As we know, technology is reshaping the financial and corporate world.
Innovative companies and financial institutions are working with the core elements of Satoshi Nakamoto's "distributed ledger" blockchain technology, where maths provides an alternative value transfer mechanism to traditional settlement/payment schemes (removing the need for trusted third party settlers/conduits), to introduce new products and services, and to speed up and improve existing ones.
As we know, distributed ledger technology has a broad range of potential applications such as replacing traditional payments infrastructures and allowing the instantaneous transfer of digital assets and data, but also raises security and confidentiality concerns.
Our regulators and tax authorities are not yet clear as to how they will deal with this new reality.
Virtual currencies are currently considered to be outside the scope of E-Money Regulations and the provisions of PSD. There are also conflicting approaches between the worlds tax authorities as to how to treat virtual currencies.
In May 2016 the European Parliament recommended that the European Commission should set up a task-force to monitor virtual currencies to prevent their use to launder money or finance terrorism, but also warned against regulators taking a heavy handed regulatory approach- which could stifle innovation and commerce.
This concerned but open minded approach has been echoed by the Governor of the Central Bank of Ireland who recently stated- "The challenge for policy makers is to understand and attempt to appropriately regulate the evolving financial services landscape, while at the same time balancing often competing objectives of competition and of choice, financial stability and the effectiveness of macroeconomic policies".
I couldn't have put it better myself.
The European Central Bank has stated that although virtual currency schemes present potential risks, that those risks are relatively low and that there is therefore currently no need to amend or expand the EU legal framework of payment systems. It has also stated that it will continue to monitor this risk profile.
Its interesting to note that the US does not appear to be following the enlightened "wait and see" approach to blockchain technology evidenced in Ireland and across Europe, but instead is actively working to regulate digital currencies.
I'd like to see Ireland's regulators being given the funds and scope to establish innovation hubs and regulatory sandboxes on this Island to encourage innovation in this area.
Back to what is being done in Ireland- well done to the Irish Dairy Board on its innovation.
Looking forward to seeing large Irish corporates start to use "smart contracts" where, utilizing blockchain technology, payment instructions are encoded with requirements which, once met, enable autonomous self executing transactions.
The future is bright- the future is Green!
Ireland’s biggest dairy exporter has become one of the first companies in the world to close a global trade transaction using so called blockchain technology. UK bank Barclays and Israeli startup company Wave executed the transaction – a letter of credit transaction between Ornua (formerly the Irish Dairy Board) and Seychelles Trading Company. It’s the first deal to have trade documentation handled on the new Wave blockchain platform, with funds sent via Swift. Barclay’s said the landmark transaction could herald a new era of simpler, safer and faster trade finance. Blockchain, or open ledger technology, is a system for permanently storing information on networks of unrelated computers, without a central or organising authority. It emerged from the development of the Bitcoin cyber-currency, but is now seen as a potentially safe way of recording all kinds of financial transactions.