and IoT technology simplifies data management throughout the complex system of farmers, brokers, distributors, processors, retailers, regulators, and consumers. Information on the food we eat becomes simplified and transparent. Consumers can enjoy greater trust in the food they put on their table and regulatory agencies gain greater confidence in the data reported to them.
Blockchain redefines trust across the agriculture spectrum with arm’s length cryptographic security, eliminating any potential pursuits of self-interest on the part of data administrators or other actors.
Blockchain enables real-time payments, concurrent with delivery, and better visibility to buyers, leveling the playing field for farmers. Farmers get paid sooner, and increased competition for their crops raises the prices they receive while simultaneously helping consumers to pay lower prices for food through a much more transparent, secure and environmentally sustainable supply chain.
Today the Mobility Open Blockchain Initiative (MOBI) announced “its formation to explore blockchain for use in a new digital mobility ecosystem that could make transportation safer, more affordable, and more widely accessible. MOBI is actively working with companies accounting for over 70% of global vehicle production in terms of market share.”
The consortium’s goal is to “foster an ecosystem where businesses and consumers have security and sovereignty over their driving data, manage ride-share and car-share transactions, and store vehicle identity and usage information.”
The CVA is a founding member of the consortium, joining the likes of BMW, Bosch, Ford, General Motors, Groupe Renault, ZF, Aioi Nissay Dowa Insurance Services USA and many others in this important industry effort.
More information in the press release.
You can also check out the MOBI website.
The Blockchain Summit – Crypto Valley is a unique event held in the heart of Switzerland’s Crypto Valley – in Zug. This is the place where Ethereum was born. And this is the place where blockchain and crypto are king.
- Discounted tickets: Click here
- Discount code: CVAMembers
We have just received word that there are still places in the Future Hack sustainable development hackathon running from January 21 to 25 in Davos/Klosters. The first ever hackathon to take place around Davos during the World Economic Forum, it offers up to $500,000 in prize money as well as a chance to contribute to solving pressing problems around the UN’s Sustainable Development Goals (SDGs).
Details and registration available here: https://futurehack.io.
Crypto Valley Association member introduces concept of Blockchain Crypto Property (BCP) to provide classification and risk-assessment of crypto assets
Zug, Switzerland, October 2, 2017 — Crypto Valley Association (CVA), the Swiss-based not-for-profit association supporting the development of blockchain and cryptographic related technologies and businesses, today distributed a paper on behalf of MME and Blockhaus, proposing a new method for token classification. Both MME, the leading Swiss consultancy firm for law, tax and compliance in Blockchain applications and Blockhaus, a developer of decentralized investment banking platform applications for tokenized ecosystems, are active members of the CVA. The framework was developed specifically for utilization for regulatory and critical risk-assessment purposes.
The paper, entitled “Conceptual Framework for Legal & Risk Assessment of Blockchain Crypto Property,” introduces the concept of Blockchain Crypto Property or BCP. BCP is defined as digital information that contains all elements of a property right that is registered on a blockchain or in an alternative digital ledger, which can be transferred via protocol, that may carry out additional functions governed by a Smart Control System, following coded or manual input.
“Information on a blockchain is unlike any other previous incarnation of digital information. Blockchain Crypto Property shares many of the characteristics attributed to physical and other tangible properties as we understand them in the law, and yet BCPs are expanded with purely digital characteristics as well. These are groundbreaking concepts that require further examination and novel classification. Our paper examines the legal and risk characteristics of this completely new kind of property. A common understanding of the underlying nature of different kinds of cryptographic tokens would allow policymakers to construct thoughtful and enforceable legal and regulatory frameworks. Moreover, an agreed-upon framework could also provide investors and issuers with standard tools to evaluate, mitigate, and communicate risks in token design and launches,” said Dr. Luka Müller, Partner at MME.
The MME and Blockhaus paper contains a functional approach in defining the three main categories of BCPs: tokens without a counterparty, tokens that have a counterparty, and a completely new asset-class, tokenized co-ownership. The “without counterparty” classification is represented by native currency tokens, infrastructure tokens, and application tokens that do not grant holders any rights and have no underlying assets; tokens like Ethereum and Bitcoin fall into this class. The second classification, or “counterparty class,” refers to tokens which include any form of a relative right, such as the right to receive an asset or financial payment, either against the token generator or a third-party. The final classification, the “co-ownership class,” denotes tokens with smart contracts that are programmed or registered on the blockchain, allowing individuals to participate and co-own a technical platform or a form of intellectual property.
The main purpose of functional categorization is to grant a structured approach for legal, regulatory and tax assessment purposes. In addition, the BCP concept provides tools that will enable interested parties to make clear and well-founded analyses of tokens from legal and risk perspectives, in turn making it easier to identify frauds and uncover potential flaws. Consequently, the ability to categorize assets and assess risks is of huge value not only to regulators but to investors and token issuers.
In addition to the three BCP classes, MME has devised risk cases in order for regulators and potential investors to assess the risks associated with tokenized assets. These fall under four categories: functionality and protocol-related risks, such as network attacks and faults; storage and access of private key-related risks, like hacked wallets and exchanges; market-related and counterparty risks, such as insider trading and liquidity risks; and regulation and money laundering-related risks.
“The issue of the legal and regulatory status of cryptocurrencies is currently the most pressing concern in our community. Crypto Valley Association has called on regulators to devise clear, comprehensive, and flexible regulation on tokenized assets that protects investors but also supports innovation. We believe that MME’s BCP concept is an important contribution to this debate. It can be of immense use to both regulators seeking to understand cryptocurrencies and investors looking to evaluate their risks,” said Oliver Bussmann, President at Crypto Valley Association.
With offices in Zurich and Zug, MME is a leading consultancy firm in law, tax, and compliance. MME advises and represents companies and private clients in commercial, corporate and private business matters. Prominent in the blockchain legal space, MME has assisted many crypto organizations set up in Switzerland.
“We are now entering a new age of the tokenized ecosystem. In order to understand the opportunities associated with tokenized assets, while also recognizing the risks, we require a clear conceptual framework to open the doors of the tokenized economy for mainstream adoption. The BCP concept we are proposing should serve as a method of structured discussion between all participants of the blockchain community,” said Dr. Müller.
Headquartered in the Swiss canton of Zug, Crypto Valley Association is the independent, government-supported association established to take full advantage of Switzerland’s strengths to build the world’s leading blockchain and cryptographic ecosystem, working with government to foster the development of pioneering digital technologies in Switzerland and internationally. To date, four of the five largest token sales recorded have been completed by companies based here in Switzerland, attracting a combined investment in bitcoin and ether of over $600 million USD.
“Conceptual Framework for Legal & Risk Assessment of Blockchain Crypto Property” can be accessed here. The paper was written by, Dr. Luka Müller, Stephan D. Meyer and supported by Christine Gschwend and Peter Henschel.
An in-depth interview with Luka Müller on the BCP concept is available on the Crypto Valley Association blog.
By Tom Lyons.
There is no doubt that the current discussion around token launches (or ICOs) is the most important in the blockchain community right now. The explosion of ICOs has brought a lot of excitement, but also a great deal of scrutiny, particularly on the regulatory side.
Luka Müller is one of the leading names in blockchain and token generating law in the world (his firm MME Legal is a founding member of the Crypto Valley Association and he serves the CVA as Chair of the Regulatory and Policy Working Group). He says one reason there is so much debate about ICOs at the moment is that we are still not clear about what, legally speaking, cryptotokens really are.
As part of the wider Blockhaus initiative, MME has conducted a comprehensive analysis of the legal aspects of cryptotokens. In it they introduce the concept of the Blockchain Crypto Property or BCP as a basis for a cryptotoken legal framework. The paper has just been released to the global blockchain community (for more, see box bottom of this page) in the hope that it will spur comment and debate in the community.
We sat down and talked to Luka to find out what it is all about.
Luka, you’ve just published what is likely to be seen as a major statement on the legal framework for cryptotokens. What’s the background?
At MME we’ve been working with blockchain projects since 2013. The first major project was the Ethereum Foundation project in 2014, so we’ve seen this technology grow from its early stages. That’s given us a lot of time to gain experience and to think about what we are dealing with here.
The heart of the issue is that digital information on a blockchain is not like any other kind of digital information. Because of its immutable nature, because of cryptography and private keys, information on a blockchain becomes like a thing. Bitcoin works precisely because it is like a physical coin – something you can take out of your pocket and give to someone else – just in digital form. Because of this, information on a blockchain has the characteristics of property as we understand it in the law: it is something that is (immutably) defined, to which you can have exclusive access, which you can transfer and have the transfer publically recorded, etc. We’ve never had anything like it before in the digital world prior to the release of the Bitcoin protocol.
The whole concept of the BCP is based on this realization. The point of our paper is to first differentiate between “normal” digital information and BCPs, and then to examine the legal and risk characteristics of this new kind of property.
Are you proposing regulation as well?
No. And this is very important.
In our paper we take a functional approach to define what we see as three main categories of BCP. The purpose of this functional categorisation is to propose a method and a framework to facilitate multi-jurisdictional legal, regulatory and tax assessments. You can think of it as a protocol for all the participants in the blockchain space – whether regulators, supervisory bodies, blockchain companies, service providers, investors or whoever – to have a common understanding of what these tokens represent.
Once we have this common understanding about the different properties of tokens, then the regulators can make their own decisions about how to write the rules. It’s very possible that different jurisdictions will have different approaches. That’s normal. The point is that these approaches and rules should come out of a single, legally grounded understanding of what each token really is.
And it’s not just regulators that can benefit. In the paper we show how you can use the concept of a BCP to do detailed risk assessments of any token as well. This can be of immense value to investors for instance as well as for regulatory bodies to adopt a risk-based approach in setting rules. We think it could even help token issuers to more clearly think about the kinds of tokens they are creating.
You talk about risk. What is your assessment of the risks in the cryptocurrency space? Will regulators shut down ICOs?
No one doubts that there is fraud in the ICO world – just like there is fraud everywhere else. And certainly when you have a new technology as important as blockchain, it is going to attract the bad actors as well as the good.
But to be really honest, in my experience there are far fewer bad actors than people think. Most of the projects we see – and we see literally hundreds – are being run by well-meaning honest people with a passion for their project. But they are often technologists or idealists. They themselves may not quite understand all the legal and other ramifications of what they are doing.
To me the larger risk in this space is not outright fraud but the less talked about possibility of honest mistakes being made by well-meaning people, or confusion among stakeholders – for example investors – about what they are really dealing with.
One of the things the BCP concept can help with is to provide the tools that allow people to make clear and well-founded analyses of tokens from a legal and risk perspective. That will make it much easier to spot the frauds, but also – if you want to put it that way – to uncover the legal and risk-related “bugs” in a token.
As far as regulation goes, both we at MME and the CVA, along with I think most serious members of the global blockchain community, welcome sensible regulation. In these early days, we also think it makes sense to introduce effective self-regulation into our industry. The CVA has started a project to draft an ICO Code of Conduct just for this reason.
Good regulation is in everyone’s interest. The trick as always is to find the balance between protection and innovation. I am confident that most regulators will do this over time.
Is this paper the last word on the subject?
Quite the contrary! It’s the first. We’ve called this the “Genesis Report” because for us it is a draft. That’s also why we’re releasing this paper not strictly as MME but as part of the Blockhaus initiative, and why we are very happy to be publishing it also through the CVA. That’s appropriate because this is really meant to be something for the community. I hope it spurs debate and that we’ll get a lot of good feedback.
Having the last word on this subject is really beside the point. We do however strongly believe that it is for the good of the community to act as quickly as possible to define a workable legal framework for tokens, based on their functional characteristics as property, and so to get the transparency and certainty around tokens the community needs. That’s what this is about.
The paper “Conceptual Framework for Legal & Risk Assessment of Blockchain Crypto Property (BCP)“ was written by Dr. Luka Müller and Stephan D. Meyer, supported by Christine Gschwend and Peter Henschel.
It has the following aims:
- It attempts to qualify the digital information on the blockchain in a legal context by answering the question “what is the legal qualification of a token?” The conclusion is that there is a need to introduce a new type of property: the blockchain crypto property or BCP.
- It employs a functional approach to define three main categories of BCPs (see below). These functional categorisations allow for a structured methodology for making legal, regulatory and tax assessments of different kinds of tokens. This is intended to support a common understanding of BCPs for all the participants in the blockchain space.
- It demonstrates how the functional approach can be used to carry out detailed risk assessments of each class of BCP. This includes a large number of detailed sample risk reports of different existing tokens.
The paper defines three classes of BCPs, with sub-classes:
- BCP Class 1: No counterparty
- These are native currency tokens (bitcoin), infrastructure tokens (ether), or application tokens (golem).They do not give the holder any rights vis-a-vis a legal person, and have no underlying asset.
- BCP Class 2: Counterparty
- These confer a relative right against a legal counterparty. Every contractual and/or participation right can fall under such a classification.
- BCP Class 3: Co-Ownership
- These are tokens which have functions and/or rights programmed and/or registered on the blockchain using smart contract systems. Such a token structure allows users to participate in co-owner like structures to co-own for example intellectual property rights.
BCP Risk Assessment
The paper also defines four risk classes, with sub-classes:
- Functionality & Protocol-Related risks (bugs in the underlying technology, improvements in cryptography rendering protocol vulnerable, network attacks, consensus attacks, etc.)
- Storage & Access of Private Key-Related Risks (bug-filledgy or hacked wallets, hacked exchanges, lost private keys)
- Regulation & Money Laundering-Related Risks (regulatory risk of any kind)
- Market-Related & Counterparty Risks (liquidity risk, insider trading, token loses value, etc.)
Comments from the community are welcome, please get in touch with Stefan.firstname.lastname@example.org