Report from the International Blockchain Congress

Sarah Rudolph

Sarah Rudolph

Managing Editor

The second International Blockchain Congress (IBC) took place on Friday at the Aon Center in Chicago. Topics ranged from crypto trading to smart contracts to the regulations surrounding ICOs. While the Congress was run much more efficiently than the first version, which fell hours behind schedule, this iteration saw much less in the way of attendance and speakers from outside the U.S.  That said, a couple of speakers from Asia shed interesting light on cryptocurrency markets that those in the West rarely see or understand. Highlights from IBC included:

Panel: Crypto Trading 2018

Somewhat surprisingly, the Crypto Trading panel actually had very little to say about trading cryptocurrencies. Part of this stemmed from the fact that the panel was moderated by Tom Sosnoff from TastyTrade. Sosnoff is a very active trader himself, making between 10 and 15 thousands trades each year, but crypto trading will not appeal to him because the current composition of the crypto market bears little resemblance to the highly-regulated, centralized futures, equity and options products that he routinely transacts in. Simply put, there is a large gulf between crypto markets and the markets that Sosnoff is used to. Another factor in the lack of talk about trading is that none of the other panelists were actually traders. While most of the panelists had something interesting to say about the crypto markets, none of them are actually actively engaged in a personal way with the trading side of the business.

The more interesting moments in the panel included:

  • Stephen Watkins of Entrex illustrated how the “grown up” world is embracing the cryptoasset world. Entrex bills itself as “The Capital Market System for Entrepreneurs” and they are leveraging blockchain to be more effective in that endeavor. As they see it, there are 26 million companies that don’t have access to the capital markets, and blockchain might change that.
  • Scott Diamond of the Digital Asset Network said that the price of cryptocurrencies is “number nine on the list of sexy” when it comes to looking at blockchain. He recommended that people release themselves from their “first world brain” and look instead from the perspective of second world long-term value creation in order to understand the full potential of the technology. He also revealed that he bought tickets to see Pearl Jam at Wrigley Field and paid in Bitcoin.
  • Russ Zhang represents Huobi, the third largest cryptocurrency exchange in the world, and his calm presence symbolized how the crypto world is colliding and melding at a rapid rate. Huobi announced the listing of a cryptocurrency ETF in June but, interestingly, none of the news articles about it indicate what exchange the fund is traded on. Seems like a fact that might be good to know.
  • Yuri Zamostin and Coinifide are making a push in crypto and blockchain education, a necessary ingredient to adoption and growth of the technology.
  • Alex Clifford from OneChain Capital represents the big money, as they look to invest institutional-sized capital in blockchain and cryptocurrencies. As he sees it, big companies presence will help to spur adoption but there will be plenty of room for entrepreneurs.

Panel: The Future of Smart Contracts

Zach Smolinski ably lead a lively panel on what can be a stultifying topic: smart contracts. Highlights included:

  • Daniel Riddell of DECENT Foundation, an international organization that is building a “blockchain ecosystem”, emphasized that Web 3.0 such as blockchain has flipped the script from Web 1.0: a thick protocol layer will take longer to be established but once it is, adoption will happen quickly. The winners will be those protocols that are the most scalable with the best consensus models.
  • Zach Zilliak of Zilliak Law pointed out that there is a “false equivalence” between smart contracts and legal contracts. Others have suggested that smart contracts are neither “smart” nor “contracts”.
  • Will Turner from Barnes and Thornburg opined that the ascendance of smart contracts will not lead to less litigation because, just like email, the addition of new data and information only leads to more legal discovery and ways to pursue a legal case or strategy.

Fireside chat: George Chikovani and Raymond Cheong

The “international” aspect of the conference was satisfied at an eye-opening and entertaining look at what’s going on in the cryptocurrency markets in Asia. George Chikovani of the Innovation and Development Foundation (and organizer of the conference) sat down with Raymond Cheong, former partner at KPMG and Co-Founder at Global Bock Chain and Digital Economic Academy in Beijing. Cheong prefaced his comments by saying that the recent troubles faced by the Turkish lira illustrate how Chinese traders operate in ways that westerners may not understand. Specifically, he said that a popular strategy in China in recent days was to buy airline tickets to Turkey and then cash them out with a profit when the value of the lira fell. In his telling, traders in China will do everything to creatively evade restrictions and take advantage of situations, including cryptocurrency markets. In Asia, they talk about cryptocurrencies and are interested in speculation, while the west thinks about blockchain and is interested in investment. He believes that 80 percent of the digital platforms in the world are Chinese, that many Chinese have found ways to participate in ICOs despite their being banned by the Chinese government, and that transaction volumes on crypto exchanges are most definitely inflated and not true.

Fireside chat: Alexandra “Lexy” Prodromos and Michael Zalewski

It fell to Lexy, who is the executive director of the Chicago Blockchain Center, and Michael to follow the fireworks that Cheong unleashed, and it proved to be a tough act to follow. Zalewski, who is a member of the General Assembly in Illinois, talked about some of the solid moves the state has made when it comes to blockchain and how it is trying to create a positive environment for crypto assets. He talked about putting health records on the blockchain to make things easier for his constituents, as well as the possibility of using blockchain to trade energy credits more easily. It was encouraging in our divisive and partisan times to hear from a government official that is actually working on issues that might make the world a better place!

“The New York Bitlicense rules were a step in the wrong direction,” Zalewski said. “In Illinois, we don’t want to over-regulate. We see this as a growth opportunity.”     – CM

A look at ICOs

Jim Falvey, who is currently working with John Lothian News on CryptoMarketsWiki, gave a presentation on ICOs and token offerings in which he laid out the regulatory pitfalls for companies doing ICOs, including the warning that you must document everything for the SEC.

In March 2018, the SEC issued subpoenas to many ICOs that had used private placement/SAFTs.  Falvey said the opposite of the old adage about permission and forgiveness applies here:  DO NOT act and then ask for forgiveness; get permission from the SEC before doing an ICO.

In an ICO, a company can raise money by issuing tokens that entitle the holder to a number of rights set out in smart contracts. It is similar to an IPO in some ways, but tokens can be issued to fund projects rather than to fund a company.

Aside from the SEC, there are at least nine other regulatory agencies involved in ICOs. It is important to know whether a token is a security, a commodity, or a utility – as determined by the Howey Test – as these are of course regulated by different agencies.  Regulators have already determined that bitcoin and Ethereum are both commodities, and the CFTC regulates bitcoin futures.

“A lot of uncertainty still lingers around ICOs, and the U.S. is losing a great opportunity for a tremendous market because of uncertainty and regulations,” Falvey said. And once companies leave the U.S. to invest elsewhere, they’re not likely to come back.

One of the reasons ICOs have become popular is undoubtedly that they cost much less than an IPO, according to a panel on ICOs, Crypto and Tokenization. But there are tax liabilities and other concerns. For example, the whole project shouldn’t fall apart if the CEO moves away, according to Brian Shields of Codercoin. Several of the panelists cautioned against having token sales in the U.S. at all because of regulation – Malta or Singapore would be easier, they said. And there are investor protections for IPOs that don’t apply to ICOs – for example, investors in IPOs can request reports and financial documents that ICO investors can’t.

Currently, 95 percent of ICOs are launched on the Ethereum blockchain. Plurality is coming, however, according to Franklin Fitch, founder of Beaxy.   

There is a lot more opportunity coming, Brian Shields said. “We’re not in a web 3.0 economy yet, but there is web 3.0 technology.”  He also said that when everybody stops talking about blockchain is when we’ll know it’s widely in use. – SR


  • Wulf Kaal has been making the rounds of conferences to promote his company Semada. It has been described as an effort to “create a reputation based precedent system in decentralized networks via its Weighted Directed Acyclical Graph” but Kaal spends most of his presentation time describing how trust is broken, not describing what Semada is. They have 4 PhDs on their 5 person team so perhaps it’s on a different wavelength that won’t be understood until much later.
  • Lawrence Johnson of Morningstar laid out the cases that 1) traditional investors should not invest in cryptocurrencies, 2) they aren’t likely to challenge gold as a store of value and 3) they will, however, disrupt the capital formation process. Email for white papers on all three subjects.
  • Worth a look: Achain, Hashgraph, CheckOwl.


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