Blockchain Bites: Revision of the Attorney General’s Office in the Privacy Act; Verification of US election coverage by EOS and Ethereum; and Senate inquiry into FinTech and RegTech

Attorney General’s Department Review of the 1998 Privacy Act (Cth)

On October 30, 2020, the Attorney General’s Office began reviewing whether the Privacy Act 1988 (Cth) (Privacy Act) is suitable for the digital age. This drive for change reflects the global push towards consumer data privacy, with the department stressing that its primary concern is uncovering their options to “empower consumers, protect their data and better serve the Australian economy. “.

Experts commented that the proposed makeover should be consumer-centric, urging a similar feeling to the EU General Data Protection Regulation (GDPR).

In explaining the context of the review, the issues paper says:

A company’s ability to interact with consumers online is vital for economic growth and prosperity. As Australians spend more online and new technologies such as artificial intelligence appear, more personal information about individuals is captured and processed, raising doubts that “the Privacy Act and its enforcement mechanisms remain fit for purpose.”

At the same time, companies that are trying to do the right thing are faced with an increasingly complex regulatory environment when it comes to handling personal information. This is especially true for companies working across international borders, where compliance with information protection standards may be a requirement for access to foreign markets.

In addition to EU law and the GDPR under consideration, the Attorney General’s Department is also carefully evaluating the ACCC’s Digital Platforms Investigation Report.

Associated Press uses EOS and Ethereum to verify election coverage

Behind the scenes of the US presidential election, the Associated Press released official election results on the Ethereum and EOS blockchains to provide anyone who reviews the coverage of the Associated Press results with an independent method to verify the accuracy of published numbers using the underlying blockchain data.

Interestingly, the project was conducted in collaboration with the Wikipedia alternative Everipedia and will see more than 7,000 state and national election calls registered on the Ethereum and EOS blockchains.

Despite the interesting applications of the technology, the data written on the blockchain is obviously only as strong as the voting process itself. Or in the words of Everipedia co-founder and president Sam Kazemian:

This is one of those times when they are super pro-blockchain but, for example, it might be better to actually trust the centralized organization that has been doing it professionally for over 100 years.

Given President Trump’s recent claims that electoral fraud has occurred, it will be interesting to see if blockchain records become a source for checking how the results arrived in various locations. Blockchain has previously been applied in an attempt to minimize the risks of spreading disinformation. In 2019, The New York Times launched its blockchain-based News Provenance Project to counter disinformation, using a Hyperledger-based platform to verify media sources.

Senate Inquiry into FinTech & RegTech Second Issues Paper released

On 9 November, the Senate Select Committee on Financial Technology and Regulatory Technology presented an interim report which is expected to be finalized on 20 September 2020. The report made 32 recommendations to the government, some of which have already been implemented in the budget 2020-21. In preparation for the final report, a second paper on numbers was published.

The welcome of interim reports will be strengthened with the Committee announcing that it will now take further evidence before delivering its final report in April 2021. The Committee was established in September of last 2019 and after an extensive round of public communications and hearings in January and February, they released their interim report in March of this year.

As COVID-19 intervened in the trial, Senator Andrew Bragg commented:

the commission must now examine further issues relevant to its mandate.

The issuance document notes that if Australia wishes to maintain a competitive position in the financial and regulatory tech space, there must be an additional demand for positions:

It is clear that Australia needs to have a long-term view of technology as an engine for future jobs and economic growth to ensure Australia remains globally competitive. In the context of COVID-19, the rapid growth of global digitization and the decline of Hong Kong as a financial services hub, there are significant opportunities for Australia to seize….

So far the Committee would like to explore: Blockchain applications, digital identity and MyGov and data security, but stresses that any presentation can go beyond these issues if it is relevant to the wider area scope.

For those interested in contributing, written submissions addressing these issues must be submitted by 11 December 2020.

The United States Securities Clarity Act has been handed over to regulatory purgatory

Following the introduction of the Securities Clarity Act (HR 8378) by Congressman Tom Emmer and an immediate referral to the House Financial Services Committee, HR 8378 has been in purgatory ever since.

With little else going on in the US at the moment, many fear the bill could suffer the same fate as the US dollar stimulus proposals back and forth again.

The bill has an interesting goal of amending US securities laws to exclude the assets of investment contracts, or in practical terms, most digital tokens, from the definition of security.

More specifically, HR 8378, which Representative Emmer sponsored with support from Democratic and Republican co-sponsors, would provide regulatory clarity for the launch of an open blockchain network by making contractual activities separate and distinct from a securities offering that could be , for example, the initial offer or private sale of those tokens. The bill allows companies that meet current securities registration requirements or qualify for an exemption to arrange for the distribution of their assets to the public without fear of increased regulatory uncertainty down the road.

It does so with two fairly simple amendments to the Securities Act of 1933:

  1. define an “investment contract asset” as: “an asset, tangible or intangible, including assets in digital form – (A) sold or otherwise transferred, or intended to be sold or otherwise transferred, under an investment contract ; and (B) which is not otherwise a guarantee [under section 2(a)(1) of the Securities Act of 1933]”; is
  2. provided the term “security” does not include an investment contract activity.

The bill was generally well received upon its introduction, receiving praise from various different interest groups. Specifically, Amy Devine, chief policy officer of the Digital Chamber of Commerce, said the bill:

help clarify the legal status of some digital tokens, an issue that has had a significant impact on the growth of the blockchain ecosystem in the United States.

Likewise, Kristin Smith, the executive director of the Blockchain Association said the bill helps:

clarify outstanding issues relating to when and how securities laws and commodity regulations apply to digital assets … [and would do] much to clarify the situation and enact pro-growth policies for the crypto economy.

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