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Asset exchange, idea for regulation compliants
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Author Topic: Asset exchange, idea for regulation compliants  (Read 3964 times)

bahamapascal

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Asset exchange, idea for regulation compliants
« on: November 04, 2014, 12:59:24 pm »

So today a Idea came to my mind, which might be a very useful addition for the AE. Sooner or later (if not already now) it's a problem for "real" companies  to offer stocks on the AE, as its decentralized and they can't comply with the (damn) KYC & AML rules, as every one can use the AE (Anonymously). In some coutrys that might not be a problem, but Overstock for example this is/will most likely be a deal breaker.

So what is if we implement a future, where the company can chose between a open AE listing and a private one.
An open AE listing (as they are now), would mean every one can trade the Asset.
While an private listing would mean that ONLY nxt accounts with a permission can trade this specific asset.

As example:
Overstock wants to issue shares on the NXT AE . When creating there share, they chose to make them private. No Nxt account will be able to buy there shares, except it was given permission by the Asset Issuer.
Now Overstock can say, please send us x Documents for registration needed for KYC/AML, then we will give the Nxt account provided by the custommer the permission to buy/sell the shares.


What do you guys (and girls) think about this???



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Darkhorse

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Re: Asset exchange, idea for regulation compliants
« Reply #1 on: November 04, 2014, 02:27:53 pm »

What is the point of decentralisation in here? Lets not talk about Overstock. How about other solid companies that wants to raise fund? That is the whole point of ipo, ico whatever.

How to tackle this kyc should be the question. We have a new exchange in my country that has also started with kyc.
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bahamapascal

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Re: Asset exchange, idea for regulation compliants
« Reply #2 on: November 04, 2014, 03:00:26 pm »

What is the point of decentralisation in here? Lets not talk about Overstock. How about other solid companies that wants to raise fund? That is the whole point of ipo, ico whatever.

How to tackle this kyc should be the question. We have a new exchange in my country that has also started with kyc.

Well, the point would be the fees. Issuing shares on a regular stock exchange is verry costly if I am not mistaking. And for the investor, they also have to pay high fees for trading.
Regarding Overstock, I just used it as example...if you want you can supstitute it with any company in the US, Europe or any country that requires ATM/KYC.

The problem is, what is the reason for a company to make a ipo, if its not leagel for them to do? The private Assets would be optional. So if the company is in a coutry where ATM/KYK is no problem, great they can issue a public asset.
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MaWo

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Re: Asset exchange, idea for regulation compliants
« Reply #3 on: November 04, 2014, 03:39:47 pm »

I like this idea. It combines both worlds smoothly.
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bidji29

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Re: Asset exchange, idea for regulation compliants
« Reply #4 on: November 04, 2014, 06:37:00 pm »

Seems a good idea. NXT core stay decentralised, but the asset issuer have the possibility to centralise his own asset
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2Kool4Skewl

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Re: Asset exchange, idea for regulation compliants
« Reply #5 on: November 04, 2014, 06:44:44 pm »

I mentioned a similar setup earlier:

There is no reason a decentralized asset exchange can't facilitate businesses that have to comply with regulations.  All you need is an option (checkbox) during asset issuance that prevents non-verified accounts from holding your asset.  The asset issuer selects certain "verifiers" which they view as legitimate.  These "verifiers" would be separate businesses who collect KYC information on customers' accounts for a small fee.  For instance, a user that wants to trade "regulated" securities would pay the "verifier" a small fee and the "verifier" would collect the necessary KYC information from them and send a transaction to them which marks their account as "KYC verified by them".  The "regulated" asset could only be held by accounts that had such a tx in their history.  The asset issuer at any time could also change the "verifying companies" it wanted to use by issuing another TX declaring the change.  In this manner an asset exchange could both trade regulated and non-regulated securities.
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Brangdon

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Re: Asset exchange, idea for regulation compliants
« Reply #6 on: November 04, 2014, 08:48:41 pm »

I agree with 2Kool4Skewl that this should be able to go through third party ID verifiers. Of course, a company could elect themselves as verifiers for their assets.

Classic exchanges might want to become verifiers. Many of them already comply with KYC rules.

Any feature along these lines ought to be designed in consultation with relevant authorities.  There's no point doing it unless they will be happy with the result.
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bahamapascal

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Re: Asset exchange, idea for regulation compliants
« Reply #7 on: November 04, 2014, 11:05:57 pm »

@ 2Kool4Skewl: Awesome, so I wasn't in fact the first one with this idea.

@Brangdon: Third partys are a good idea, but you can't give one authority the power to verify accounts. That's not possible in a decentralized system, at least I can't see how. It would have to be hard coded in the core that XY can verify an address....and that's not good at all.

It has to be on an individual basis, every asset issuer (who choose to use private assets) has to give out the permission to each address individually. Of course, they can work with a third party verifier that has a collected (centralized, not on the block chain) database of verified addresses.


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Brangdon

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Re: Asset exchange, idea for regulation compliants
« Reply #8 on: November 05, 2014, 08:10:06 pm »

@Brangdon: Third partys are a good idea, but you can't give one authority the power to verify accounts.
That wasn't the intention. Rather, to let verification be delegated. The asset issuer would give a list of accounts they trusted to verify the asset holders. The list of verifiers wouldn't be hardwired into the core, or centralised.

The idea is that an asset buyer might only need to get verified a few times, so long as the assets they wanted to buy trusted at least one of those verifiers. Without delegation, we've have to get verified all over again for each asset. That would be a hassle, and possible a privacy risk in that we'd probably have to send the verifier personal documentation that would contain more information than the asset issuer needed to know. The fewer people I have to show my passport or driving license to, the better. Also, without delegation every asset issuer would have to get involved in verifying, which is hassle for them, and might require them to jump through government hoops. It's easier for them if they can delegate. It increases the market for their assets, if many potential investors are already verified.
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cryptoscout

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Re: Asset exchange, idea for regulation compliants
« Reply #9 on: November 05, 2014, 08:12:21 pm »

You have Secure AE to be the bridge to the other world.
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bahamapascal

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Re: Asset exchange, idea for regulation compliants
« Reply #10 on: November 05, 2014, 09:45:30 pm »

@Brangdon: Third partys are a good idea, but you can't give one authority the power to verify accounts.
That wasn't the intention. Rather, to let verification be delegated. The asset issuer would give a list of accounts they trusted to verify the asset holders. The list of verifiers wouldn't be hardwired into the core, or centralised.

The idea is that an asset buyer might only need to get verified a few times, so long as the assets they wanted to buy trusted at least one of those verifiers. Without delegation, we've have to get verified all over again for each asset. That would be a hassle, and possible a privacy risk in that we'd probably have to send the verifier personal documentation that would contain more information than the asset issuer needed to know. The fewer people I have to show my passport or driving license to, the better. Also, without delegation every asset issuer would have to get involved in verifying, which is hassle for them, and might require them to jump through government hoops. It's easier for them if they can delegate. It increases the market for their assets, if many potential investors are already verified.

Ah OK, so basicaly we are on the same page any ways :)

You do agree that a the option for a "privat" asset, where accounts first have to get the permission from the asset issuer (who most likly will work with some kind of verification service/ or network) to be able to buy that asset?
Or have I misunderstood your post?

@ Cryptoscout: If I am not mistaking, Secure AE is just a bridge so that investors can buy assets with Bitcoin and don't have to install the Nxt software/buy Nxt? If that is right, then SAE would not help a bit for regulation purpose, as every one can still invest via Nxt AE in the Asset (without KYC/ATM, etc.)
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ChuckOne

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Re: Asset exchange, idea for regulation compliants
« Reply #11 on: November 05, 2014, 09:51:34 pm »

This could be done via RM.
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bahamapascal

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Re: Asset exchange, idea for regulation compliants
« Reply #12 on: November 05, 2014, 09:59:28 pm »

This could be done via RM.

What's RM ?
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ChuckOne

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Re: Asset exchange, idea for regulation compliants
« Reply #13 on: November 05, 2014, 10:03:40 pm »

Rights Management. People should be able to define what others can to with things they own. It basically decouples ownership from 'having in an account'.
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bahamapascal

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Re: Asset exchange, idea for regulation compliants
« Reply #14 on: November 05, 2014, 10:15:23 pm »

Rights Management. People should be able to define what others can to with things they own. It basically decouples ownership from 'having in an account'.

Cool, was RM a planed feuture any ways? What Rights would RM be giving Asset issuers?
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ChuckOne

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Re: Asset exchange, idea for regulation compliants
« Reply #15 on: November 05, 2014, 10:19:27 pm »

Rights Management. People should be able to define what others can to with things they own. It basically decouples ownership from 'having in an account'.

Cool, was RM a planed feuture any ways? What Rights would RM be giving Asset issuers?

As it seems, people want to have assets than can only be owned by accounts with a certain flag. Am I right? That can be done. Furthermore, transfer of ownership is also part of RM.

What else do you need?
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Stagcoin

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Re: Asset exchange, idea for regulation compliants
« Reply #16 on: November 05, 2014, 10:23:11 pm »

So today a Idea came to my mind, which might be a very useful addition for the AE. Sooner or later (if not already now) it's a problem for "real" companies  to offer stocks on the AE, as its decentralized and they can't comply with the (damn) KYC & AML rules, as every one can use the AE (Anonymously). In some coutrys that might not be a problem, but Overstock for example this is/will most likely be a deal breaker.

So what is if we implement a future, where the company can chose between a open AE listing and a private one.
An open AE listing (as they are now), would mean every one can trade the Asset.
While an private listing would mean that ONLY nxt accounts with a permission can trade this specific asset.

As example:
Overstock wants to issue shares on the NXT AE . When creating there share, they chose to make them private. No Nxt account will be able to buy there shares, except it was given permission by the Asset Issuer.
Now Overstock can say, please send us x Documents for registration needed for KYC/AML, then we will give the Nxt account provided by the custommer the permission to buy/sell the shares.


What do you guys (and girls) think about this???

If I understand this ccorrectly, this is not a bad idea. Just to be clear, no one NEEDS to verify their account to use the AE. Asset issuers don't NEED to require verification of accounts if they don't want. They can issue private assets if they WANT to comply with government laws or if they only want to use the asset between a few people.

Third party verification services SUPLEMENT private asset issuence and could, in theory, also supply verification that someone is not in compliance with the laws of their government. For example, there could even be "black market verified accounts" which verify that some account belongs to a criminal organization and is "trusted" not to snitch... or else.

This doesn't require anyone to do anything and is completely possible on a decentralized system. It could help both those who wish to comply with laws and those who wish not to comply with laws. It would merely be another tool asset issuers could use. They could either specify trusted accounts themselves or use a third party database to provide trusted accounts for them.

If this feature is implemented, I think it should, rather than use a list of trusted accounts provided by the user upon asset issuance that needs to constantly be updated for a fee of 1 NXT, use an SQL database query to a web link, possibly protected by a password. This would not only allow less fees to be paid and provide real time updates to the list, but it would lead to less blockchain bloating because the list is not kept on the blockchain, only a link to the list. Plus, those using third party verification services don't have to worry about updating the list at all. The only downside I see to this is what happens if the list goes off line.

I can imagine both private verification services existing as well as government operated ones existing in the future. I will definitely implement private assets in Stag at some point if not help develop the feature for NXT.
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bahamapascal

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Re: Asset exchange, idea for regulation compliants
« Reply #17 on: November 05, 2014, 10:29:10 pm »

Rights Management. People should be able to define what others can to with things they own. It basically decouples ownership from 'having in an account'.

Cool, was RM a planed feuture any ways? What Rights would RM be giving Asset issuers?

As it seems, people want to have assets than can only be owned by accounts with a certain flag. Am I right? That can be done. Furthermore, transfer of ownership is also part of RM.

What else do you need?

Yes, thats right. The asset issuer should be able to flag accounts, alowing them to hold there asset. But removel of that flag is also importend I belive, withdrawing the right for that account to recive more assets.

Is it best if I create a issue over at bitbucket for this?
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ChuckOne

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Re: Asset exchange, idea for regulation compliants
« Reply #18 on: November 05, 2014, 10:38:46 pm »

@bahamapascal
The flag could be anything and should does not be set by the issuer. From what I understand, a third party (certificate authority) flags accounts as 'trade-allowed under law XYZ'.

Issuers could allow ownership of assets only to those accounts certified under law XYZ and law ABC of country A, B and C. So, users can get those predicates/flags/attributes and issuers can use them.

Have look at http://www.nxttechnologytree.com/

From what is visible there, you can see that there is also a Ruleset feature and a Judgement System.


This is the YAML description of these features:

Rulesets:
  description:
    - rule = plain English sentence
    - an account has a ruleset, there might be common rulesets among accounts
    - rules might refer to Knowledge Base
  requisites: None
  recommendations: Knowledge Base


Judgement System:
  description:
    - a human reports/triggers the execution by inviting judges
    - account A trust n judges
    - account A ask judge to judge account B according to the ruleset of A
    - aid people to make their opinion about others if they encounter them the first time
    - JS is shortcut because their might be too many cases of others violating rules
  consequences:
    - people need this information to avoid problems with others in future
    - they can see that others quite often violate a rule (e.g. not to drink during job hours) and act accordingly
  requisites: Rulesets



So, Rulesets and Judgement System provides the flags (the data) and RM uses it.
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ChuckOne

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Re: Asset exchange, idea for regulation compliants
« Reply #19 on: November 05, 2014, 10:40:24 pm »

Is it best if I create a issue over at bitbucket for this?

Thanks for the initiative but this is not necessary right now as it is a planned Nxt feature. :)
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