By Matthew Dove (Senior Editor)
At its security token seminar in London on April 23, Blockpass’ CEO Adam Vaziri laid out his vision for upcoming blockchain innovation. The future of tokenisation isn’t just about making money without falling foul of regulators. It’s also about the establishment of self-sovereign identity…
Following a keynote from DLT champ Lord Holmes of Richmond, Vaziri was keen to decentuate the negative and accentuate the positive of the ICO Boom ‘n’ Bust exclaiming that “now is the most exciting time” for the sector.
Despite its myriad vagaries, Vaziri argued that ICOs showed the world that startups were no longer beholden to institutional investment and VC funds. With a coin and prayer (and a decent marketing campaign) the new kids on the block were doing it for themselves. The only thing missing was compliance and that’s where STOs and Blockpass come in.
Who doesn’t want a get-out-of-jail-free card sewn into their front pocket?
Vaziri paced the floor of CMA’s Cannon Street offices as he mimicked the dilemma of fintechs pondering, “what the consequences of their innovation are.”
“Certainty is critical” as the market matures and the best way to achieve this is with regtech not regulation. Even if clear and relevant governmental guidelines were forthcoming, compliance stills mops up roughly 30% of operational costs leaving most fintechs unable to take the hit.
The main failing of the much-maligned coin offerings, the Blockpass CEO argues, is their pseudo anonymous nature. STOs, in this sense, are a different animal entirely. The sublime alchemy of Vaziri’s approach is to introduce iron-clad AML, KYC and taxman-friendly protocols into tokenised products without diluting the crypto-anarchist spirit of those spicy ICOs.
“The key thing is we provide this infrastructure for STOs, for exchanges … but we can’t even know who our users are. We have maybe 6,000 verified users and we don’t know who they are. It’s the users themselves that store their own data, they have it in their own devices.”
Not only are security tokens set to be compliant by design, their issuers and traders are too. Software like the kind available from Blockpass allows users to verify themselves. They can then use their new certified identity to trade on multiple platforms without having to repeat the process ad nauseum. This “low cost pre-verified compliance” actually allows vendors to earn rewards by contributing to a user’s Blockpass verification rather than ponying up a third of its budget to achieve the same result.
The sublime alchemy of Vaziri’s approach is to introduce iron-clad AML, KYC and taxman-friendly protocols into tokenised products without diluting the crypto-anarchist spirit of those spicy ICOs.
Vaziri and Co. aren’t content to stop there though, Blockpass intends to allow its users to establish self-sovereign identity. Such an idea – identity as controlled by you and not a third party – has applications far and beyond the mere trading of digitised assets.
Blockpass is not, therefore, “some centralised honeypot, sitting on [user] data” but a facilitator of “self-sovereign identity.” Whilst this sounds great it does have one rather unfortunate drawback, identity isn’t self-generated…
Like it or not, our identities are state-issued. So, no matter how watertight Blockpass’ tech is, the information it’s verifying (birth certificate, passport et al.) is potentially flawed. This point was raised by Matthew C. Le Merle of Fifth Era in the Q&A session that followed Vaziri’s presentation;
“The really bad guys don’t use their own birth certificates, driver’s license or passport. They hack into the UK birth certificate database and they run off thousands of fake birth certificates. They create fake driver’s licenses and passports, then they come to you and get a wrapper that’s secure, immutable and portable put around a fake identity … and they run their frauds.
The government perpetuates 200-year old approaches to passports, driver’s licenses and birth certificates. We don’t have biometric, DNA-based birth certificates. That’s the real issue. It’s a garbage in, garbage out problem. I love what you’re doing but you’re putting a wrapper around fake identity.”
Vaziri’s response was clipped but to the point;
“If the UK government can’t create a genuine identity, then I’m not sure I can solve that problem.”
Sportingly, Vaziri then expanded the problem even further beyond Blockpass’ current capabilities, specifically regarding financial inclusion, broaching the question; how do you verify persons without a state-issued identity?
“It’s a garbage in, garbage out problem. I love what you’re doing but you’re putting a wrapper around fake identity.” – Matthew C. Le Merle
“There’s a button on a Huawei phone … it says, ‘all of your information is sent to the People’s Republic of China, do you consent?’ Err, no. But the same is true of Facebook. All of your data is on a server which the NSA can search at will.
We need to conceive a system that addresses verification at a core level, which is biometric but – and it’s a big ‘but’ – without undermining the citizens themselves by putting them in a worse situation. I don’t want to think about 1984-type totalitarian scenarios but if you hack into a biometric, you can cause much greater harm than you can by nicking someone’s passport. But how do you do that? It’s about putting the user first and not giving too much centralised control. So, yeah, don’t click the button on your Huawei…”
Unfortunately, history has seen the inexorable rise of centralised authority (having been seized rather than given) and untold numbers have already pushed that button. 1984 was 35 years ago and whether you want to think about them or not, those types of “totalitarian scenarios” – as well as the inequities of the “really bad guys” – aren’t hard to spot. Furthermore, they’re proving increasingly difficult to ignore.