Blockchain Insider Ep. 45. Taylor-Copeland Lawsuits Send Ripples Through XRP's Security Status START OF AUDIO 00:00:00 SK: We are here, in the 11FS offices in WeWork Aldgate in London, for Episode 45 of Blockchain Insider. Simon's away again this week, sunning himself in South Africa, so I'm back in the driving seat. Today, we bring you, the SEC turns its attention to Ethereum, supposedly, Ripple sued for securities laws violations, and Wall Street warms to virtual currency trading. [Break] SK: I'm not alone today, however. Joining me in the studio is Sara Feenan. How are you today, Sara? SF: I'm very well, thank you, how are you? SK: Good, good, we just enjoyed the last of the sunshine, didn't we, and it's finally-, finally cooling down. SF: We did. Summer's over. SK: Yeah, that was it, guys. [Laughter] SK: So, before we get started, I just wanted to say a quick word about our sponsors. Today's episode of Blockchain Insider is brought to you by Corda. Corda is an opensource blockchain platform that allows businesses to transact directly, in strict privacy. Using smart contracts, Corda enables complex transactions, using real assets and legally binding agreements, without the need of a trusted intermediary. Corda is the result of a collaborative effort led by R3, with over 160 of the world's largest banks and technology partners. It is ready to build on today. The financial community is deploying Corda to manage their agreements, and move assets globally. Now, you can transform your business ecosystem with the platform selected by the world's largest institutions to build their future on, Corda. Go to Corda.net to learn more. So, on with today's news. The first story up today is this story from-, this one's from ComputerWorld.com, but I think it was pretty much everywhere this week, about the SEC's decision on Ethereum cryptocurrency, that could affect all others funded by ICOs. So, we mentioned this briefly last week. Apparently, the SEC is scrutinising Ethereum, and trying to decide whether it should be classified as a commodity or a security, but basically, the debate comes around because Ether was basically pre-sold, unlike some other ICOs, so that means it could be viewed as, apparently, so this is the terminology, "A common enterprise that had influence over its value, similar to how a public company's actions are key to its stocks value." ICOs are, by definition, securities, because they pass the Howey Test, that test determines whether a financial institution qualifies as an investment contract, and thus is a security. So, basically, the debate is, because Ether is slightly different, and it has morphed in its appearance, since it first came about, is it a security? Was it a security? How should it be treated? SF: Yeah, it's-, it's a very interesting question, isn't it, especially with regards to the morphing, as you say, in terms of its definition. Potentially, the pre-mined, they might be looking at as a security, caveat as yet undefined, but the alternative would be a commodity, and Bitcoin is defined as a commodity, as we know, because it's listed on the CME as a futures contract. I'm wondering about the definition between a commodity and a security here. Obviously, we've got the Howey Test for securities, but a commodity is a basic good-, as it is defined on Investopedia.com, a commodity is a basic good used in commerce that's interchangeable with other commodities of the same type, in other words, it's fungible, so one barrel of oil is interchangeable with another barrel of oil, which, yes, arguably, Bitcoin and Ether both fit that bill. But actually, a further definition is that a commodity is most often used as inputs in the production of other goods and services. Now, to me, that sounds a little bit more like Ether, especially after the pre-mine, once the platform was live, the gas tokens are basically fed in to smart contracts, and any businesses that use these smart contracts built on top of the Ethereum platform. I find that kind of-, the definition quite hard to grasp, really, and I don't really envy the SEC, in this case. SK: Well-, well, I think-, I mean, I think-, I don't think anybody envies them. I think, as well, it comes-, you know, it's that argument, it comes down to semantics, you know, asset, currency, payment. Just for a little bit more colour on this one, the SEC Commissioner, Hester Peirce, gave a-, a speech this week, or last week, which was really interesting, where she gave a bit more, kind of, definition, on how the SEC might be treating all tokens, going forward. It was a really interesting speech, I would recommend you-, you dig it out, she gave it at the Medici Conference, and you can get it for free, in full, online, but basically, she said that she wasn't willing to make a blanket statement that everything other than Bitcoin is a security, so that's kind of what you just pointed out-, SF: Yes. SK: That Bitcoin is a commodity, is-, does that mean everything else is a security? And then she raised the possibility that some of these tokens' functions can change over time, so might be, you know, a security as they're first issued, say to fund a project, they may take on a different function later, which, again, is the Ethereum question, but she also pointed out that if their function changes later on, and the original creator is no longer involved, it makes no sense to go after the original creator, it's this, kind of, you know, again, the morphing, the way that we see these, um, you know, blockchain-based, cryptocurrency-based companies, sort of, change and evolve as they go on. But especially if you don't know who the original creator was [laughter] um-, SF: Yeah, well, precisely, precisely. But it's also-, I read another article about, potentially, the Ethereum Foundation being in control of the future price, I guess, because of their-, their guidance and leadership, but I also read something about, potentially, bug bounties having an effect on the price of Ether, or-, or them giving away-, SK: What's a "bug bounty"? SF: A bug bounty is basically where a reward is offered for somebody who finds a bug in opensource code, and either reports it, or fixes it-, SK: Okay. SF: So, to-, to imply that that process there is having a future effect on the price is, I think, a little bit out of touch with the opensource community, because that is quite common, in opensource platforms, and it's also-, one of the massive benefits of being opensource is, by that token, no pun intended-, SK: [Laughter]. SF: Having a more robust codebase. SK: I think it's kind of-, this is a debate that's just going to go on and on. The fact that-, I think the encouraging thing here is that we don't know if they're looking at Ethereum specifically. We do know they're looking at it, you know, um, that Hester Pierce says, quite clearly, "We are looking at it, and we want to engage, we want to talk to you, we want to understand how you work," um, and I think, encouragingly, she's saying, you know, "We're not going to do a blanket rule, we're going to, like, try and work this thing out," but I do think it will be some time before we see them actually get to grips with what-, you know, what regulation they're going to put in place, if any-, SF: Yeah. SK: And, you know, consequently, the impact it will have on those cryptocurrencies, will probably not be felt for some time. SF: Yeah, for sure, and it-, it does raise some-, some questions around some of these tokens, and these, in some cases, huge ICOs that were raised using the Ethereum platform, such as EOS and Tezos, where the intention is to create an entirely new platform. So, where does this leave them right now, given that none of those platforms are live yet, and what is the, I guess, statute of limitations on those platforms becoming live? Do you have to show intent for it to become live? There's-, there's so many questions that-, that-, that kind of arises, of-, of having this hands-off approach, although I do encourage that, the more nuanced version of, you know, looking at Ethereum. SK: Yeah, I think generally speaking it's quite encouraging. So, from one reasonably nuanced view on, you know, regulation surrounding tokens, to one that's slightly more black and white. So, this is a story from CryptoLaw.com, apparently Ripple has been sued for securities law violations. Now, not by the SEC, by a company called Taylor-Copeland Law, on behalf of-, a class action suit, basically, and it's filed against Ripple Labs, its wholly owned subsidiary XRP II, and Ripple Labs' CEO Brad Garlinghouse, and basically these-, this is a group of people who've sustained loss as a result of, uh, Ripple's sale of XRP tokens. The legal complaint is basically formed around the premise that they believe XRP is a security, and Ripple have therefore violated the Securities Act, in part by not having registered XRP as a security. So, basically, they founded their class action suit in existing law, which I suppose would make sense, if one was going to file a suit. The formal complaint includes all sorts of allegations which, you know, we've been over before, but unlike cryptocurrencies such as Bitcoin and Ethereum, which are mined by those validating transactions on their networks, "all 100 billion XRP were created out of thin air", their quote, not mine. Defendants have since earned massive profits by quietly selling off this XRP to the general public in what is essentially, again another great quote, "a never-ending initial coin offering", and, you know, there's loads of bullet points and sub-bullet points, you know what legal documents are like. It's going to be an interesting one, to see the outcome of this, I think, because again, well, what we've just said, you know, actually, we think it's going to be a while before we see any constructed laws, or formal laws, come out of the SEC. Depending how this lawsuit goes, it might have an impact on that, I suppose. SF: Yeah, maybe. It is kind of jumping the gun, because I believe part of the news that was released about looking at Ether, and Ethereum as the platform, as issuing securities against the law, Ripple was involved in that, too, or they were supposedly involved in deciding whether or not it's a security. So, I feel this lawsuit is jumping the gun, when it comes to Ripple and XRP, but then again, if the SEC does decide that it is in fact a security, then perhaps this has a little bit more legs to stand on. SK: I wonder who actually would hear the case. Because if it's a securities violation-, I don't-, I don't know enough about US law, I'm sure somebody's going to tweet me and tell me, but if they are-, if they're being-, it's a class action suit being filed in a US court of law, with-, on the premise that they've broken securities law, then presumably that's an SEC enforcement? SF: Yeah, I mean, it has, sort of, global aspects, as well, because it's not just in the US, obviously, these cryptocurrencies-, SK: Yes, of course. SF: Have been sold. But it's not the first time that Ripple have had a run-in with regulators in the US. They were fined in-, by the FinCEN in 2015, for failing to register as a money services business in the US, not undertaking proper KYC and AML procedures, and I should clarify here that they did comply, they paid the fine, and they agreed to further compliance, and all of the criminal chargers were dropped. This was back in 2015, so obviously, it was early days in, kind of, adoption of cryptocurrencies. I suppose I have two points on that, is that it potentially should have been something that cropped up in the research of all of these ICOs'-, SK: Due diligence, yeah-, SF: Due diligence, yes, is that this has happened before, and potentially setting a precedent, a fine and potential criminal action. This was dropped, because of Ripple's compliance with FinCEN, and the Department of Justice, but also it should have potentially been something that Ripple might have thought of, too-, SK: Yeah. SF: Especially in more recent months. SK: Yeah, I mean, I think that-, that case, definitely a benchmark for what everybody who followed did, so any of the exchanges know that they have to have a money transfer licence, that kind of thing, if they're taking fiat currency. They-, they understand that now. But yes, it's-, it'll be interesting to see, again, an interesting one to wait and see. XRP are not having a great time of it, or Ripple not having a great time of it right now, so the question will be how well they deal with this particular situation, and, you know, the allegations. They have a perfect chance to come back and rebut them, so we'll see what they come up with. More lawmaker conversation, for the next story, from a publication called atimes.com, apparently South Korean lawmakers are seeking to overturn an ICO ban. So, this kind of goes back to that first story we were talking about, in South Korea they DID issue a blanket ban on all ICOs, and, according to local media, a group of lawmakers from the ruling democrat party of Korea are leading a move to overturn the government's domestic ban on ICOs. The new bill legalises some future ICOs, primarily focusing on coin offerings initiated by public organisations and research centres, um, basically those that have the-, the aim of promoting and developing blockchain technology. I think, for me, this is quite clearly a-, what we've had here are three stories about the different ways that the law can work, and is working, around cryptocurrency and-, and ICOs, and exchanges, and everything that's related to it, really. SF: Yeah, and they're clearly treading carefully, in terms of the focus on the coin offerings, with the public organisations, as you just say, and, as you say, blanket rules don't work, too. But I think, going back to your point about the different ways that regulators can handle this, it's-, these are really globally traded instruments, this should be some kind of global coordination on this. But the South Korean market is very interesting, actually, because we have-, there's been such an extreme demand for these virtual currencies, and in January, I think it lifted the prices, in Korea, they were-, well, cryptocurrencies, some of the more popular ones, shall we say, trading at a 50% premium to those on American exchanges. SK: So, you mean there were-, so, if I wanted to buy one Bitcoin in South Korea, it would be 50% more than if I wanted to buy one Bitcoin in the US? SF: Exactly, yeah. SK: Interesting. SF: But I think-, [laughter] something that made me chuckle a little bit was, even the central bank had to ask staff to refrain from trading cryptocurrencies, particularly during working hours. SK: [Laughter] and they wouldn't be the first one that has had to do so, actually. I think there's a couple of interesting stories [laughter] that have come out like that. SF: Yeah. Yeah. SK: Yeah, I mean, I think that the point that, um, I would make, and I think it's one that, you know, the great-, the great Simon Taylor, um, agrees with here, as we talked about it last week, he's going to love that, is that, you know, the point is, they're doing things. So, the point is that people are actually moving here, there is actually some conversation being had, and, you know, that's a starter for ten. SF: Yes. Exactly. SK: Moving on to a story from the New York Times, the headline is, "Should the Fed Create 'FedCoin' to Rival Bitcoin? A Former Top Official Says 'Maybe'." So, it's the most clickbait-y headline, um-, SF: Oh, very much so. SK: Of the week, I think. This gentleman, who was previously-, previously at the Fed, said, "Most central banks have a view that these crypto-assets are clever, like guys in the garage did it and it's kind of cool, or risky, given the potential investor losses and widespread fraud." Basically, this guy was-, was working in a senior position in the US, and then there were lots of changes in the regulatory organisations, and he didn't return to the Fed, so now he's working as a-, I think he's a-, a professor, or a visiting professor, at universities. He said that if he'd been back there, he would have appointed a team, "to think about the Fed creating FedCoin, where we would bring legal activities into a digital coin." But he was careful to add, "Not that it would supplant and replace cash," he said, "but it would be a pretty effective way when the next crisis happens for us to maybe conduct monetary policy." SF: [Laughter]. SK: So, yeah, it's almost like they didn't do a thing. With all due respect to Kevin Warsh, it's-, it is sort of easy for him to say, now, as a professor-, SF: Yeah. SK: Rather than being in the Fed. And there's-, there's been-, well, it's-, there's been a number of different conversations and investigations about central bank digital currency as a way to control monetary policy, of course, as he mentions, yes that is one way of doing it. I'd like to pick up on-, he says, "FedCoin to rival Bitcoin." I'm not sure if it's to rival Bitcoin. I think, if anything, Bitcoin was to rival fiat currency, so-, SF: It's kind of the classic-, this is not a-, this is not an unusual-, sorry, this is not the first time we've heard this conversation, a lot of central banks have looked at it, and there-, there is the constant struggle that regulators just have, like, "How do we keep up with technology? How do we make sure that we're keeping up with what's out there? But also, we can't go out there and just go, 'Oh, we're just going to create a coin, it'll be fine'." You know, they have a much-, um, many more concerns on their plate, if you like. SK: And-, SF: Yeah, there's a great deal of investigation that has gone in to the central bank digital currency, not-, not cryptocurrency, per se, as he mentions in the article, the Monetary Authority of Singapore, and, of course, here in the UK, the Bank of England looking at ways to integrate RTGS with new and innovative payment methods. So work is being done there, but these organisations-, it's-, this is quite serious, monetary policy is a serious business, so it's understandable that they would be a lot slower to-, to adopt this, and there's, you know, a number of factors to-, to take in to account, not just monetary policy, but the privacy, as well, that you ostensibly have with cash, you know, with a digital currency, if we know anything about Bitcoin, you do not have. SK: Yeah, I mean, and I think the-, the interesting thing, as well, is when the-, the Bank of England, as you say, were conducting these experiments, they actually came out and said, "No, it's not ready yet." They basically came out and said, you know, "Right now, it's not good enough. We can't answer-, we've still got too many holes, and we-, we're not going to roll it out right now." It doesn't mean they're not still looking in to it, I have no doubt whatsoever that they're still exploring it, but they did issue a statement where they were like, "Nah-," SF: Yeah, yeah, so, last year, when they were looking at the blueprint for the RTGS system, they did say, "We're not going to do it on the blockchain, because the blockchain's not ready yet," or distributed ledger technology, whatever your flavour. Um, but they-, I do know that they are looking in to ways to integrate with innovative payment solutions, as they say, i.e. blockchain or-, or DLT, and it is-, it's something that's-, that's clearly on their radar, and Bank Underground, their blog, they've been researching cryptocurrencies for a while now. So, I know for a fact they're pretty clued up, so we shall see. SK: Yes, absolutely, and I think-, and I think-, it's that exact point, isn't it? That they have to keep their eye on the ball, or they'll mis something important, and if-, and if-, you know, part of their job, most central banks also have a regulatory aspect to what they do, they need to know what's going on, in order to be able to-, to regulate effectively. So, moving on from central banks to private banks, I suppose, there's a story from CoinDesk which says that 12 Chinese banks say they deployed blockchain in 2017, so nearly half of the-, oh no, it's not private banks, sorry, it's publicly listed banks. So, nearly half of the 26 publicly listed banks in China say they deployed blockchain applications in 2017. The applications have been adopted across a range of purposes, from using blockchain technology to issue invoices, and cross-border loans, to ID authentication processes. I mean, this doesn't really surprise me in the slightest, that the Chinese banks are using "blockchain", in air quotes, because we haven't really got any details, to do some things. I think I'd like a little bit more detail about what those things are. SF: Yeah, yeah, it would be good to have a little transparency on that, and some of these are state-owned commercial banks, as well as privately held banks. Yeah, I mean, it would be great to get some detail, really. So, one of the points I'd like to pick up in the article is, they say they're using this decentralised technology, but if it's a state-owned bank, it's-, it's arguably just a distributed system, not necessarily decentralised. Uh, there's, you know, a great deal of questions I have about this, around privacy and scalability, what their stack's like, what their, you know, consensus process is like. So, please, China, if you're listening, let us know. SK: [Laughter]. Yeah. Actually, China, if you're listening, please let us know ANYTHING you're doing with blockchain, and, for that matter, AI, because we'd just really like to know. But yeah, I mean, I think the point is, as you said, that they're-, we shouldn't be surprised that they're ahead in technology, but the way in which they do things in China is-, is both interesting and almost universally not applicable outside of the country-, SF: Yeah-, SK: Uh, in its-, in the format in which it is being utilised in China. SF: Yeah. SK: Whether there are lessons to be learned, and whether there are ways that it can be integrated with other payment systems, and other banking systems, is absolutely up for debate. SF: Yeah, for sure, and one of the solutions was a cross-border payment system, so it would be great to hear what countries they are-, SK: Yeah, absolutely. SF: They are integrating with. And one of them, also, said that the platform has so far processed transactions worth a total of 1.6 billion yuan, which is $250-, just-, just above $250 million, which is quite a decent amount of money for a live project, certainly. SK: Yeah, though I always think, when we talk about China, like, you-, everything looks huge, and then you look at something else in China, and actually, it's dwarfed, it's just the sheer scale of the country [laughter]. SF: That's very true, very true. SK: So, moving on, another piece from the New York Times, which is entitled, "Bitcoin Sees Wall Street Warm to Trading Virtual Currency." So, this is a story about the parent company of the New York Stock Exchange, the Intercontinental Exchange, or ICE, that has been working on an online trading platform that would allow large investors to buy and hold Bitcoin. "The new operation, ICE, would provide more direct access to Bitcoin, by putting the actual tokens in the customer's account at the end of the trade," uh, is the quote from the article, and I think, the point being, it's an actual exchange, as opposed to what we've seen so far, or would be an actual exchange, as opposed to what we've seen so far, is-, is, you know, the futures product. It's not actually-, SF: Mm. SK: Handling the-, the currency itself, it's-, it's-, it's betting on the price of the currency, basically. You know, the article goes on to mention that they are also looking at-, ICE is potentially also looking at swaps. Again, they're quite a complex product, but they are quite widely understood in capital markets, and going back to your earlier point, they fall under a specific set of regulations. So, it's kind of, "Which way does it want to go?" I think [laughter]. SF: Yeah, I certainly have questions about the regulatory implications of this, for example, with the swaps product, there's the Dodd-Frank in the US, which is where this article is based, it's mandated swaps, such as credit derivative swaps, interest-, interest rate future swaps, they're becoming cleared. So, where does that leave Bitcoin, in relation to that? But also, as we've discussed on the show before, and has also been, you know, widely available news (ph 19.28), since the CME futures contracts were launched. What's their margining? Have they got limits to price fluctuations? I'll be really interested to see where this develops, but it's kind of still a bit antithetical to Bitcoin, really, it's just more and more of this institutional adoption of Bitcoin, which is presumably wanting to trade, or speculate, shall I say, on the changing in price, and not really an investment in the underlying infrastructure. SK: Oh yeah, absolutely. I mean, it's basically people wanting in on the game. They've seen it's a way to make money, you know, we had a story on last week's podcast about just how much money some of the exchanges were making, certainly in relation to some of the-, the big banks, and-, SF: Mm. SK: You know, it's-, it's eye-watering, and, um, I think any large financial institution would be foolish if they weren't looking at a way to get their mitts on some of that revenue, but, as you say, it's-, it's a lot harder than it sounds-, SF: Yeah. SK: Certainly when you're a regulated financial institution that has many, many rules to comply with-, SF: For sure. SK: Even if Mr Trump does get his way, and roll back Dodd-Frank. SF: Yeah, hopefully not the whole lot-, SK: [Laughter]. SF: I mean, it's a 2,000-page long piece of regulation, so-, some of it good. SK: So, moving-, moving away from, um, exchanges, and, in fact, regulation, on to a story from CoinDesk, which is about automakers. So, BMW, Ford, General Motors, have formed a blockchain coalition, so-, and it says that, "Rather than pushing a particular type of distributed ledger, MOBI," which is quite catchy, "Mobility Open Blockchain Initiative, aims to create common standards and APIs, to enable payments and data sharing between cars, all in the service of driving forward a new digital mobility ecosystem." Um, so basically, you know, building off the back of the cars or the vehicles of the future, so they're ride-sharing and self-driving, and even if they're not self-driving, they've all got, you know, incredibly complex computers, basically, in them now. I think it's-, so-, so, the-, the-, Chris Ballinger, who's the Chairman and CEO of MOBI said that, um, you really have to have common standards, and common ways for cars to communicate, to identify themselves and make payments. I mean, there's quite a lot to unpick there, I don't think anybody has, you know, until the last ten years, thought about cars having to identify themselves, but to me, this is kind of all about data, it's about the fact that carmakers have woken up to the fact that cars now generate data-, SF: Mm. SK: And that data is incredibly valuable. And, you know, we've talked about it on the-, the sister podcast to this show, which is Insurtech Insider, about how that value can be realised, who owns that data, as well, you know, is it the person who owns the car, or is it the person who manufactures the car? Is it the person who manufactures the software? And it says-, you know, the quote from the article here is that, "The MOBI Consortium is probably the auto industry's first coordinated response to the realisation that data produced around cars is a valuable resource." Um-, SF: Yeah, for sure, I mean, the-, the sentiment is all about data, as we've seen in the last, um, few years, that data is king, really. It's-, it's the gold mine. And I can certainly see a blockchain aspect from a micropayments, um, perspective, and connecting that in with Internet of Things devices, but I do wonder about security, not just of the, sort of, you know, data on the blockchain, and payments being made, but security of that data, in general, which is a-, you know, a question that's still open, about Internet of Things devices. "Is your kettle spying on you?" I think was a-, SK: [Laughter]. SF: Was an article last year [laughter]. Um. "Is your kettle hacking in to your wi-fi router?" or something like that, I can't remember, but-, SK: "Is your fridge going to accidentally order you 12 cartons of Ben & Jerry's?" [Laughter]. SF: Yeah. "Oh, no, you've overordered on cheese again, fridge-," SK: [Laughter]. It's always the fridge. Definitely the fridge. I think the question there I have as well is, like, does it need to be-, does it need to be a blockchain? SF: Yeah. That-, I mean, that-, that was my first question, when-, because generating a huge amount of data, and cars moving very quickly, and stuff happening very quickly, sometimes in a split second, on the motorway, what are they using the blockchain for? I mean, I can see an element of storing the data in IPFS, and, you know, pointing to it somewhere, with the right security wrappers around it. Yeah, I suppose, from an insurance perspective, you could-, you could look at the whole car history, if you were buying a second-hand car, and see if it actually had had any crashes, and whether they were appropriately tended to, rather than just relying on the owner's word. SK: Yeah, I suppose there's also an element there, now we're thinking about it, of sort of talking inside smart contracts. So, the car instantly detects it's been in a crash, and instantly alerts-, you know, there's an instant, kind of, triggering of either a payment or an alert, or-, or, you know, even a warrantee ding. But it-, again, it's-, it's interesting, it shows that people are looking at ways to use blockchain. I think that we-, you and I, and-, and the rest of the people in the industry, are going to spend at least the next five years, sifting through ideas that really do need blockchain technology behind them, and ideas that, like, will literally make the first thing you say go-, will literally make you just go, "Why is it a blockchain?" SF: Yeah, yeah, it's going back to what, uh, Kevin Warsh said, from the-, the FedCoin article. "It's, like, kinda cool-," SK: Yeah [laughter]. SF: "Or risky," I think, is what he added. And if you certainly work-, if you work in our line of business, you don't get a press release without either blockchain or AI in it-, SK: Oh, for sure, yeah. Buzzword bingo. SF: Mm. SK: So, our next story is again from CoinDesk, and this is a story about Microsoft Azure launching a "Tool To Speed Up Blockchain-Based App Creation." Wow. That's a headline. So, Microsoft's cloud computing platform, Azure, formally announced the release of its blockchain application creation service, Azure Blockchain Workbench. So, Workbench will allow businesses looking to create bespoke blockchain apps to speed up the development process by automating the setup of the-, the underlying infrastructure. Microsoft Azure general manager Matthew Kerner says it means "developers can focus on application logic," whilst business owners can focus on actually validating the use case for the application. I spoke to-, to Simon Taylor about this one, earlier, and he was-, he was keen to point out that, you know, this is actually how enterprises can actually start using blockchain platforms, so the-, the tool, Azure Blockchain Workbench, is compatible with any of the major blockchain platforms, and it basically enables you, as a big company, to get your hands on all the operational stuff. So, system integration, there's no point in having a blockchain-based system if it won't talk to any of your other-, SF: Mm-hm. Yeah. SK: Systems, and if you are a large enterprise, you have many systems. SF: Yeah, and we've seen this kind of model before, with, uh, kind of, API-layers, that enable business users to, kind of, to some extent, drag and drop processes that they want, uh, which will design their processes, potentially validate them, and then, all of the-, the-, the, sort of, system integration, and the API construction, goes on in the background, so they don't have to know about it. But, I don't know, I-, I sort of think that there should be an element of people educating themselves on how these things work, I certainly think, to a certain extent, not with a view to excluding people, but with a view to having a common understanding of how powerful this technology is, and also what its limitations are, too. SK: No, to a certain extent, I agree, but also, I think if you're-, you don't build your own cloud services, do you? You go to Amazon, or Microsoft, or whatever, you know, to use cloud-based services, you don't try and build them yourselves, and I'm-, I'm not sure how many large enterprises actually understand the-, the-, the technology behind those services. SF: I think being able to understand and use AWS is certainly a-, a skill that you'd see on many job descriptions, which is not just how to set up an account and let them do it, but how to also, you know, set up the docker services, and things, involved in that. SK: Okay. It's-, I mean, it's-, again, it's not something I've ever tried to do, uh-, it's not something I'm going to be adding to my-, SF: Well, there's your weekend sorted then, Sarah. SK: [Laughter]. Goodness. Um. I'll put it on the list. Put it on the list. SF: They have also done quite a lot of work on the blockchain-based ID system, and decentralised IDs, and there's links in the article to a-, you know, quite a thoughtful post on decentralised ID, and they're also part of the ID2020 initiative, and it's really talking about owning your own identity, which is something that I think is-, is a huge use case for blockchain and decentralised systems, is being able to control that identity that is currently, sort of-, it's distributed, yes, but it's not owned by you at all, and it's not consistent, and it's not something you can control. SK: Yeah, I mean, I think ID verification is going to be such a huge topic. I mean, it already is a huge topic, and it's one that, you know, problem that blockchain is often mooted, um, as a solution to, um, and as somebody once pointed out to me, and it links nicely back to that previous story. It's not just your identity. It's your fridge's identity-, SF: Mm. SK: And your car's identity, and they-, they need to talk to each other. And, you know, I-, I think-, I think they key here is that it's-, it's about trying to at least get those enterprises over the first hurdle, and I think, whilst you are absolutely right, there is definite advantages to understanding how your underlying technology works, I think the problem-, the hurdle-, that, sort of, first hurdle for blockchain technology has been insurmountable for a lot of, certainly, financial institutions, going, "We don't even know where to start." So, if Microsoft Azure can come to them and go, "Okay, here are the building blocks, you build something, and then you can go from there-," SF: Yeah, I-, I think, um-, I mean, not to be negative on this-, SK: Mm. SF: To be clear, I do think this is-, this is a great step forward in enterprise uses, uh, but people that we've spoken to, for example, they-, to generalise, there's a knock-on effect in all of the integrated systems across, you know, one organisation, in one country, and if it's a multinational organisation, you need to communicate with all of those other systems, as well. So, you know, it's good to think about the-, the benefits of blockchain, which is this distributed system that has one single golden source of the truth, and is spread in, you know, this replicated state machine, in many locations, and that's useful, even within one organisation. So, just be warned not to just build another thing on top of all the other things. SK: [Laughter]. I think that's advice for life, isn't it? SF: [Laughter]. SK: So, our final story today comes from CNET.com, and apparently, Facebook is starting a blockchain team. The Head of Facebook Messenger will now move over to head up a new internal team dedicated to exploring blockchain technology. The new team will fall under one of three-, sorry, three other new divisions, which are basically lumped together as "new platforms and infra", which I'm assuming is short for infrastructure-, SF: Infrastructure, yeah, it's the cool dude way of saying it. SK: Um, I mean, I don't think anyone's really surprised, are they? SF: No, no, of course not, and to quote Anna Irrera, she said, "Give them blockchains!" SK: [Laughter]. SF: Um. So, it's-, you know, not to discredit Facebook's obvious technological ability creating distributed systems, I wonder what they're trying to use it for. I mean, they've moved in the direction of, kind of, shopping online, as well-, SK: Mm. SF: So are they just trying to, kind of, control the whole stack, and now they're doing direct payments online? Is it going to turn in to digital wallets? Is it fiat? Is it cryptocurrency? Is it just an exchange, off the back of Facebook, that you can single sign-on, using your Facebook identity? Are they trying to own your identity? Which is something which they have been doing, let's face it. So, there's-, there's a great deal of questions we have about that, and Facebook has obviously been in the news quite a lot recently with, uh, the old Cambridge Analytica scandal, plus more to come, I'd imagine-, SK: Yeah [laughter]. SF: Um, so-, SK: Skeletons we haven't yet fallen out of the closet-, SF: Yeah, I mean, going back to the whole decentralised identity thing, that's-, they've been trying, for years, to own our identities, which I think, you know, by and large, we should be owning ourselves. So, I question-, question the intent, if I may. SK: Yeah, I mean, we-, we absolutely-, it's-, it's very much a, kind of, almost a non-story, really. Yes, they're doing it, but we absolutely need more detail before we, kind of, have any-, any possible, um, sort of, grounds to-, to provide any sound analysis on, I would say. SF: Exactly. SK: Um. But yes, another one to-, to keep an eye on, and I suspect that's going to be one of those ones that it's worth reading the annual reports to, sort of, try and decipher where-, where you think they might be going at the end of the year. Um. So, loads of news this week, there were some stories we also didn't have time to cover. So, the first one is from CNBC, and this has a brilliant headline. It says, "Warren Buffett says bitcoin is 'probably rat poison squared'." SF: "Probably." "Probably rat poison squared." SK: I don't also know how you square rat poison, but-, SF: Yeah, rat poison times rat poison-, I don't know, maybe the poison is the antidote to the poison, and actually, it's just a rat? I'm not sure. But rats are, you know, smart and cunning, so, who knows? SK: I think we may be reading too much in to that-, SF: More information, please, Warren! SK: [Laughter]. Yeah. The second headline is-, uh, it also features animals. It's from Bloomberg, and it says, "Dancing Badgers Draw More Attention Than SEC at Ethereum Meeting." SF: No comment. SK: [Laughter]. Our third story is from CNBC, which is a very short statement from Bill Gates, no pun intended, "Bill Gates: I would short bitcoin if I could." SF: Well Bill, you can. SK: And, uh, final story, from CCN, "Barclays CEO Rules Out Cryptocurrency Trading Desk, For Now." So, Barclays are-, they're not going to do a thing that they weren't ever going to do. SF: Yeah, it's one of those other news stories that's like, "Somebody ask Barclays if they're going to do the thing," they said, "Probably not going to do the thing," and now it's news. SK: Moving on to our Tweet of the Week. [Tweet of the Week jingle] SK: This week's Tweet of the Week comes from Erik Voorhees, @ErikVoorhees, sorry if I pronounced that wrong. It reads, "SEC Commissioner on CNBC today: 'If you want to know what our markets would look like with no securities regulation, the answer is the ICO market.' So... fast growing and full of cutting edge innovation, where adults are able to make decisions with their own money? Sounds awful." That may have been sarcasm. I suspect it was sarcasm? SF: I think it was, yeah. SK: I think that's a-, a little optimistic-, SF: I haven't seen the original quote that that's come from, so I didn't see the CNBC piece where the SEC Commissioner was talking about that, but it garnered quite a lot of attention, I think there was over 1,100 retweets, 195 comments. So, go and check it out, if you want to know what various different people think about it. But yeah, I mean, there's two ways of looking at it, aren't there? There's the regulatory sense, as we've discussed, very much, earlier on in the episode, and there's the, kind of, libertarian, "Let's circumvent central banks and all of the central infrastructure counterparties," view. SK: I mean, I think it just goes back to, uh, an opinion I've held for a while, that you shouldn't try nuance in a tweet. SF: Very good. [Laughter] SK: Just before we go, 11FS, the company that brings you this podcast, are a challenger agency who help banks, asset managers, FMIs, and anyone with a challenge in blockchain or DLT, to achieve more. If you want to understand how to commercialise blockchain projects, or just have a speaker for your next event, we hope that you'll get in touch. Hit up our website 11FS.com to find out more. So, Sara, thank you very much for joining us. Where can people find out more about you? SF: You can find me on Twitter, @Saronimo, or you can go to Clearmatics.com, or tweet us @Clearmatics. SK: Also, I have to thank the amazing production team here at 11FS. Laura Watkins, our Producer, Michael Bailey, our editor, and Petrit Berisha, our Assistant Producer. Thank you so much for listening. If you like what you heard, subscribe to our podcast, leave us a review on iTunes, those reviews do help us so, so much, and spread the word, tell all your friends and colleagues to listen, too. We will have more Blockchain Insider next week. Goodbye. END OF AUDIO 00:33:42 END OF TRANSCRIPT