11th May 2016: updated to include nominal cost draft UK #anticorruption guarantee scheme forwarded to Open Knowledge session lead Mor Rubenstein and highlighted via Twitter (I guess the next blog post should be insights on the real world path to beneficial ownership public registers):
Governments typically take a long time to progress anything meaningful and individuals rarely have the self-funding to sustain significant efforts year on year and civil society funding mechanisms are largely undeveloped or very conservative in the sub-national jurisdictions likely to be discussed the most.
Undoubtedly, some non-standard open government experts and open data hacktivists could add a lot to the pubic and private discussions at the Anti-Corruption Summit in London next week. Unfortunately, they are the ones least able to add a lot to an offshore bank account or a credit card lol:
I have helped push an offshore jurisdiction in the Open Knowledge open government league table from top 100 (rebased) to top 40 to top 20 and potentially to top 10 in Q3 2016 but nonetheless I very reluctantly had to ask several times not to be nominated in the recent Open Government Partnership International Expert Panel round precisely because of the unsustainable commitments requested of anyone in the open data community determined to self-fund via debt if required rather than risk independence given the requirements to travel potentially to the other side of the world, the implied requirements stop paid work to progress unpaid work, etc.
Fix the open data funding mechanisms and fix everything faster.
In the meantime, I have milestones and deep insights on bitcoin and blockchain and the Isle of Man gambling regulator is expected to legalise bitcoin transactions in July 2016 so I would welcome an open data CSR fellowship, an advisory board role or project specific consultancy!
I’ve blogged before about the pipeline of pending bitcoin milestones and country growth hacking so I should highlight progress on XBT as a currency code.
I attended the open data summit in Ottawa in May 2015 and prompted by some hardcore Q&A I decided to unblock the stalemate on BTC as a currency code.
I discovered that the United Nations and World Bank supported global aid flow database already includes a mechanism to include politically sensitive currency codes. X is used as a prefix to the established currency code BTC and truncated to 3 characters, i.e. XBT.
A draft strategy emerged in the corridors at a fringe unconference on Saturday and fermented at a micro brewery in Gatineau (Quebec) on Saturday night:
register a wallet with a bitcoin operator based in the same country as the charity
process a cross-border bitcoin transaction
handcode the bitcoin transaction as cross-border aid flow in an XML aid flow transaction file to include XBT as the currency code
leverage an Isle of Man login to the global aid flow database to upload the cross border aid flow transaction file — ok, the system was developed to process millions of dollars/pounds/swiss francs/etc but millibits sounds like millions
request that the IATI technical support team add an XBT currency code to the official code list to stop validation errors in thousands of aid flow management systems and apps linked to the IATI API
With due diligence on shortlisted charities and previous bitcoin transactions via Blockchain Luxembourg, firstly I selected a German charity Amani Kinderdorf with projects in Africa to support AIDS orphans and secondly I selected a German bitcoin wallet operator cubits based on personal recommendations.
Disclosure: I subsequently accepted an advisory board member role for 3 months to research bitcoin mass adoption.
On 11th September 2015 IATI started a private consultation on XBT as a currency code within the IATI Technical Advisory Group.
Disclosure: I am a member of the IATI TAG.
On 1st October 2015 it was confirmed that XBT had been added as a currency code to the IATI global aid flow database system emdorsed and supported by the United Nations, the World Bank, etc.
I have accumulated extensive relevant expertise via 2 years on the Bank of England currency tracking system, the Open Bank Project (the first batch at Level39), a 1 year open banking placement at the Treasury in the Isle of Man Government and bitcoin milestones, so I have had some interesting discussions on possibilities with potential partners in Dublin, Zurich, Luxembourg, New York, Melbourne, etc.
Obviously I have followed the Barclays project with Safello and they are expected to support bitcoin charity donations in Q4 2015 or Q1 2016.
Disclosure: I applied to the Barclays Techstars fintech accelerator.
I had previously discussed a large opportunity in wealth management with Cayman National Bank and, prompted by the announcement of the HM Treasury Open Banking Working Group chaired by Barclays and the Open Data Institute, more recently with Barclays Isle of Man. Cayman National Bank didn’t have the right existing client profile but I think Barclays will need to do the London thing before it has enough internal momentum to progress something more ambitious offshore.
I defined and requested that Jersey, Guernsey and Gibraltar corporate register and charity regulator reference codes should be added to the global aid flow database system. Jersey and Guernsey have been added but Gibraltar does not presently meet all the technical requirements.
On 10th November 2015, I flagged a hidden issue at an excellent Wragge Lawrence Graham fintech event with a great keynote by Bob Ferguson from the FCA and “ask me anything” fintech VC panel — actually lots of fintech milestones are self-funded so a mechanism to fund or to refund hacktivist research could accelerate progress in any jurisdiction.
The regulatory sandbox at the UK FCA with a government umbrella company and representative appointment risk management mechanism is real world help to support fintech startups and to let large operators dip their toes in the water and even fail small.
A little reported response to the Paris attacks was to increase aid flow to fragile states from 30% to at least 50% — the jurisdictions at highest risk of diversion. So the need to maximise financial reporting at lowest cost, the need to visualise soft power dynamics and ultimately the need to demonstrate sustainable social impact will support a shift to blockchain technology, daily micropayments direct beneficiaries and perhaps even a BIP to automatically allocate some bitcoin ecosystem processing to the nearest direct beneficiary mobile phone as an income stream.
At the RISE conference in Hong Kong I arranged to follow up on key points with Bobby Lee. Downstairs at the Facebook developers bootcamp I noted that Facebook had hired talent from Ripple etc and that, for example, mainstream bitcoin apps would be ok.
On 18th November 2015, Facebook launched the non-profit donations option but I would expect the most progressive social impact via the internet.org initiative.
Next week, I will progress a bitcoin milestone in London that should indirectly progress Banknotey, a platform to finally extend ebusiness to cash customers so they can have a better life too.
I received a bill from the NHS dentist but it didn’t have routing details for online banking. I contacted the NHS dentist reception and they explained that they do not offer the option to pay online. Mmmm. Next I contacted the department accounts team and they did not have any routing details but they referred me to the centralised payments section. I confirmed sub bank account routing details and agreed to forward an email confirmation with a payment reference. The reason online payments are not encouraged is that they are processed and reconciled manually. So, the inbound payment from “Cryptopay Limited” was not reversed, lol, and I added a bitcoin milestone to the list:
I have more milestones in the pipeline, of course! ;O)
The minimum days and focus on meaningful Continued Professional Development in the UK Civil Service increases on 01/04/2015 so the next step in the UK national government could be to register and control bitcoin addresses (or another perhaps less contentious crypto currency such as Dogecoin) for one or more exemplar services to build up expertise in crypto currency and underlying technology such as blockchain.
The Isle of Man is well established as a proof of concept accelerator and the UK is a leading financial services centre so ideally leverage the strengths of both jurisdictions with a faster parliament and a bigger regulator so that British companies are world class. The crypto community is a joined up growth policy, lol.
When the front office does not include BACS online payment routing details on invoices, the back office is not able to support manual requests to confirm routing details and the internal financial system does not have the fractional cost online payments option installed?
cash = 60p per £100 excludes 70p per paying in slip
cash exchange = £1.65 per £100
cheque or postal order = 31p
incoming BACS credit = 15p
So, “openmindedly” with numbers that do not reflect any volume discount etc, in the 2014/15 financial year, with cash transactions averaged out at £20 and card transactions averaged out at £50, if a government processed incoming retail transactions without online banking payments (excludes bank account and hardware monthly fees and excludes fraud):
£10m in cash transactions @ £60,000
£0.5m in cash exchange for floats etc @ £8,250
£30m in cheques @ £186,000
£45m in debit card payments (15p) @ £135,000
£15m in credit card payments with 2% fee (£1) @ £300,000
£0m in online banking BACS payments @ £0
However, benchmarked with fintech platforms such as BACS online banking payments, digital currency and banknotey (TM):
£10m in credit card payments with 2% fee (£1) @ £200,000
£1m in bitcoin with 1% fee (50p) @ £10,000
£24m in online banking BACS payments at 15p fee @ £72,000
Ok, that equates to £689,250 with older ratios and £541,875 with newer ratios or nearly -22% in cost savings. An interesting headline number in an era of government budget reviews and pressures to rebalance whole economies.
The card companies have not supported any shift to a surcharge process historically because the inevitable customer conclusion is that cash would be a “free” payment method.
If a government amended policy on not absorbing higher cost credit card transaction fees (American Express is not accepted by the Isle of Man Government) but allowing the customer to choose a preferred surcharge on every payment method such as cash, cheque, debit card, credit card, charge card, prepaid card and even points, miles, bitcoin, ripple and banknotey it could contribute the equivalent of a 1% pay rise, offset the living wage and allow credit cards from credit unions as a more flexible payment method on what are typically quality of life public sector services rather than cash from payday lenders or loan sharks.
If a government then progressed legislation to itemise transaction fees outside the public sector at the offline and online point of sale, customers, SMEs and the economy would immediately benefit from more awareness of transaction process costs, more consistent and more competitive commercial rates and open up the opportunities on real time risk based transaction fees.
As someone that reported a fraudulent card transaction to purchase a flight into the UK from online banking in time to catch the criminal at the departure or arrival gate, it is a reasonable assumption that fintech could significantly decrease financial crime with transparent fees, a shift to joined up real time policing of each and every fraudulent transaction and an end to passing a large percentage of the avoidable costs of financial crime to customers.
policy advisor, Isle of Man Parliament
project lead, openmindedly @ Isle of Man Government
The Isle of Man does not have a central bank and that is well received by bitcoin believers, of course!
On 10 June 2014, the Isle of Man financial services regulator explained that the policy was to support legitimate businesses within the emerging crypto sector to operate in the jurisdiction without regulation, to support best practice and that a public register would be introduced in new legislation.
On 18 July 2014, the Isle of Man financial services regulator announced guidance notes.
The Crypto Valley Summit prompted extensive discussions and — perhaps not widely enough — I recommended a voluntary public register without a fee pending the compulsory public register with a fee in the new legislation.
The new legislation (explanatory notes) is expected in H1 2015 but will not regulate crypto businesses. As at 15 December 2014 it has passed the first and second reading in the lower chamber so still requires a third reading in the lower chamber, first, second and third readings in the upper chamber and also (UK) Royal Assent in the joint chamber so it is on the right timescale.
The UK is often cited as the most important onshore jurisdiction to crypto businesses. I discussed with peer contacts and noted that even the world class UK Government Digital Service has limited public API functionality.
Most regulators and governments struggle to minimise consequential costs but increasingly real time risk management of any business on a public register is a core requirement.
I reviewed the existing Isle of Man public register of regulated banking licence holders and decided to configure a no/low cost public API with import.io as a proof of concept that even an unregulated crypto business would want to be on a voluntary public register that could be monitored with innovative automated services such as alerts (public register ping, highlight a shift to a different jurisdiction) to investors, digital wallet holders, digital currency exchanges, insurance companies, media companies, other regulators and cross-border law enforcement such as Europol and Interpol.
So, what could you do in 2 hours?
host a group coffee with some local peer contacts to shortlist crypto businesses already active in the local tech community and the inevitable 1 or 2 handfuls of stealth mode tech startups that may or may not want to be included yet (20 minutes)
draft a voluntary public register and any amendments (30 minutes)
circulate to highlight any gaps (10 minutes)
upload the summary, content and link to a holding page on the regulator website (30 minutes)
draft tweet (10 minutes)
apologise for making it look easy with import.io (20 minutes)
I’ve been lucky to have had some great discussions around public sector possibilities with open data and open banking but a meetup with Malcolm Couch, the Chief Financial Officer of the Isle of Man Government (the name on our banknotes) and Mark Shuttleworth, Isle of Man resident and ubuntu founder, centred on internal disruption, crowdfunding, Mobile World Congress, cloud hosting, Africa and an open banking mobile app undoubtedly accelerated me on a path to some recent digital currency milestones.
By default governments retain ownership of employee IPR even though most national accounts do not include any employee IPR or goodwill from residents and expats — I had wondered if that would disrupt calculations such as GDP, not unlike the recently included drugs and prostitution numbers in the latest UK statistics.
I needed a different type of engagement to reflect intellectual property rights and digital assets accumulated to date with credit card funding and the opportunity cost of not switching to the private sector — something between an employee secondment, a sabbatical, a fellowship and a social enterprise non-executive directorship to fast forward the local ecosystem but with an IPR exemption — I’ve called the net result country growth hacking!
In January 2014, I started a 1 year specialist contract on open government and open banking with the Isle of Man Government and they were already an early adopter of the shift to tax transparency via USA FATCA and UK “FATCA” and committed to FoI/RTI legislation.
I was 1 of 12 from the IATI (International Aid Transparency Initiative) technical advisory group conference in Montreal at the World Bank supported Open Contracting Partnership fringe meetup next day on the draft procurement transparency standard, with open banking inspired input. To some extent the open bank project API is a mainstream bank version of the bitcoin blockchain.
Isle of Man footprint
TGBEX launched physical bitcoins as a tangible option to collect an inevitable bit of history or to easily and safely invest in offline bitcoin.
QwikBit installed a bitcoin ATM in a very popular pub, the Thirsty Pigeon.
CoinCorner have a live exchange and recently launched a wallet and installed a payment tablet that connects to the existing POS at the Thirsty Pigeon.
CoinKite POS is installed at the Java Express coffee shop. John Middleton also hosts a bitcoin awareness night on Monday night.
A leading local hotel, the Claremont Hotel, is pending installation of inbound bitcoin systems.
CrypArt commissioned original artworks with QR coded bitcoin wallets as the centrepiece and they now have an option to include your existing keys.
A significant handful of other businesses are already exploring bitcoin transaction technology.
A trade association, the Manx Digital Currency Association, helps co-ordinate the industry such as collated responses to government policy, draft legislation and regulator consultations and to promote the jurisdiction as a responsible well regulated centre of excellence in digital currency. The committee members are all active in the industry and indeed the secretary is former head of ebusiness at the Isle of Man Government.
bitcoin milestone: declaration of beneficial ownership of a bitcoin address on a public register
As I thought more about the regulatory context of bitcoin, centred on anonymous transactions and beneficial ownership, I decided on a “mystery shopper” strategy to flush out whether or not anyone could declare beneficial ownership of a bitcoin address at the Courts of Justice and then register the document as a deed on the public register at the General Registry.
On Monday 8th September the first draft was rejected by the Courts of Justice Commissioner for Oaths as it did not meet a prescribed format and I had to amend the draft document and try again. On Wednesday 10th September I arrived at the Deeds Registry and, after some discussion at the public counter and 2 internal legal opinions — a typical deed has a grantor and a grantee and they were uncertain if the system would be able to register the deed — but 2 days later I received the deed certificate by post:
I would definitely recommend some minor but legally significant amendments to the existing procedures, but the offline option demonstrated that a beneficial ownership public register could be delivered within weeks and with existing legislation, procedures and systems.
Isle of Man Crypto Valley Summit
Max Keiser happened to mention his connection to Hollywood Stock Exchange so I knew bitcoin would prompt some serendipitous collisions. I went to the UK Parliament weekend hackathon last November hosted by Rewired State to learn new skills, so I was totally stunned when our team of strangers went on to win with political crowdfunding platform Westminster Stock Exchange inspired by Hollywood Stock Exchange. It highlighted an unexpected core issue with the parliament API and government. MPs are accountable for government performance but government data is not widely available in geocoded datasets filtered by constituency.
At the end of day #1, Brock Pierce, serial investor in bitcoin companies and recently elected director of the Bitcoin Foundation, declared the Isle of Man the bitcoin capital of the world. He also wanted a photo of the deed and the declaration of beneficial ownership of a bitcoin address.
At the end of day #2, Chris Corlett, CEO, Department of Economic Development announced that the Isle of Man Government was the first national government to request expressions of interest in supplying digital currency payment processing. The culmination of my recommendation a number of weeks earlier to Peter Greenhill, ebusiness director at the Department of Economic Development, a coffee with Owen Cutajar, a test transaction via Firmstep AchieveForms and a strategy meetup with the CFO and CTO. Not easy, but easier in the Isle of Man.
On 22nd September, 4 co-founders (Graeme Jones, John Middleton, Adrian Forbes and Richard Owusu) incorporated Garigus Limited, the first corporate entity denominated in bitcoin in the Isle of Man and perhaps the world. It is expected that the company will allow the group to progress ecosystem upgrades and other digital currency projects. Of course, a public corporate bitcoin address could be considered equivalent to a crowdfunding platform!
welcome regulation and compliance
Most regulators are still in catch up mode with digital currency technology but the Gambling Supervision Commission, Financial Supervision Commission and the Office of Fair Trading are generally accepted to be ahead of equivalent regulators, although detailed documentation and consensus agreement on the regulatory framework, minimum standards and compliance requirements is not widely expected until 2015.
A regulator may need to consider that if a brand is already strong enough to reassure players, a licensed gambling operator could soft launch a temporary technology trial in an unregulated jurisdiction anyway just to quantify demand and any issues and then relocate to support faster innovation. Should the Isle of Man be somewhere “where you can” map possibilities?
For example, BetVIP claims to be the first licensed gambling operator to only accept bitcoin, with the systems licensed in Curacao and the company based in Malta.
Well, if regulators are struggling to keep up, so are the banks!
The Isle of Man has the same issue as other British jurisdictions — UK banks are reluctant to bank or simply reject a bitcoin company. Of course, a lot of bitcoin startups are just using a personal bank account but even that option could be squeezed out with the first tax filing.
I recently progressed a new mortgage with a more reasonable Santander after both HSBC, my bank of 15 years and never a missed mortgage payment, and LLoyds Bank were very worried about 1 “high roller” £100 gambling transaction on a football match banker with a subsequent profitable cashout transaction but did not comment on a £40 bitcoin transaction, despite millions of customers gambling more every week in offline casinos with ATM cash withdrawals. You have been warned, probably best to stop anything vaguely naughty now if you want to keep your bank account!
I have a pipeline of bitcoin milestones but bills to pay so I have a seed funding round in London on Wednesday and I have also invited offers on digital assets such as altETF.com, PlayAsYouGo.com (GoCoin igaming?), ChristianBanking.com and shairholder.com to accelerate ecosystem projects with unconditional self-funding.
In a week that ended with Yodlee listed on NASDAQ, a timely reminder that I really need to finalise the next micro funding round on banknotey.com, a unique payment process to instantly extend ebusiness to the unbanked, the underbanked and even the lazy banked, before my government contract ends on 31st December 2014!