The Blockchain Association, a U.S. advocacy group uniting the industry’s leading startups like Coinbase, Circle, 0x, Ripple and others, has filed an amicus curiae brief in the ongoing SEC vs. Telegram case.
It’s the second industry’s motion in as many days to support Telegram’s fight against the SEC allegation it broke the U.S. securities law by selling future tokens (called grams) for its TON blockchain to accredited investors in the U.S.
On Tuesday, the Chamber of Digital Commerce filed its own amicus brief, supporting Telegram’s argument that “digital assets may be the subject of an investment contract without being a security.” The Chamber, however, did not explicitly ask the court to take either side in this litigation.
The Blockchain Association’s brief strikes a more straightforward note, arguing that Telegram made sufficient efforts to meet the SEC criteria, adding that the regulator’s court action could harm both Telegram’s investors and the market in general.
“The Court should not block a long-planned, highly anticipated product launch by interfering with a contract between sophisticated private parties. Doing so would needlessly harm the investors that securities laws were designed to protect,” the association says in its brief.
Repeating long-held concerns that blockchain and cryptocurrency companies have not received clear and unambiguous guidance from the SEC for years, the brief argues the agency’s litigation against Telegram makes the situation even more gray:
“The SEC’s lawsuit also raises novel questions regarding whether companies are forbidden from raising funds from sophisticated U.S. investors, under well-established regulatory provisions, to build blockchain networks.”
The advocacy group cites other cases of blockchain startups successfully interacting with the regulator, namely TurnKey Jet and Pocketful of Quarters, which both secured no-action letters from the SEC. Kik is also mentioned, a firm still hoping for a court trial on its famous case.
“Engaging with the SEC is extremely costly” and doesn’t necessarily save companies from future actions, the brief argues.
“Telegram discussed its plans with SEC staff for a year and a half, provided copious information, and responded to limited feedback by adjusting the design of its transaction. Yet at the end, the SEC has sued, and the SEC’s briefs thus far say nothing about the substance of those discussions,” the association says.
Forcing Telegram to cancel the launch of TON and the token issuance will ultimately harm both innovators and investors who invested in grams, the brief continues: “It would frustrate the investors’ aims in entering into the Purchase Agreement, and would frustrate innovation by delaying the network launch.”
The association concludes by asking the court to “reject the SEC’s arguments that the not-yet-in-existence Grams were securities at the time of the Purchase Agreements.”
The first court hearing for the case is scheduled for February 18.
Russian Smelting Giant Nornickel Launches Metal Tokenization Platform for Testing
Nornickel, the Russian mining and smelting giant, has taken another step toward the issuance of tokens backed by metals on Atomyze, a Hyperledger-based blockchain platform.
The platform is now launched for testing alongside a handful of Nornickel’s partners, including commodity trading company Trafigura, metal refinery firm Umicore and supply chain consultancy Traxys, according to an announcement Tuesday. (All three have been involved in early-stage trials with Nornickel since December, Bloomberg reported at the time.)
Later, a wider circle of institutional players will have access to the distributed ledger technology (DLT) platform, according to Atomyze. It’s expected to serve the companies from Switzerland and the U.S., as Nornickel CEO Vladimir Potanin told Bloomberg Tuesday morning.
Users in Russia might also be able to access Atomyze by the year’s end, but only if long-in-the-works regulations clarifying the status of digital assets have been passed by that time.
The first batch of tokens will be backed by palladium, cobalt and copper mined by Nornickel. Over the first year, Nornickel expects to tokenize up to 10 percent of its overall sales volume – a number that may rise to 20 percent in the future, the firm said.
Umicore and Traxys didn’t respond to CoinDesk’s requests for comments by press time. However, a Trafigura spokesperson said that the company is “in advanced discussions to participate” in Atomyze and “is looking forward to taking an active part in the testing phase of the platform.”
Atomyze was created by Tokentrust, a Swiss entity led by CEO Marco Grossi, a former director of Deloitte Switzerland. Tokentrust’s board includes Alexander Stoyanov, the managing director of Nornickel’s subsidiary Global Palladium Fund.
IBM was also involved, acting as the project’s lead technology partner. Big Blue “participated in the development of the platform and in the integration of the advanced BFT (Byzantine Fault Tolerant) consensus mechanism, which allows implementing a system with an open governance model when using the Hyperledger Fabric framework,” a company representative said.
Atomyze is further applying for a securities license in Switzerland that would allow it to operate an organized trading facility (OTF), Grossi said through a spokesperson.
Atomyze is “in discussion with large institutional and professional organizations from various industries who are envisaged to participate in our DLT network by running independent nodes to ensure the right level of decentralization,” the spokesperson said.
The network will run in the IBM’s public cloud and comply with the European privacy protection law known as the General Data Protection Regulation (GDPR) and a security regulation called Cloud Computing Compliance Controls Catalog (C5), Atomyze said.
Nornickel has been working on tokenizing its metals for a while, aiming to turn them into more liquid assets and make the sales process easier and more flexible, Nornickel CEO Vladimir Potanin said in October.
The company joined the Hyperledger enterprise DLT consortium last summer. Nornickel has been testing the solution inside a regulatory sandbox set up by Russia’s central bank. However, a lack of clarifying regulations for digital assets means it can’t go live.
Justin Sun Bought Steemit. Steem Moved to Limit His Power
The people who run the Steem blockchain executed a reversible soft fork Sunday, stopping one of the largest piles of tokens from voting. The move comes days after Justin Sun’s Tron Foundation acquired Steemit, the blockchain’s most prominent app.
The protective measure is a striking one in the cryptocurrency space and illustrates some of the thought-provoking realities of delegated governance.
The blog post describing the fork describes the involvement of a well-resourced entity as potentially very exciting. But its authors were quick to qualify:
“In these early stages the most important task for witnesses [Steem’s version of bitcoin miners or EOS block producers] is to ensure the security of the Steem blockchain. To this end, we have updated to a temporary protective protocol to maintain the status quo currently established in regards to Steemit Inc’s stake and its intended usage.”
Steem is a delegated proof-of-stake blockchain (DPoS), much like EOS, which means a smaller number of decisionmakers are needed to coordinate in order to counter a major new stakeholder. The community deemed action necessary because Steemit owns a giant pile of tokens that could be used to take over the blockchain, though the pool has never previously voted. It is believed that Sun, a savvy marketer and controversial figure in the industry, now owns that giant pile.
From here out, things start to get pretty confusing.
When the soft fork was executed, the network’s validators, called witnesses, blocked STEEM held by a limited set of accounts from voting on who governs the network and participating in other ways that might allow it to seize control. Within the community, this pool of tokens is known as the “Steemit Inc ninja-mined stake.”
As far as we can tell, the fund amounts to something like a founders reward or pre-mine on most other similar blockchains. Sources tell CoinDesk the ninja stake could potentially represent something like 20 percent of the current supply, which would apparently make it a decisive voting bloc.
As the post about the soft fork notes, “There have been a lot of uncertainties around [Steemit Inc] and its continued use of the assets it controls.”
Steemit’s holdings have always been a source of tension between Steem and Steemit, but as long as co-founder Ned Scott ran Steemit, the community felt relatively comfortable that he would not intervene in governance. The ninja stake was meant to be used to grow the network. With a new owner, the group is less sure.
The move prompted a response from Sun, who wrote Sunday night, “We have so much to work to do to make Steemit.com the power that it really can be.” He went on to list plans for incorporating Tron’s various cryptocurrencies, getting STEEM tokens onto more exchanges and getting influencers onto the blogging site.
Sun is organizing a summit called STEEMit 2.0 Town Hall for March 6, inviting the top 50 witnesses to take part, according to the post. A key question for that meeting will no doubt be what Tron intends to offer in terms of a token swap between STEEM and TRX, a question that has only been floated abstractly so far.
Ned Scott and the Tron Foundation did not reply to a request for comment from CoinDesk.
The announcement of Steemit’s acquisition did not specifically address the company’s holdings of cryptocurrency, so it is as yet unknown if all of it went to Tron in the deal.
How Steem works
Steemit, a blogging site that works somewhat like a cross between Reddit and Medium, is the most well-known app on the Steem blockchain.
Besides Steemit, there are many more decentralized apps that run on the blockchain. Steemit Inc only owns Steemit, but it is the most influential.
Steemit relies on Steem to track its users and also assess their clout on its network. Content that does well on Steemit shares in a small portion of the blockchain’s new emission of tokens.
The current supply of STEEM, as of this writing, is 373,442,235, according to Steemd.com, a block explorer.
Steem has three different tokens: Steem, Steem Power and Steem Dollars. Steem is the core token. Steem Power is created when users agree to lock up Steem, and it functions sort of like an ownership stake on the network. Steem Dollars is a stablecoin.
What makes Steem challenging is that you never really know how much Steem Power there is in the world. It shrinks very slowly but it can increase quickly.
According to a longtime Steem community member, James Reidy, there are 210 million Steem Power in existence that could potential govern the chain. There could be as much as 340 million, if all STEEM were staked to vote.
Reidy estimated that Steemit controls something like 68 million in Steem Power, “but exact numbers are not known because they could have Steem and Steem Power in any number of unknown accounts,” he told CoinDesk.
There are several times more witness candidates than there are witness slots available.
Reidy, who serves as a witness candidate but does not hold one of the top 20 spots (there are several times more witness candidates than there are witness slots available), told CoinDesk:
“What the witnesses did I believe is best for the chain during this uncertain time. There were promises from SteemIt Inc that the stake in question would be used for certain purposes to grow the ecosystem but more importantly that it would be non-voting stake. This was never enshrined in code. It’s highly unlikely those promises transferred in the sale (why would they) so the witnesses moved to protect the chain until details can be agreed upon.”
The Oldest Private Bank In UAE Taps Blockchain To Enhance Client Security
The oldest privately owned bank in UAE, the Mashreq Bank, will utilize blockchain, according to the bank’s Executive VP. By using the technology’s security and easier integration, they will create a platform for smart banking.
Mashreq Bank To Use Blockchain
Founded in 1967, Mashreq Bank has been a pioneer in many different aspects in the banking sector. Aside from being the first UAE bank to install ATMs and the first to issue debit and credit cards, the large bank will lead in blockchain adoption in the region, as well.
A local report from earlier today had the bank’s Executive Vice President and Head of Retail Banking Group, Subroto Som, speaking on the matter. He explained their stance and vision with the ongoing digital revolution in the sector. Som informed that the bank is already implementing artificial intelligence (AI) and robotics.
Additionally, he said that “in 2019, we began investing heavily in emerging technologies, such as blockchain.” As a result, they will utilize the technology’s features to launch a platform for smart banking later this year:“Our blockchain platform exemplifies technology that is secure, easy to integrate, and automates the onboarding process for our corporate clients.
A first for the region, the platform ensures the protection of customer data while providing the convenience and flexibility of smart banking. With a launch planned for the first quarter of 2020, we aim to roll out the initiative to our business clients before exploring an expansion into additional segments.”
According to Som, the blockchain platform will ensure the bank’s position as a digital banking leader in the region.You Might Also Like:
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A Blockchain-Based Electronic Mortgage System
Last year, Mashreq Bank collaborated with the Dubai Land Department in another blockchain-based product. It’s called e-mortgage, and its purpose is to speed up and strengthen the home loan registration process.
DLD’s director-general Sultan Butti bin Mejren spoke on the matter at the time. He believes that blockchain can automate and accelerate the whole process, thus decreasing the paper transactions.
“The development and launch of the new e-mortgage system comes as part of our ongoing efforts to enhance automation applications and systems in our transactions to reduce paper transactions and the number of visits.”