Industry Regulators Struggle WIth Platform Innovation

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    March 27, 2018 at 05:11
    Once a new technology rolls over you, if you’re not part of the steamroller, you’re part of the road.
    Stewart Brand

    Crypto-platforms are beginning to disrupt several regulated industries. Blockchain-based platforms remove intermediaries and also eliminate the need to reconcile conflicting data. As a result, new products and services are quickly being instituted. While businesses scramble to keep up, industry-based regulatory agencies retain rules that might be considered obsolete. Below are three industries that are presenting challenges to accepted rule-making bodies.

    Crowdfundng Platforms & The SEC

    Perhaps no other blockchain-related industry has received more scrutiny from international regulators than the ICO field. At present, the SEC has is actively attempting to stop prospective ICOs. And yet, several crowdfunding platforms have launched to support these ICOs. For instance, Indiegogo and Republic are traditional crowdfunding platforms are now venturing into the token fundraising field. In contrast, Cryptstart is a Waves-based crowdfunding platform devoted solely to helping crypto startups. Others, like Tokenly and FundYourselfNow, have secured a viable market niche within the crowdfunding field.

    The SEC is certainly fine with offering regulations for crowdfunding platforms in general. With regard to token-based fundraising, the situation is a bit murkier. Earlier this month, the SEC issued a public statement warning that there are potentially unlawful online platforms for trading digital assets…

    ….notably the coins and tokens offered and sold in initial coin offerings. “If a platform offers trading of digital assets that are securities and operates as an ‘exchange,’ as defined by the federal securities laws, then the platform must register with the SEC as a national securities exchange or be exempt from registration,” the SEC said. A national securities exchange or one that operates under an exemption must have rules designed to prevent fraudulent and manipulative acts and practices, the SEC said (MarketWatch).

    It’s not clear yet how far the SEC will go to rein-in token sales..The SEC asserts that tokens marketed with the potential for profit “based on the entrepreneurial or managerial efforts of others continue to contain the hallmarks of a security under U.S. law” (SEC Statement). In contrast to cryptocurrencies, platforms are more susceptible to this ruling (outside of ICOs).

    Healthcare Platforms & HIPAA

    Within the healthcare industry, many health-related ‘platforms’ appear to be forks based on the Ethereum platform (see WELL, Health Nexus). As such, they employ smart contracts as a way to connect healthcare service providers and patients. Other platforms are open-solution and heatlhcare-specific (such as GemOS), allowing for easy integration with Ethereum and other platforms.

    [​IMG]And being a platform, they may offer utility tokens related to their particular niche. For instance, WELL offer tokens to facilitate on-demand health care by enabling cross-border payments, data accessibility and payment risk. The latter is particularly germane to remaining HIPAA compliant (HIPPA requires medical providers to supply patients with their healthcare records upon request).

    In contrast, a more robust healthcare platform might incorporate several advanced blockchain-related technologies for achieving HIPAA compliance. For instance, the Health Nexus platform emphasizes a key-pair system for secure data sharing, a distributed database system for distributed storage, and a new validation and governance protocol. The latter involves enabling a governance consortium the capability to validate and verify (proof-of-stake) miners in order to make sure they’re HIPAA compliant.

    Its these urges to stay compliant with centralized authorities that are at odds with blockchain decentralization efforts. Nonetheless, expect healthcare-related platforms to dramatically impact healthcare operations in the near future. As Hashed Health observes::

    Centralization, consolidation and ever-widening control of healthcare networks has been the dominant business strategy for the industry for decades, especially since the introduction of the Affordable Care Act. Business success in healthcare has primarily come from ever greater control of value chains focusing on covered lives, pharmaceuticals, claims, specialty networks, outpatient facilities, and supplies. It is clear that too much value is being extracted by value chain participants today. An open blockchain solution exposes these relationships and forces re-intermediation with lighter, more nimble value-adding actors. The uncomfortable question that blockchain technology poses for the healthcare industry is the unconventional yet tangible opportunities that open, decentralized networks offer for true value-added healthcare services.

    The present regulatory health care system will not easily fold to these new and open blockchain platforms. Regulators will be forced to adapt however as they advance. THis is especially true with regard to how they ensure patient privacy. Fortunately, crypto-platforms enable developers to build a variety of new and useful products upon it.

    Insurance Platforms & GRDP

    Unlike healthcare & the securities industry, the regulatory requirements involving the insurance industry are relatively minimal. The most important among these are the KYC (Know-Your-Customer) and AML (anti-money-laundering) requirements. The former is associated with formally on-boarding insurance customers (via data entry and an extensive verification process). The latter involves carefully monitoring transactions. Both requirements can be dramatically minimized using blockchain technology.

    Nonetheless, how might a platform minimize KYC/AML requirements? Galileo Platforms, a blockchain-based platform technology company serving the insurance sector, suggests that a “single operator, possibly on behalf of a consortium of insurance companies, would manage and enable the registration, KYC/AML and on-boarding” all at once (Galileo Platform).

    Consider IXLedger, which bills itself as the first fully-fledged blockchain-based platform for managing insurance products. The company promotes itself as a

    marketplace where all the parties to the Insurance sector gather and choose their services as they seem fit. These parties are Insurers, Insurance Companies, Brokers, and Re-insurers. This platform provides them an interface where they can buy and sell their insurance related products like Insurance Policies, Bonds, Contract and much more.”

    Being a platform, IXLedger can produce tokens that can be used to make payments for insurance products and services (steemit). Expect these disintermediation effects to have far-reaching consequences.

    [​IMG]Still, regulatory-body rule-making continues unabated. As with other blockchain-related companies, IXLedger has found instituting the EU’s new General Data Protection Regulation (GDPR) fairly challenging.. When implemented in May, GDPR will allow customers to request removal of their personal data. This contradicts the blockchain’s immutability nature.

    In order to comply, IXLedger will be storing data access permissions on the blockchain and actual data off-chain (Medium). One wonders if the technical challenges presented with this rule will somehow encourage greater platform use.


    Obviously, most regulators appear to be just now catching up with the power of platforms. Not incidentally, its platforms that will have a tremendous impact upon the crypto-scene this year.

    XTRABYTES plans to be one such company. Its advanced technology modules may very well impact each of the industries above. Depending on its features, X-CHANGE (a decentralized exchange) might very well serve as an alternative to crowdfunding site and ICOs. Likewise, future modules X-PAY and X-VAULT may offer unique and worthy features amenable to the insurance and healthcare industries, respectively. With a code-agnostic platform like XTRABYTES, product innovation can be continual.

    The post Industry Regulators Struggle WIth Platform Innovation appeared first on XTRABYTES Today.

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