Global block-chain innovation: the US slightly behind, Europe and China in leading position

The block-chain technology innovation continues

No one can predict the future of block-chain, just as no one can predict the future of internet in the early 1990s. But it is clear that this technology will have a significant impact. From large companies to start-up companies and government departments, various entities are making further use of the concept of decentralized architecture and decentralized trust to reduce frictions and to create a more honest, transparent and efficient governance framework.

There are only a few of block-chain technology start-up companies in the United States, majorly because of the regulatory requirements. Block-chain technology companies such as Kraken and Coinbase are located in the Bay Area, but their major business field is encrypted currency. American companies now have already fell behind in many vertical fields in which other countries are expanding: health, energy, insurance, and supply chain.

Although a quarter of the block-chain companies listed on Outlier Ventures' trackers came from the United States, these companies are majorly centered on encryption or Bitcoin. And only a few of them have digged out the non-monetary use of the block-chain.

New York is the center of American block-chain technology companies, mainly because New York is the center of financial industry development of America and the world, and New York financial industry is also working to solve the problem of distributed classification accounting technology. But New York is also home to a number of big companies in non-financial fields. For example, Consensys has applied block-chain technology outside the financial field with the help of Ethereum which is a technological innovation that applies some of the techniques and concepts of Bitcoels to computing. With a number of mechanisms similar to Bitcores (such as block-chain technology and P2P networks), a shared computing platform can be maintained to run any program flexibly and safely. In addition, Digital Asset Holdings has raised more than $ 70 million from the world's 15 largest technology and finance companies to establish secure and decentralized processing tools, in order to speed up billing, reduce costs and improve the security and transparency of regulated industries. The CEO of Digital Asset Holdings, Blythe Masters used to be an economist and executive officer at JP Morgan Chase.

The SEC has delayed the American block-chain ecosystems

In general, the slow development of block-chain ecosystem in the US is strongly related to the regulations of the American Securities and Exchange Commission (SEC). The SEC can not solve a series of problems caused by ICOs (Initial Coin Offerings), which is a way of investing in encrypted monetary items. Typically, part of the platform tokens of new encrypted monetary items would be sold through ICO, and the early holders or enthusiasts of these tokens can exchange their tokens into real money. ICOs is the best way to raise funds for the founders of a currency project, and most of the ICOs raise money in the form of Bitcoins or its competing coins, and the SEC did not provide a regulatory framework for its existence, so that the development of the US block-chain has been slowed down.

Singapore and Switzerland are trying to break through the judicial limitations in order to treat Bitcoins as asset rather than security method. At the same time, the SEC does nothing about it, which is unfavorable news for companies who wish to raise funds and European or Asians who wish to invest in these start-up companies.

Due to the potential legal impact, some European ICOs even use IP shielding to prevent Americans from investing in encrypted currencies. However, Brock Pierce from the United States and its Blockchain Capital venture capital team recently decided to break through industry barriers with their own ICO. The Brock Pierce raised $ 10 million in six hours which accounts for 20% of its next round funds by selling virtual currencies to investors last week.

But it is not easy. To raise funds from international and domestic investors the Brock Pierce had to put its ICO entity in Singapore and sign a series of documents with the SEC. In United States, the investment amount is limited for the domestic authorized 99 investors, while the rest of the foreign investors were unlimited.

At present, at least eight states in the United States are developing legislation on block-chain, but no bill is submitted at the federal level.

A bill passed by the House of Representatives of Connecticut (The Substitute House Bill 688) stipulates that the virtual currency is equivalent to currency, but at the same time it creates a regulatory rule different from the legal tender for companies who provide the virtual currency service. In April 2006, Georgia signed the HB 811 statute which mandated the state regulators to develop rules for virtual currency companies, but the status did not explicitly define the scope and object of application. New Hampshire also chose to include encrypted currency traders as providers of currency transfer service, with the same requirements and regulations as traditional monetary transfer service. In New York, due to many obstacles in licensing applications, only 22 companies have successfully applied before the deadline in 2015; only a few of them obtained permission. Before June, 2016, the state only signed two Bit Licenses, and the other 20 companies still have to follow the state government's ‘safe harbor’ regulation.

Canada speedup the development of block-chain technology

Canada has an active block-chain entrepreneurship community, mainly because Ethereal came from the Toronto Bitcoin community, where there is a group of talents such as the main proposer of Ethereum, Vitalik Buterin. In addition, famous block-chain technology experts like William Mougayar and Don Tapscott also came from Canada. Unlike the SEC, the Canadian Securities Regulatory Authority (CSA) has launched a new financial technology program ‘Sandbox’, primarily for block-chain start-ups and other financial technology companies.

China encourages the development of block-chain

The Chinese government is investing heavily in some of the depressed regions and planning to construct block-chain industrial parks nationwide, in order to attract investments from some of the world's top companies. In China, the number of block-chain companies is increasing year after year. ICO is currently unregulated in China, and more and more block-chain start-up companies choose to sell virtual currencies to improve their capabilities of innovation and capital growth. It can be said that the Chinese government does not consider ICO as a threat. In fact, Chinese government not trying to stop it is a disguised encouragement.

Over the past year, a series of alliances have emerged in Chinese market:

1. The China Ledger Alliance: it will be committed to the research and development of distributed general ledger system and its derivative technology, the basic codes will be used for open source sharing.

2. Financial Blockchain Shenzhen Consortium: the alliance has assembled 31 enterprises or institutions, including WeBank, Ping An Bank, the Bank of China, Jingdong Finance, Tencent, Huawei, Bank Ledger, Shenzhen Financial Information Service Association. Among them, there are 25 initiate institutions. Tencent, Huawei and other six institutions are planning to join. The alliance hopes to take advantage of block-chain technology in the field of information security and identification applications to improve security level and efficiency of products.

3. Qianhai International Blockchain Ecosphere Alliance: the alliance is committed to the establishment of an intensive and efficient ecological environment for block-chain technology and its application, to speed up the industrialization of block-chain technology, to promote the applications of block-chain technology in various of Chinese social and economic fields. The alliance includes Microsoft, IBM and the Hong Kong Institute of Applied Technology (ASTRI).

Australia, New Zealand intend to try on block-chain

Australia’s central bank is conducting an internal block-chain research, and Alibaba is also using block-chain technology to combat forged and fake commodities. Its supply chain project model is tested in New Zealand and Australia.

Europe is in a leading position

Europe has led the development of block-chain in many ways, the culture of open source has contributed to the dynamic development of block-chain technology. Both individuals and enterprises are actively involved in block-chain projects. In fact, most ICOs are run by European start-ups, many of them came from eastern Europe. The block-chain start-up companies’ main businesses are concentrated in London, Amsterdam, Barcelona, Berlin and Cryptovalley in Switzerland.

The Guardtime from Estonia is not only working with the government to apply the block-chain to health records, but also with international organizations such as NATO. In addition, the US Nasdaq has been applied in Estonia. The co-founder of Skype, Jaan Tallinn also started a block-chain company called Funderbeam in Estonia.

The UK chief scientist, Sir Mark Walport released a 88 pages report on block-chain in January, summarizing the potential of this technology, and how it will change the public services and improve government efficiency. Soon after, London-based financial technology company, GovCoin Systems Limited announced a block-chain test, in order to support the government's goal of streamlining welfare distribution.

The Isle of Man government has begun to use the block-chain registry to record what companies are using the distributed online ledger system; The Governor of the Bank of England, Mark Carney said earlier this year that, the Bank of England is studying the central bank's digital currency (CBDC) policy and other technical issues; ING Bank in the Netherlands completed 27 POCs in February; Philips were using the block-chain technology for health care as early as 2016; the Dutch central bank also conducted a Bitcoin cloning experiment with DNBcoin, and was doing more test.

The Denmark’s central bank is planning to issue a chain-based electronic krona as reserve currency, the French central bank is also involved; Sweden is planning to use block-chain technology for land ownership; Brussels has recently proposed a block-chain pilot to conduct relevant reviews and supervisions.

Although the EU has not yet started a detailed classification and is finishing the legal aspects of the block-chain, Switzerland is already working on it. In April, the FINMA, a Swiss regulator, announced a new licensing category for certain financial institutions that implemented banking operations but had limited acceptance of client assets and no lending activities.

Who will dominate?

The block-chain technology creates new opportunities and challenges for existing business models. The question is: who will be the fastest innovator in this field? At present it remains unknown. But it is clear that ICO will have an impact on the block-chain ecosystem in the short or medium term, and that block-chain innovation will largely depend on the regulatory authority that regulates the freezing or release of ICOs, and the improvement in regulations will provide further conditions for the next generation of block-chain innovations.

This article refers to a number of sources of information: www.venturebeat.com

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