What Regulators Think at OECD and Why it Matters; R3’s Regulatory Head Says Adoption Relies on Governments
What are the rules? For most blockchain companies and projects, the complex landscape of regulation and policy creates business risk, which impacts not only innovation but also ultimately, mainstream adoption.
But at OECD’s second Global Blockchain Policy Forum, regulators are increasingly becoming aware of the need for concerted efforts at every government and agency levels.
Forkast.News is in Paris, and Editor-in-Chief Angie Lau is helping lead the conversation among ministers, senior decision-makers, government leaders as they join experts, academics and blockchain industry leaders. We will be bringing candid conversations, insights and context to the discussions and comments from the very people who have the power to impact blockchain innovation.
More than 1700 attendees from around the world are discussing everything from preventing anti-money laundering and terror financing to developments of public sector use of blockchain. We are providing a deeper dive into what OECD members are discussing today, the conversations that seed the regulatory policies being formed, and how it will shape blockchain application and adoption in future.
- OECD Global Blockchain Policy Forum 2019 kicks off with France Minister of the Economy and Finance Bruno Le Maire declaring support for blockchain, while specifically targeting Facebook’s Libra project as a threat to monetary sovereignty of nations
- Isabelle Corbett, R3 Head of Regulatory Affairs and Public Sector Partnership,s says she’s assessing the “tone” of regulators at OECD to understand what is being viewed positively, and what is being viewed with caution, but is not discouraged by Le Maire’s remarks
- Corbett says gov tech is a way governments are applying tokenization from land registries to vehicle registrations
Listen to the podcast version
Angie Lau: Welcome to this special edition at the OECD Global Blockchain Policy Forum right here in Paris. I’m Forkast.News Editor-in-Chief, Angie Lau. This is really where thought leaders in blockchain industry sit alongside policymakers and regulators from around the world and really trying to figure out, and the word is figure out, what the initiatives in innovation are going to come as a result of these conversations that are happening right here in Paris.
It’s a pleasure for me to introduce to you right now
Isabelle Corbett. She is with R3. She is the Head of Regulatory Affairs and
Public Sector Partnerships at R3. So really, your vision and your leadership at
R3, as you talk to policymakers and regulators, are really critical to blockchain
adoption, from not only an enterprise point of view, but also a government
point of view. So welcome, Isabelle.
What are some of the key things that we should be watching
out, listening for, coming out of the OECD?
Isabelle Corbett: You
know, this is an agenda that is filled with some really interesting topics, and
they are all of the ones that we are discussing most. I would say, from my
perspective in this in this forum, we’re talking about gov tech and we’re
talking about regulation. And both of those things are what I spend all day,
every day thinking about and, learning about, and trying to educate about. So
when we’re talking about what we expect to see or what we should be looking
for, I would say one thing that’s really important is the tone that we’re
picking up from regulators about how technology should be treated, how
technology and cryptocurrency are different. How is something in between like
tokens should be treated? And then the other piece I would say that we’re
looking for is the gov tech element. So how should governments be thinking of
this? What should they be doing? Where should they be using blockchain?
Angie Lau: All right. Let’s pick up on the tone, because
Bruno Lemaire really kicked things off. Initially very encouraging, very
supportive of technology.
I think there is a recognition really amongst all nations
who have shown up here at OECD that there needs to be direct engagement. And
then came the very, I would say, aggressive tone that came out about this
threat to monetary sovereignty of states as a result of Facebook.
That’s the kind of tone that seems to contradict even
itself in terms of the regard to the technology. How are you perceiving it?
Isabelle Corbett: You
know, I perceive it the same way as you did. I mean, there is a very, very
clear tone about Libra, but I am not discouraged by that. In fact, I think that
a lot of people are applauding Libra in that it’s getting a clear reaction. And
in a world where we’re talking about new technology and regulators have been
somewhat hesitant to speak out about it over the past couple of years. But now we’re
seeing them be a little more clear about support of technology. But there has
been a lot of desire to have more clarity. And so what is Libra getting? Very,
very clear reactions. And I think that that is a huge benefit to them. And I
think that it is somewhat clarifying for the industry who is looking at crypto
Angie Lau: I don’t think it’s an accident that Facebook
is setting up its team in Geneva in very innovative regulatory space of
Switzerland. I was just there the past couple of days. That ecosystem seems to
be really wanting to innovate for the potential of technology like Libra.
Is that in conflict with the rest of the EU? Is that in
conflict with other policy makers in other jurisdictions — as people try to almost
jockey to figure out how much they’re going to embrace the technology and how
much are they going to set up guideposts?
Isabelle Corbett: So
I think that FINMA has been remarkably clear and thorough in the work that
they’ve done. I think that there is a lot of benefit to what they’ve said and
what they’ve put out there. Switzerland is a great place for innovation for a
lot of reasons, especially in the financial world. We’ve seen that Zug was out
there years ago saying we’re inviting innovation here. There are innovation
hubs in Switzerland, but that’s really a little bit more about cryptocurrencies.
Zooming out, I would say when you’re talking about crypto
assets, which is a much, much broader topic, you’re seeing a lot of input, a
lot of studies, lots of reports coming out, asking for input on crypto assets
and how they should be treated. You know, we saw that the FCA has put out a lot
on the topic. They asked for comments and put out a report. Those are really
helpful insights that we’re getting, because when you’re talking about crypto
assets, you’re talking about a world of tokenizing anything.
Isabelle Corbett: And
when I say anything that sounds kind of scary, it makes it sound like it could
be, your dog at home. No, I don’t mean that. I mean, tokenizing real estate. I
mean tokenizing gold, tokenizing securities. Those are all things that we’re
doing at R3. And the advantage of that is you can move them. You can move them
quickly. You can, in real estate, have partial ownership. And so you start to
get a lot of the benefits of blockchain when you tokenize assets, you move them
Angie Lau: That is certainly one of the key innovations
right now in this in this space. You’re seeing it firsthand, tokenization. How
are you working with governments and how are you working with jurisdictions as
you talk about another value proposition, possibly security- backed? I mean,
how do you define it legally? How is it as a financial vehicle? What are these
conversations like at R3 as you engage governments?
Isabelle Corbett: So
we engage with governments since the beginning. We knew when we were looking at
the technology to be used in regulated environments that regulators would be
absolutely key there. So we have been in conversations with regulators around
the world. In my first year at R3, I went to the home countries of every one of
our members and then we had about 50. So a lot of stamps on my passport.
And the conversations have really been, how are we using
blockchain? How are we using its tokens as assets, and then how can they use
it? And so we’re starting to see more and more interest from regulators on how
they can actually use the same things, the same tools that we’re using in the
private sector, in the public sector.
Angie Lau: So you’re
talking about not only talking to them about the rules, you’re also talking to
them about: Hey, how do you, as your own enterprise entity, also use
tokenization in doing the work of governments?
Isabelle Corbett: Yes, absolutely. Tokenization is one part of the
technology, one way that it can be used. It’s not the only way, though. So we
talked to governments about land registry. We have a couple land registry is
being built on Corda vehicle registration. A lot of supply chain. So there was
a PoC in the UK government on food safety and supply chain. So when you start
looking at that, and then you take that same supply chain, and you look at
things like medication or you look at things like parts for aircraft from the
Department of Defense, when they’re procuring those goods, they want to know
that they are the goods that they expect to be receiving and they meet the
quality standards before they put them in their aircraft and deploy that
aircraft. The tokenization piece is important, but registries, supply chain,
payments, a lot of intergovernmental payments like taxes.
Angie Lau: We heard
today the very strong words and obviously the very big interest amongst all of
these nations is the fact that how do we also participate in getting the fair
value back to states via taxes? How are you engaging in those taxation questions?
Isabelle Corbett: So
the taxation questions are largely focused on cryptocurrency. And that’s
understandable, right? Because you’re seeing a lot of value moving hands in the
cryptocurrency market. But when you’re talking about taxes on other use cases… So,
for example, I mentioned land registry. When you transfer land between parties
— that’s a tax event. Someone is paying taxes because they’re purchasing that
real property. That piece to me is interesting and it is essentially ready today
because we’re looking at these products that are moving land, that are
transacting on land. If you add a regulator node for the tax authorities so
they can see that transaction and know immediately what the tax liability is of
it — they can also receive that tax payment on ledger and that that is a
really powerful element.
Angie Lau: So when it
comes to R3, part of the enterprise solution that you’re offering to corporates
is really from a private point of view. And so let’s talk about that, because
it seems to be that we’ve talked about this dynamic between public blockchains
and private blockchains, and now it’s almost evolving past that. Can you tell
us about some of the conversations that you’ve had, even amongst the blockchain
community as how do you regard the private blockchain as it interacts with
public decentralized blockchains?
Isabelle Corbett: So
I would say what’s important about what we’re calling private here is identity,
right? Identity is absolutely core. You need to know who is doing what on the
platform. You need to know who you’re transacting with. And that’s really to be
in a regulated space and also to be appealing to regulators. For the public
sector to look at deploying technology, it’s unrealistic to think and we’ve
already heard that at least twice today, that that will be on a public
permission list ledger.
Angie Lau: And so do you think that adoption will come
from this hybrid, from this almost interoperability?
Isabelle Corbett: I
think that interoperability is something that will happen, and it will happen
because the market will demand it. The question is just who facilitates it?
Angie Lau: How is it being regarded in R3?
We have from the beginning said that interoperability was
going to be important because there will not be one ledger for all. That has
been recognized from the beginning. I think that that’s actually recognized
universally. I’ve not heard anyone say we think that there’s only going to be
one because they’re all different. So Corda, our platform, is designed uniquely
in several ways. Most importantly, it’s how it shares data. We have limited
data sharing, which makes it scalable. That also means that you maintain
privacy in your data. And so I think that the fact that Corda looks different
from others is a very clear reason why there will be multiple chains that
ultimately are successful. But the users of those chains may actually be the
same. Someone might use Corda for something, someone could use different
platforms, other use cases. They’re going to want that interoperability.
Angie Lau: And in
fact, you just announced working with MasterCard on this. Tell us a little bit
more about that project as I really see this as one example of a real-world
application that could potentially really change how things are done.
Isabelle Corbett: Sure.
Absolutely. We are really excited to announce that. And the reason that I think
that is so important is twofold. One is that it’s cross-border payments, and
that’s a huge opportunity for blockchain. MasterCard, a huge card player,
getting into blockchain, looking to solve this, using this new technology, is
amazing. The other piece is — we’re still largely associated with banks and
being a financial services institution, but we are far beyond that. Every time
that we have an announcement that is outside of traditional banking, that’s
really exciting for us because Corda is being used across industries.
Angie Lau: All right. Give us some examples. You have
about 20 Corda apps in production right now in terms of how it’s being utilized
and which industries are we seeing them in.
Isabelle Corbett: We
are seeing these applications go live in insurance. We have several in
insurance. Healthcare is also emerging, which is closely related in some ways.
We have supply chain, which is huge. I think that’s huge in government. That’s
also going to be huge in the private sector. Telco, oil and gas, government. I
mean, it’s a broad-use platform.
Angie Lau: And so that means you’re going to be very
busy because here in OECD, it really seems that we’re just the tip of the
iceberg here. We’re talking about taxes, we’re talking about sovereignty,
issues of monetary policy. And now you’re talking about different industries,
insurance, health. Those have completely different regulatory bodies. How do
you think this industry must think about even engaging those conversations as
we go down sub-layer to different regulatory bodies that regulate specific
Isabelle Corbett: I
think it’s simple. I think that the relevant regulators have to be in the
conversations from the beginning. That has always been our approach. Regulators
who want to know more, who want to get involved — we always invite them to
reach out to us. We will do our best to reach out to them, too. But when I
speak about technology and what it’s going to take to get applications live, I
say there’s the technology, there’s the business, and there’s the regulatory
aspect. And all three of those have to be thought through and addressed.
Angie Lau: Right now all we’re seeing is the industry and the
business. Are the regulators from health, from insurance, from
telecommunications. Are they starting to engage?
Isabelle Corbett: They are. Yes. So I just came from a telecom conference in Budapest earlier this week, and there were a lot of government bodies there. There were a lot of regulators. There is certainly more and more attention being paid by those regulators in particular industries. And we’ll continue to see an uptick, you know, as blockchain becomes more and more of an undeniable reality. We get more and more inbound.
Angie Lau: I know that you probably speak from a very
specific point of view at R3. But for future blockchain startups or even the
startups that exist in the industry today, how much should they be thinking
about these regulatory conversations and are they critical to sustainability?
Isabelle Corbett: They are critical. I think that it is
important to think about as you go to design a product, you need to be thinking
what are the regulatory implications of this? That should be one of your first
questions. Because if what you’re building requires registration, will be
regulated, you need to be in there with regulators to make sure that your
business is viable.
Angie Lau: Last but not least, tell me what you hope to
learn from the OECD as you engage in these workshops and forums. What do you
think the most critical thing that will all take away from these conversations
will be in Paris?
Isabelle Corbett: I think that what’s most critical
for us is exactly what we started this conversation with, which is about tone.
What is the tone? What is the message? What is being viewed positively? What is
being looked at with caution and what we hear? A strong note you likely read
this morning. All of these conversations are kind of on a continuum. So that
tone really matters. So far, we’ve seen a very positive tone towards blockchain.
Angie Lau: Isabelle, a pleasure. Thank so much.