The first day of the Cyber Days conference at UCLA was full of enthusiastic speakers with a passion for blockchain technology.
For the talk entitled "Refugees, Unbanked, and Undocumented," blockchain advisor and investor Michael Trainer shared the stage with UCLA professor Bhagwan Chowdhry, who played the role of moderator.
In comments to ETHNews after the presentation, Trainer summed up his onstage remarks as an exploration of the potential for social impact via the blockchain. The technology is too nascent to have any earthshaking consequences today, he said. Because the tech is in what he called its "ideation" stage, technology watchers of 2018 are not well positioned to accurately predict what use cases will prove impactful. However, he maintained that the blockchain will eventually become "unequivocally disruptive."
He did note several use cases, however, some of which have been developed to varying degrees and others of which are currently nothing more than ideas.
- Microlending, would be fairly easy to implement on a blockchain-based platform.
- Blockchain integrated supply chain metrics could eventually enable farmers to track their goods across the globe.
- A kind of blockchain-integrated system could allow business entities to pay individuals (in either fiat currency, digital assets, or some other kind of commodity) for attention paid or services rendered.
Trainer opined that technology is "agnostic" and the impact it has on the world depends on the good or bad intentions of those developing and using it.
He noted that one major challenge companies will face in implementing blockchain-based services will be the allowance of users to control which aspects of their digital identities are shared with whom, and on what terms.
Another discussion, was called "Blockchain, Cybersecurity, and Autonomous Vehicles," featuring Grayson Brulte, the co-chair of the City of Beverly Hill's Autonomous Vehicle Taskforce; Rajiv Phougat, the CTO of automotive, aerospace and defense industry solutions with IBM; and Michael Morgan, the leader of global privacy and cybersecurity practice with the law firm McDermott, Will, and Emery. It was moderated by Jonathan Fairtlough, a managing director with Kroll's cybersecurity and investigations practice.
Morgan spoke on the need for thoughtful regulations to govern the development of autonomous vehicles. According to Brulte, the US and China are engaged in an autonomous vehicle technology arms race and the US, which is already years behind, continues to lose ground.
With regard to technical challenges, Phougat said that an autonomous vehicle relies on many more lines of code than an airplane does, which translates into more potential vulnerabilities. He said that the blockchain may be useful in authorizing and authenticating software updates before they are implemented in actual vehicles. IBM is currently exploring blockchain solutions to connect private entities, like cars, and public entities, like cities, for the payment of parking fees and highway tolls.
Morgan also suggested that blockchain technology, with its potential to host consumer profiles, can provide crucial support to a future of autonomous vehicles in which rates of vehicle ownership are significantly lower than they are today.
The last talk of the day was named "Finding the Balance Between Regulation and Innovation." It featured Steve Masur, a partner at the law firm Masur Griffitts, which serves tech firms; Greg Gilman, the founder of the tech incubator, accelerator, and venture fund Science Inc; Adam Ettinger, a partner at Sheppard Mullin, where he and a colleague run the law firm's blockchain group; Kelsey Lemaster, a partner at the law firm Goodwin Procter, where he specializes in tax issues; and Amy Wan of Sagewise as a moderator.
The wide-ranging discussion began with the question of whether so-called utility token cryptocurrencies simultaneously operate as securities.
A utility token, Masur explained, fulfills some practical purpose within the blockchain network to which it is native. Last week, he said, the Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission expressed the opinion that they don't have total jurisdiction over the cryptocurrency space, and that within the space, their mandates overlap to a certain extent. In Masur's estimation, digital asset tokens represent a new asset class.
Gilman said that a token's definition as a security often has to do with the way it's sold to investors. Ettinger elaborated on this point, saying that the SEC recently issued a cease-and-desist order to a company holding an ICO on the grounds that certain representations made to investors positioned the token as a means to turn a profit. The regulatory agency, he said, wants to dissuade any public notion of a "magical line" between utility and security tokens. A true utility token, in his view, would be something analogous to tax software, in the sense that one buys it only because of the practical purpose it serves and not because of any possible value that it might hold outside of that narrowly defined purpose.
Ettinger also pointed out that each state has different money transmitter requirements for licensing, so if a token is deemed a security, that can imply a range of consequences for the entity issuing it.
On the subject of taxation and ICOs, Lemaster said that if a company raises funds in the form of cryptocurrencies and those tokens' values plummet by the time tax season rolls around, the firm will nonetheless owe taxes based on the dollar value that the tokens held when the firms received them. He also pointed out that individuals using virtual currencies to invest in ICOs will be taxed as though they sold those spent tokens, not as if they used them as a means of payment.
During the Q&A which followed the talk, Lemaster addressed questions around taxes on airdrops, which can be seen in two ways:
- As income, such as the kind one amasses when catching a valuable home run ball in the World Series.
- In terms of the precedents set in cases involving book reviewers: If a person takes ownership or control over the books by giving them away or assimilating them into their personal library, they can be taxed on them. Likewise, if a person spends tokens acquired via an airdrop, those tokens will be taxable. But if they simply hold them, they may not.
In the case of hard forks, Lemaster explained one perspective holds that gains are to be considered found money, taxable immediately upon receipt. But it could also be argued that a fork in a blockchain is equivalent to dividing one's house in two, which would not alter a person's tax obligations.
Asked where the US fits into the future of the blockchain space, Ettinger said that he does not expect to see much meaningful regulatory change in 2018. The internet boom of the mid and late 1990's, he said, was centered in the US, thanks in part to legislators engaging with the task of passing regulations that fostered innovation. In his opinion, legislators today are not working as fervently to support blockchain development.
In his view, smart people with capital, who have the ability to bankroll innovative projects and the knowledge bases to execute them, must advocate on behalf of these projects and get the public invested in seeing them realized. For the US to play a leading role in the blockchain space, he said, the American public must agitate for legislation that fosters blockchain development.
Earlier in the discussion, Gilman had noted that Gibraltar, Japan, and Estonia are establishing regulatory regimes much friendlier to blockchain businesses than those in the US.