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The Authority continues its reflection on the blockchain

by

Alain Castonguay

September 17, 2018 09:30

Dinner-conference held by the Cercle finance du Québec in the framework of its third annual conference ” Women in finance “, September 13, 2018 in Quebec city | Photo : Alain Castonguay

Just as she had done in January last, thefinancial markets Authority reiterates its warning about the currency’s cryptographic. “There are a lot, there’s a lot of excitement around it, people are interested in, and there are also scammers who are interested in it. You have to be extremely careful, “says Lise Estelle Brault, senior director of the supervision of derivatives Authority, during a dinner-conference held by the Cercle finance du Québec in the framework of its third annual conference” Women in finance “, last Thursday in Quebec city.

Caroline St-Jacques, of Manulife, animated exchanges during this debate, whose theme was ” Blockchain: challenges and opportunities for the world of finance “. Ms. St-Jacques recalled the challenges related to the protection of personal information and the regulatory framework for this technology.

“The perspective of the Authority, the blockchain is simple: we start from the principle that the register is a database, and that there are very interesting properties for the world of finance. All sorts of people and companies are getting involved, a number of which are subject to the regulatory framework of the Authority. But there are cases where its use is not subject to tax, ” she said.

Sometimes the process looks like the first public offering of a company which wants to list its shares on the stock markets, and this transaction falls within the framework of the securities. “Our regulatory framework applies to “, she says.

However, the use of the blockchain there is also sometimes a simple ” change to the plumbing of financial markets “, in order to accelerate the efficiency of financial markets, clearing and payment systems. This adaptation of the hardware is the effectiveness of the subject institutions, but the regulator does not intervene, she said.

External Expertise

Ms. Brault stresses that the reflection within the Authority on the blockchain has been launched 18 months ago. “We quickly realized that we did not have the skills in-house. “The Authority has had recourse to the expertise of the researchers, Jeremy Clark, and Emilio Boulianne, Concordia University. The research project, conducted with the collaboration of the staff of the regulator, aims to build a prototype of stock exchange in an environment launched a project for the stock exchange based on a blockchain, decentralized and public.

“We are trying to see how could work a stock exchange, for example based on the platform Ethereum. We don’t have the goal to succeed, we really to learn, ” she notes.

Problems persist: for example, if the two users do not have exactly the same time on the medium used, there are problems, isced-t-it. “We are not made to the stage of a financial market completely decentralized,” she said.

Lise Estelle Brault reminds us that in the universe of fintechs, artificial intelligence and the blockchain, political borders can become very blurry, which represents a serious challenge for the regulator. The supervision of financial markets, in this context, therefore, requires a close collaboration at the international level. A consultation is underway, conducted jointly with other regulators, under the auspices of the global Network of financial innovation (GFIN).

The regulators in ontario and quebec have joined the GFIN last August. The consultation ends on the 14th of October next. The Authority wants to know what the industry expects from the regulators ” in a world where everything is increasingly connected.” The comments will fuel the debate at the international level for the adoption of common rules, she says.

Opportunities

The other invited experts spoke in particular about the opportunities associated with the use of the blockchain. Chadi Habib, senior vice-president, information technologies at Desjardins group, and Francis Nadeau, CEO of HydraLab, a firm that develops applications arising from the blockchain, have summarized the main lines of technology: registry core of data distributed among the users, invariable nature of the registry, trust between users, which limits the use of intermediaries, etc

According to Mr. Habib, the reduction of delays and elimination of some intermediaries on the real estate market would reduce transaction costs, which will be of great benefit to its members. This adds value to the service offering of the financial cooperative.

Traceability

For his part, Francis Nadeau cites the example of a retailer of the diamond market that uses the chain of blocks to implement a traceability system. Thus, we can guarantee the provenance of diamonds for consumers who want to avoid getting a stone taken from an area where there is an armed conflict.

Mr. Nadeau believes that the prospects are also very good for traceability systems in the food industry. He gives the example of the tartar of salmon sold in your favorite restaurant, of which we could authenticate the source with the transactions recorded in the blockchain. The consumer could thus ensure to eat a fresh product and that has been caught in compliance with the rules.

According to Jean-François de Rico, partner at Langlois lawyers, traceability arising of intelligent contracts is a functional application arising from the technology blockchain. In travel insurance, it is used to compensate customers who experience disruption resulting from any delays for the airlines. In order for the contract works and that the obligation arising from the protection applies, users must be able to rely on a reliable source of information. In this case, there is a highly efficient database that tracks international flights, ” said the lawyer.

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