It looks like things are moving forward for a more secure use of blockchain and cryptocurrency technologies. Just today, the world’s leading players in digital currency have partnered to create the Blockchain Token Securities Law Framework as a form of self-regulation. The partnership includes Coinbase, ConsenSys, Union Square Ventures, and Coin Center.
Blockchain is a system that offers security through transparency. It’s a data structure that uses digital ledgers of transactions shared among a distributed network of computers. It’s used by digital or cryptocurrencies, the most famous of which is Bitcoin and the newcomer Zcash.
Basically, transactions in a blockchain are monitored and kept by people part of a decentralized network, called miners, who store all data in blocks. Digital tokens or cryptocurrencies created on blockchains are called blockchain tokens.
According to ConsenSys, “The ability to widely sell a product or access to a product enables companies to overcome capital crunches and bring worthy products to market.”
The new initiative is an attempt to take blockchain tokens out of its relatively gray area of regulation. “[It] is intended to be both a rubric and guide to selling tokens in exchange for currency without running afoul of the US Securities laws designed to prevent unregistered capital raising,”says ConsenSys. With the increase in uptake of cryptocurrencies in 2016 and after the failure of the DAO, the move comes at the right moment.
It’s a 27-paged framework that includes a “decision matrix” for users of blockchain technology. It should, in principle, limit design flaws that could have potential legal consequences outside of the digital world. It’s the first of its kind, providing developers and applications with an evaluation instrument for their tokens and plans.
“The document is exemplary and demonstrates the best qualities of our industry, specifically the persistent search for answers and comfort in a legal system where final answers are almost exclusively handed down by the judiciary,” said ConsenSys General Counsel Matt Corva.
Although more free from risks, cryptocurrencies are still prone to being abused — and even being hacked. Hopefully, with this self-regulation framework, more people will see the benefits of blockchain tokens.