You can always tell when a new technology vertical starts to mature and to organize itself as an industry. In 2018, the block chain industry began that transition. In January, at the World Economic Forum in Davos, Switzerland, many of the official sessions and off-site events were about bitcoin, crypto currency and block chain. It was not clear how many of the WEF attendees understood the real impact that these technologies and their variations are going to have on society in the long run, but the World Economic Forum provided an important vehicle to start thinking about it in earnest.
Today, in another step forward, the Institute for Blockchain Innovationwas launched by several leading companies and investors from the United States and Canada. The objective of the Institute is to help envision and design guard rails for the block chain and crypto currency industries as they mature and become more mainstream. The Institute was launched by Finova Financial, a startup, along with 500 Startups, Indiegogo, Ausum Ventures and several others.
According to Greg Keough, Chairman & Co-Founder of the Institute, and CEO of Finova Financial, the Institute is an “open source community” dedicated to encouraging more people to safely participate in the block chain movement. The Institute will serve as vehicle to share ideas, explore new trends and provide global thought leadership on all things block chain. Through its work, the IBI will identify and disseminate standards and best practices in the use of block chain.
The Institute has defined three important issues facing crypto currency and block chain. The first is the decentralized nature of block chain, which has led to an explosion of experiments across finance, accounting, education, health care and agriculture. The second is the friction-less nature of block chain transactions, which currently bypass global banking networks and controls to allow seamless transactions across borders. And thirdly, block chain provides immediate liquidity, something startups rarely provide to traditional angel and VC investors for legal and operation reasons.
The IBI’s launch speaks to the need for block chain companies to seize control of their narrative and promote good business and public policy before a few bad actor’s cause havoc that pushes government to over-regulate. With an Institute, the block chain industry can write the rules, in partnership with policy makers, to be reasonable without being burdensome, and in the process, educate law makers, the media and others about this emerging industry. These are also global challenges facing countries around the world. An industry institute and think tank can help countries grappling with many of the same issues around block chain, crypto currency, crowdfunding and managing Internet-based business that Americans are sorting out.
There are critics of block chain and crypto currency who believe that the “industry” is still just a collection of startups that are experimenting with the technology and business models, and that few have blazed real pathways to success yet. They worry that the ICO is an unproven business model that is being exploited by greedy entrepreneurs. Others point out that the promise of ICO’s and block chain is the transparency and rules that are built into the ICO and the software. The downside of this is that it leaves very little room for innovation or business transformation to the entrepreneur.
One of the first ideas the IBI intends to explore is the JOBS Crypto Offering, or JCO. This unique offering is a combination of a the relatively new concept of an Initial Crypto Offering (ICO) with a traditional Initial Public Offering (IPO). In a JCO, securities are issued by a company that can be converted to crypto tokens, while complying with the JOBS Act Regulation A, which regulates equity-based crowdfunding. Delaware has passed legislation allowing this already.
According to the Institute, “the JCO is a next-gen hybrid that gives startups a pathway from initial capital to IPO on the block chain so that companies all over the world can more easily tap into the financial resources they need to grow. This is a new approach to trading digital equity securities (commonly referred to as “equity tokens”) on the block chain that creates a solution for the regulatory gap in ICOs while providing liquidity in a crowdfunding model.”
Right now, the hype around block chain is sky high. An Institute like this, supported by key partners, can help the technology transform into an enlightened industry that harnesses technology and can regulate itself as necessary, which would truly be a transformational leap forward in global commerce.