The next frontier for disruption? Public services powered by AI and Blockchain technology.

This week Europe’s first GovTech Pioneers event was hosted in Vienna at the Palais Wertheim. Ahead of the conference which begins today. Bringing together leading politicians, startups, corporations, VCs and Public CIOs, the event aimed to introduce start-up driven innovation in the public sector.

GovTech Pioneers brought together leading politicians, startups, corporations, VCs and Public CIOs to introduce start-up driven innovation in the public sector
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Attendees had the chance to meet the innovators behind a $400bn market and learn more about the latest trends in Citizen Collaboration, Blockchain and Security. Speakers included IDEO Portfolio Director Peter Jackson, whose talk covered how design can push governments forward, and Stonly Baptiste of Urban-X, who joined a discussion about accelerating GovTech startups.

If there is a service out there that is better, people will go for it. And if your government isn’t willing to change, then for you winter is coming
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With data and privacy a hot topic, it isn’t surprising to see that the winner emerging from the event’s start-up competition was Fleksy – which offers a secure keyboard that it licences to governments to protect their internal mobile communications. The Barcelona-based company ultimately saw off competition from over 350 startups, hailing from 65 countries and four continents, which applied for GovTech.Pioneers. Of the 100 selected to attend, who travelled to Vienna from four different continents, 24 were selected to pitch in four different tracks. These were Citizen Collaboration, Blockchain, Public Safety & Security, and an Overall Govtech Solutions track.

Attendees had the chance to meet the innovators behind a $400bn market and learn more about the latest trends in Citizen Collaboration
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There will be a terrestrial part of government and a virtual part. A country like Estonia has recognized there is this part that does not need to be tied to a land mass
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The audience also heard from some individuals charged with leading the digital revolution into action at both national and European level. Among them were Margarete Schramböck, the Austrian Federal Minister for Digital & Economic Affairs, and Peteris Zilgalvis, Head of Unit, Startups & Innovation, Digital Single Market, DG CONNECT at the European Commission.

Former Estonian Government CIO Taavi Kotka explained how his nation empowered individuals to take control over their data while also linking disparate systems which were previously in silos.

“There will be a terrestrial part of government and a virtual part. A country like Estonia has recognized there is this part that does not need to be tied to a land mass – and other countries are starting to recognize that. Governments are realizing that they are going to start to compete with each other like businesses.”

Sharing your data does not mean giving up your privacy. It actually gives you more control if done right. @taavikotka talks about the Estonian case study at #GovTechPioneers pic.twitter.com/FefzVIvOxl

— Alice Bonasio (@alicebonasio) May 23, 2018

“Government services should be seamless,” he said, using the example of child support payments being made to a mother automatically as soon as a child is born. “We have all the facts; we just need to connect them,” Kotka added.

Another speaker providing an interesting perspective was Carrie Bishop, who oversees the digital strategy for the City of San Francisco and contrasted the different approaches between the US and UK in designing governmental structures.

“All over the UK we’ve seen a 30% cut in funding for public services, and you only deal with that by automating,” she said, revealing that at least some parts of Europe are well ahead of the USA when it comes to government technology. “Such economic pressures don’t yet exist in San Francisco, so we’ve only just begun our journey there.”

We have all the facts; we just need to connect them. Government services should be seamless
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One of the most t thought-provoking and popular sessions of the event was delivered by Tim Draper who was an early investor in companies such as Skype, Baidu, Twitter and Tesla. Wearing an eye-catching Bitcoin tie, the legendary tech VC explained how blockchain disruption extends well beyond cryptocurrencies.

Decentralized systems could take over government functions such as currency regulation systems and healthcare
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In future, according to his vision, decentralized systems will take over government functions such as currency regulation systems and healthcare. That could be a good thing too, allowing our elected representatives and civil servants to focus on other aspects of government such as providing infrastructure, security, or waste management.

“By combining Bitcoin, Blockchain with Smart Contracts and Artificial Intelligence, we could create the perfect bureaucracy,” he said. Things like insurance, health care, and the real estate industry all offer a terribly poor service at a high cost, he explained during his keynote. But in a world where technology is breaking down geographical barriers, those governments will be forced to compete for citizens by providing better-value services. Which is why Draper himself has chosen to become a virtual citizen of Estonia.

Kotka echoed Draper’s sentiment that the arrival of virtual services means governments are now entering a competitive era.

“If there is a service out there that is better, people will go for it. And if your government isn’t willing to change, then for you winter is coming. And for a country like Estonia, that will be a perfect storm.”

“As a venture Capitalist I’m always looking for places where they’re providing the worst service at the highest cost” those are the sectors ripe for technological disruption #GovTechPioneers pic.twitter.com/ztfIOqsdLb

— Alice Bonasio (@alicebonasio) May 23, 2018

For companies looking to get into Immersive technologies such as VR/AR/MR/XR our Virtual Reality Consultancy services offer guidance and support on how best to incorporate these into your brand strategy.

Alice Bonasio is a VR Consultant and Tech Trends’ Editor in Chief. She also regularly writes for Fast Company, Ars Technica, Quartz, Wired and others. Connect with her on LinkedIn and follow @alicebonasio on Twitter.

The post The Future of Government is Virtual appeared first on Tech Trends.

Crypto currencies like Bitcoin and Ethereum continue to soar and interest in blockchain is at an all-time high, but can we regulate this brave new world?

By Alex Larsen CFIRM, Institute of Risk Management (IRM)

According to Reuters: “Japan’s financial regulator said on Friday it had ordered all cyrptocurrency exchanges to submit a report on their system risk management, following the hacking of over half a billion dollars of digital money from Coincheck.”

Crypto currency has been a booming market with increases in some major coins in the high 1000’s of percent over the last year
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Whilst the whole premise of blockchain technology and crypto currencies revolves around it being essentially unhackable, the exchanges that trade these currencies are vulnerable. The introduction of system risk management (which we assume to be risk management of the software/operating systems and servers) checks is a step forward for the cryptocurrency space although it only covers one area of exposure linked to the cryptocurrency market.

History of incidents

Crypto currency has been a booming market with increases in some major coins in the high 1000’s of percent over the last year. This rise, coupled with a lack of regulation, has seen the crypto currency world being hit with a number of negative incidents from Ponzi schemes to fraud, scams and hacking incidents.

Bitconnect, which as of writing of this article, is trading at roughly $8.60, a huge fall from its height of over $300 a month ago, is an example of a potential major Ponzi scheme which has lost $2.4 billion worth of value over 10 days.

Most banks and stock exchanges are required to hold a certain amount in reserves in order to survive any major downturn or crash. This should be the case for crypto currency exchanges too
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The subpoena by US regulators of crypto exchange Bitfinex and its relationship with Tether is another concern to the crypto currency market with many claiming Tether to be a scam. Tethers are tokens backed by US dollar deposits, with each tether always worth one dollar. These tokens should be backed by dollars but thus far the company has yet to provide evidence of its holdings to the public and has not had any successful audits as of yet.

There have also been a large number of Initial Coin Offerings (ICO’s), used to raise money for startups by issuing tokens/coins, which have raised vast sums of money only for the owners to disappear with all the money, whilst others have been less deliberate but have been just as devastating to investors. A cryptocurrency called Tezos, raised $232 million last year, but suffered internal power struggles which has left the project in disarray.

Tethers are tokens backed by US dollar deposits, with each tether always worth one dollar
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This brings us to the current concern in Japan of cyber attacks of exchange platforms. Cyber attacks and hacking attempts of exchanges have been frequent with Bitfinex, coinbase and kraken amongst others having been closed down for days at a time during 2017 due to a number of hacking attempts. It is the successful hacking incidents which are the most worrying however, with successful hacks such as MT Gox, which cost almost 350 million and two attacks on Youbit which led to it’s bankruptcy. The most recent coincheck hacking was worth 500 million, a record, and it is this which has caused Japan to act.

Cyber attacks and hacking attempts of exchanges have been frequent with Bitfinex, coinbase and kraken amongst others having been closed down for days at a time during 2017
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Regulation

Last year, China took a definitive stand on regulation on crypto currencies which sent shockwaves through the market. Some feel it was perhaps heavy handed with ICO’s being banned, bank accounts being frozen, bitcoin miners being kicked out and nationwide banning on the internet of cryptocurrency trading related sites. Others however believe that it has been a positive step, and has encouraged other governments to take regulation seriously and hopefully take a more balanced approach. It certainly isn’t in the interest of governments to stop ICO’s, which provide many positives including innovation, but they should certainly regulate them from a consumer protection, taxation and organised crime standpoint.

Last year, China took a definitive stand on regulation on crypto currencies which sent shockwaves through the market
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Implementing regulation also removes uncertainty for investors as well as the companies who are involved in ICO’s. Uncertainty is the source of many risks and often a negative certainty is better than uncertainty as it allows a focus within set parameters.

It’s important to remember that too little regulation doesn’t offer protection and too much stifles innovation.

How to regulate

There are a number of ways to regulate cryptocurrencies and the following are just some examples:

1)     Framework for ICOs

New ICO’s are currently not subject to much in terms of regulation globally. One of the problems is determining how they should be treated with some being considered securities. As a fund raising vehicle, there could certainly be a framework that lays out key requirements of an ICO such as a company needing to be registered in order to issue a token, transparency in terms of individual members of the registered company as well as perhaps introducing a few requirements that regular IPO’s require such as implementing risk management. Currently in USA, ICOs are expected to adhere to Anti Money Laundering (AML)/Know Your Customer (KYC) practices.

2)     Regulate exchanges

Exchanges, which is where much of the transactions take place in terms of trading coins, is a logical area of focus when it comes to regulations

South Korea’s financial services commission for example, has stated that trading of cryptocurrencies can only occur from real-name bank accounts. This ensures KYC and AML compliance. According to the FSC, the measures outlined were intended to “reduce room for cryptocurrency transactions to be exploited for illegal activities, such as crimes, money laundering and tax evasion,”

Regulators should focus on regulation that encourages transparency and minimises anonymity
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1)     Tax Laws

Clarity needs to be brought into the tax laws in terms of when investors should pay capital gains. The USA has been quite quick to ensure that crypto-to-crypto transactions are now taxable and not just crypto to Fiat currency transactions. This is not the case in the UK however, where things are less clear and will become even more so, once crypto currencies start to introduce dividend like behaviour.

2)     Reserve requirements of exchanges

Most banks and stock exchanges are required to hold a certain amount in reserves in order to survive any major downturn or crash. This should most certainly be the case for crypto currency exchanges too especially considering the volatility which sees crashes of 60% several times a year with some crypto currencies falling 90% before recovering. This is also known in part as systemic risk which could be what the Japanese financial regulator defines as system risk.

3)     System risk management

As we have seen from this Japan story, one way of ensuring more protection and reliability is by ensuring there is regulation around system risk management on exchanges. There should be minimum requirements protecting against hacking, phishing and other cyber related attacks. The requirements could be scaled against value of the exchange, number of users or number of daily transactions.

There are a number of ways to regulate cryptocurrencies
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It’s important to note that much is being done to reduce the risks of hacking incidents such as the concept of a decentralised exchange. This would essentially be a crypto currency exchange on the blockchain, much like the crypto currencies themselves. This would reduce hacking significantly and whilst it is not currently practical, it could be the standard of the future.

Self-Regulation

The Crypto Currency market gets a lot of negative publicity and much of this could be rectified if there was more self-regulation. It would also reduce volatility within the market and bring about positive change. This refers to both exchanges and ICO’s alike.

The Crypto Currency market gets a lot of negative publicity and much of this could be rectified if there was more self-regulation
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The Japan Blockchain Association (JBA) for example has established self-regulation standards which includes the use of cold wallets amongst its 15 crypto exchange members (of which Coincheck was one of them) and are now looking to strengthen the standards further following this recent incident.

Even the most optimistic investor should at least consider that cryptocurrencies are a speculative bubble that could burst
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Risk Management in the Crypto Currency Space

Risk Management, as with all organisation’s, plays a vital role in meeting and exceeding objectives whilst providing resilience and stakeholder confidence. Exchanges and companies that are raising/have raised ICO’s should ensure that Risk Management is part of their business. Identifying risks and opportunities, assessing them and implementing response plans should be standard. Cyber risks, reputational risks, operational risks, system risks and strategic risks should all be considered and prepared for, which would minimise market disruption and reduce the likelihood of financial ruin. At the very least they owe it to the investors who have funded them.

Exchanges and companies that are raising/have raised ICO’s should ensure that Risk Management is part of their business
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For investors, with volatility so high, the rewards are great but so are the risks. Investors should ensure that they only invest what they can afford to lose, do their due diligence on their investments which includes understanding the technology, the team and look for a prototype rather than a wild concept. Additionally, investors should always be on the lookout for phishing scams and suspicious emails.

Finally, even the most optimistic investor should at least consider that cryptocurrencies are a speculative bubble that could burst.

Find out more about IRM’s Strategic Insights into Cyber Risk Course and more here.

The post Expert View: Regulating Crypto Currency Markets appeared first on Tech Trends.