Category Archives: Distributed Ledger

Distributed Ledger Technology

Will 2017 be the year that Blockchain is Regulated ?

There’s a certain inevitability that when regulators take a sufficient interest in something then they’ll attempt to regulate it “just in case”.  This could turn out to be the case given the fervour of overt interest being expressed by regulators around the World to “better understand the technology”.

The US Financial Stability Oversight Council (FOSC) 2016 report[1] sets the scene with a statement that “Like most new technologies, distributed ledger systems also pose certain risks and uncertainties which market participants and financial regulators will need to monitor. Market participants have limited experience working with distributed ledger systems, and it is possible that operational vulnerabilities associated with such systems may not become apparent until they are deployed at scale”

In early 2016, the Global Financial Stability Board (FSB), membership of which comprises central bank governors and financial regulators from the world’s major economies announced that it wanted to better understand blockchain[2].  The 2017 plan explicitly calls out Fintech issues[3], including “issues for authorities in the use of distributed ledger technology”.

Later in March 2016 the US Commodity Futures Trading Commission (CFTC) Commissioner J Christopher Giancarlo observed[4] (in a personal capacity at a blockchain conference) that “Much like the Internet, U.S. and foreign regulators must coordinate to create a principles-based approach for DLT oversight in order to provide the flexibility, certainty and harmonization necessary for this technology to flourish”.

At the end of March 2016, the US Securities and Exchange Commission (SEC) included a statement[5] that “One key regulatory issue is whether blockchain applications require registration under existing Commission regulatory regimes, such as those for transfer agents or clearing agencies”.

At the beginning of June 2016 the European Securities and Markets Authority (ESMA) published a discussion paper[6] “The Distributed Ledger Technology Applied to Securities Markets”.  As with other regulators, its target audience was “This discussion paper is meant to be read by technologists such as Fintech companies and any financial institutions interested in the use of the Distributed Ledger Technology (DLT) in securities markets such as banks, central counterparties, central securities depositaries, custodians, asset managers, investors, etc”.  ESMA has gone on to produce a number of other papers, reports, etc. which can be found at

The UK Financial Conduct Authority (FCA) has been able to be on the inside track with the emerging opportunities that Blockchain/DLT thanks to the number of blockchain projects being undertaken under the umbrella of the Project Innovate regulatory Sandbox programme.  Of the first cohort of 18 participants selected in 2016, nine were blockchain/DLT based[7].  The second cohort, at the time of writing, is yet to be announced but is expected to include further blockchain-based projects.

The US State of Illinois formed a consortium of state and county agencies in November 2016 known as the Illinois Blockchain Initiative.  It soon after issued a Request For Information[8] (RFI) “Distributed Ledger and Blockchain Applications in the Public Sector” from which responses were collated in January 2017 and a series of presentations were scheduled for February and March.

Also in November 2016, the Monetary Authority of Singapore (MAS) announced[9] that it was partnering with R3 on a Proof of Concept (PoC) to conduct inter-bank payments using blockchain technology.

In December 2016, a speech by Yves Mersch, Member of the Executive Board of the European Central Bank (ECB), at the 22nd Handelsblatt Annual Conference on Banking Technology described[10] what the role and relevance of the ECB was in relation to Distributed Ledger Technology.  He included the observation that “Whether or not we will overestimate distributed ledger technology (DLT) in the short run and underestimate it in the long run remains to be seen. However, I am sure we can agree that DLT currently stands in the limelight”.  There was also an announcement[11] that the ECB and Bank of Japan were embarking on a research project around DLT.

At the end of 2016, the US Federal Reserve published[12] a paper “Distributed Ledger Technology in payments, clearing and settlement”.  This was produced by teams from the Federal Reserve Board as well as the Federal Reserve Banks of New York and Chicago and took input from over 30 public and private sector respondents.

Getting 2017 off to a good start, the US Financial Industry Regulatory Authority (FINRA) issued a report[13] “Distributed Ledger Technology: Implications of Blockchain for the Securities Industry”.  This was very much in line with the various other papers that regulators have produced in order to elicit views – “This paper is intended to be an initial contribution to an ongoing dialogue with market participants about the use of DLT in the securities industry. Accordingly, FINRA is requesting comments from all interested parties regarding all of the areas covered by this paper”.

There’s an argument that regulators can’t properly regulate something that they themselves are part of and so it’s interesting to see that in In February 2017, Hong Kong’s Securities and Futures Commission announced[14] that it had joined R3CEV.

The February 2017, International Organisation of Securities Commissions (IOSCO) report[15] on FinTech included an entire chapter on “Distributed Ledger Technologies (DLT), including application of the blockchain technology and shared ledgers to the securities markets”.

At the beginning of March 2017, the Monetary Authority of Singapore (MAS) and the Abu Dhabi Global Market (ADGM) reached agreement[16] to provide reciprocal insight into the legislative landscape in which  “Both Authorities will also undertake and explore joint innovation projects on the application of key technologies including digital and mobile payments, blockchain and distributed ledgers, big data, flexible platforms (API), and other new technologies.”.

In March 2017 the Australian Securities & Investments Commission (ASIC) published “Information Sheet 219”  about evaluating Distributed Ledger Technology[17].  Compared to other regulators, this publication was somewhat less nuanced and gave somewhat clearer guidance around DLT and its use.

Later in March 2017 the US Illinois Department of Financial and Professional Regulation became the first US State regulator to become a member of the R3CEV consortia[18].

At the beginning of April 2017, the European Central Bank stated in its report[19] “Technological innovation: Distributed Ledger Technology (DLT) – challenges and opportunities for financial market infrastructures”  that blockchain “lacked the necessary maturity to be part of its market architecture”.

The UK FCA, akin to the Illinois initiative, launched a discussion paper in April, 2017 “DP17/3: Discussion Paper on distributed ledger technology”[20] to elicit comments about the future of DLT and what the associated regulatory requirements may be.

April 2017 proved to be a busy month of announcements and a speech[21] by Mark Carney, Governor of the Bank of England “Building the Infrastructure to Realise FinTech’s Promise” was very supportive of Distributed Ledger Technology, with a point made that “New technologies could transform wholesale payments, clearing and settlement. In particular, distributed ledger technology could yield significant gains in the accuracy, efficiency and security of such processes, saving tens of billions of pounds of bank capital and significantly improving the resilience of the system”.

Later in April 2017, the European Commission has announced[22] that it is funding an observatory and forum to help it understand what role authorities should play in supporting (or controlling) the adoption of the technology.

Around the same time in April 2017, the Malta Government announced[23] that they were developing a National Blockchain Strategy.

So, will the Regulators demand that blockchain is regulated?  There’s some really interesting dynamics here as regulators don’t usually regulate a technology itself but do choose to regulate its use.  As an example I often use, regulators don’t control the use of Microsoft Excel or Oracle Databases but they do have oversight of the processes and procedures that use the technologies.  It’s possible therefore that regulators may play by the same rules , or that they may attempt a land grab and state that blockchain, DLT and Smart Contracts introduce systemic risks.  If the latter occurs then we’re likely to see an increase in regulatory arbitrage whereby some organisations may choose to (re-) domicile their technology platform or business operation in order to benefit from the most favourable regulatory regime.

Gary Nuttall

Managing Director, Distlytics Ltd
























Blockchain? …..#DYOR – Beware of Scams!

There are two professions that regularly seek a first mover advantage in emerging markets and can be used as a signal that something is growing into an opportunity to make money…..

The first is Lawyers. They get early exposure to emerging technologies as they help with patent protection and registration, company funding and formations, act as advisors on contractual agreements, etc.   They’re therefore well positioned to see what’s coming and form strategies to then turn these emerging ideas and markets into revenue streams.  When you see lawyers showing an interest in something, it’s likely they’ve figured out that there’s potential to make lots of money.

The second “profession” to watch is criminals as they’re also very good at turning technology innovations into revenue streams. The growth in Cyber-Risk insurance is testament to the realization that criminals are increasingly using cyber techniques to commit theft, fraud and embezzle money from individuals and companies.  The theft of an estimated $450 Million worth of Bitcoin from Mt Gox (a major Bitcoin exchange) is well known and frequently cited as to why Bitcoin can’t be trusted.

There’s a lot of developments going on in blockchain / distributed ledger currently and I attend an ever increasing number of events on the topic in order to keep up to speed. There’s more and more developer drop-ins, hackathons, breakfast briefings, presentations, invite-only roundtables and forums and it would be pretty easy to become an event junkie and live on the free breakfasts, beer, wine, canapes and pizza.  There’s also growth in the paid arena too, with organisations selling tickets for conferences and companies providing training courses in the various technologies.

I keep an eye out for events held in London and regularly scan the likes of Linkedin, Twitter, Eventbrite and Meetup. A posting on LinkedIn caught my eye:

Scam Forum Announcement

I took a look at the event website and it looked like a really packed agenda, with some well known technology names presenting and sponsorship from several large financial institutions, consultancies and vendors. To quote the site ““more than 60 expert speakers and 20+ media partners for a prestigious two-day event featuring powerful keynote talks, plenty of networking opportunities, demos and panels””

£115 for a full two-day conference, dedicated to Bitcoin and Blockchain, with great speakers? Seemed almost too good to be true!  I must book, beat the rush and get the £50 earlybird discount!

Go for it!…..

Hang on, I’m a naturally suspicious individual (motto: “I may be a cynic but that doesn’t mean I’m wrong”) and thought I’d check a little further.  Just to be sure!  So, I checked out the website again.  Seemed pretty legit (apart from not having the legal stuff like company registration number, registered address, etc but then there’s still many sites that are built in haste without the web developer actually knowing the legal obligations).  The event appeared on the site (a well respected site), was published on (a great site for building communities, holding meetings, etc) and (a well known event booking ecosystem.  Then there was a twitter feed promoting it too and the organiser’s LinkedIn profile seemed pretty authentic.

But….something still didn’t stack up!

For a major conference to only begin to promote itself just a month before the event didn’t seem right. Whilst the site mentioned company presentations it didn’t name the actual speakers.  Oh, and it was being held the same day as the London Bitcoin and Blockchain Leadership Forum.  Seemed odd to have two major events on the same day?

And then….ScamBlog- Too good to be true

Like a fish nibbling on a worm, wondering why there was a worm, mounted on a sharp pointy object, in the middle of a river, I clicked on the “Buy Now” button…..and it returned an error:

“Bad Pay Button Link – Sorry. The ‘pay button link’ used to come here is invalid or damaged – Unknown or invalid reference”

So, like a hungry fish, I emailed the organiser, explained the error and received a helpful response:

“There seems to be a problem with Coinkite. I can confirm your ticket manually. Please send 0.55BTC to the following address: 15fvN3fGEt7atekErmQUYs8ZrhFj1bZ243 and tell me your full name and if you require a parking pass. Kind regards, Olivia Edwards Chief Organizer – The London Bitcoin Forum

Now there’s a problem….if I pay via my Bitcoin wallet how do I obtain a VAT receipt and claim the expense back ? How would this work?  So I emailed the organiser….no response.

Time for my suspicions to be fed a bit more!….So, I checked out “The London Bitcoin Forum Limited” on the Companies House Webcheck service and….it doesn’t exist!: Not a good start.  Being a techie at heart I checked who owned the website domain.  A quick check with Nominet revealed that it was registered to the named organiser but to an address in Berlin.  That’s odd!

So, sent another email to the organiser…this time it bounced back with “Recipient not found” …..that’s not good!

Rechecked the website…

Website gone

And then I did what a four year old would do… “ask google about it!”

Turns out my suspicions were right. It’s a scam.  It was a pretty convincing one.  Apparently several of the sponsors really had paid to sponsor the event, people were genuinely booked to speak and quite a few people had paid for tickets.


The moral of the tale is Do Your Own Research.  The old adage applies even to new innovations…If it looks too good to be true, it probably is.  There will be many more paid events, training classes, conferences and presentations popping up as more people gain interest in the blockchain / distributed ledger space.  Most of them will be legitimate, a few will be poor value and some will be fake.

There’s been a growth recently in presentation hosted by Financial Advisors (“How to make money from the Blockchain goldrush”) and Lawyers (“How we can help protect our clients whilst making us lots of money”) and criminals (“Book early!…”). This is a good proxy for how the distributed ledger / blockchain momentum is growing.  If you want reliable advice about which events to attend, just send 1 BTC to my anonymous bitcoin wallet and I promise I’ll respond immediately ;-}

Blockchain is about to overtake Cloud Computing

Use of the Google search term “Cloud Computing” started to grow in 2007 and peaked in 2011.  Since then its use has tailed off and in mid-2013 the term “Big Data” overtook it.  Big Data continues to grow, albeit much more slowly and may have now plateaued.  It now looks like Blockchain will soon also overtake the use of the term Cloud Computing.

Google TRends - Blockchain vs Cloud Computing


Whilst tracking Google searches may be a limited proxy for interest in a technology it is however still of value as a way of eliciting the general trend.  Could this be a useful lens to view the hype cycle of these three technologies ?  It’s certainly interesting to see that the steepness of the curve when each of the terms came into use differs.  Perhaps surprisingly, it was Cloud Computing that ramped up fastest.  So, maybe we’re nowhere near Peak Blockchain yet!

Blockchain vs Distributed Ledger ?

Whilst there’s continued acknowledgement that when someone says “Blockchain” they probably mean “Distributed Ledger”  this clearly isn’t yet reflected in how people are searching google for information about the technology.

As the chart shows, there has been a massive spike since 2011 in use of the search term Blockchain.  In comparison, the term “Distributed Ledger” is only just beginning to appear and in very low volumes.

Google Trends - Blockchain vs Distributed Ledger

It also looks like the Blockchain search is dominated by an interest in Bitcoin:

Google Trends - Blockchain vs Other Queries

It will be interesting to see if Bitcoin continues to dominate the level of interest in Blockchain in 2016.



Firstly, what’s in a name?  In the case of Distlytics, it has been formed from the words which describe what it does – Distributed Ledger Analytics.

Next, what’s a Distributed Ledger?  Well, in basic terms it’s a protocol / technology / architecture that provides the ability for identical copies of a database to be held, simultaneously, by multiple parties.  It’s the descriptive term of how the Blockchain technology that underpins crypto-currencies such as Bitcoin is used.

Finally, if you don’t know anything about Distributed Ledger or Blockchain technology then that’s ok…..that’s why Distlytics was formed.