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European Union Regulations on Cryptocurrency

The European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA) have called for an EU-wide approach to cryptocurrency and initial coin offerings (ICO) regulation in order to protect investor.

The EBA published the results of its assessment of EU laws and how they relate to cryptocurrencies earlier this week. The report found that cryptoassets typically fall outside the scope of EU financial laws since specific services relating to crypto custodian wallet provision and crypto trading platforms do not constitute regulated activities. According to the EBA, these factors give rise to potential issues, including regarding consumer protection, operational resilience, market integrity and the level playing field.

The EBA calls on the European Commission (EC) to carry out a comprehensive cost/benefit analysis to determine what, if any, action is required at the EU level at this stage to address these issues, specifically with regard to the opportunities and risks presented by crypto activities and new technologies that may entail the use of cryptoassets.

“The EBA also advises the European Commission to have regard to the latest recommendations and any further standards or guidance issued by the Financial Action Task Force (FATF) and to take steps where possible to promote consistency in the accounting treatment of crypto-assets.” the EBA said.

Separately, ESMA published its “Advice to the European Union (EU) Institutions” on ICOs and cryptocurrencies. ESMA said that while it does not believe that cryptocurrency currently raises financial stability issues, it is concerned about the risks it poses to investor protection and market integrity. ESMA identifies the most significant risks as fraud, cyber-attacks, money laundering, and market manipulation.

“A key consideration for regulators is the legal status of crypto-assets, as this determines whether financial services rules are likely to apply, and if so which, and hence the level of protection to investors,” ESMA said. “Because the range of crypto-assets are diverse and many have hybrid features, ESMA believes that there is not a ‘one size fits all’ solution when it comes to legal qualification.”

The regulator noted that some EU member states have or are considering some bespoke rules at the national level for all or a subset of those cryptoassets that do not qualify as MiFID financial instruments. While ESMA understands the intention to bring to the topic both a protective and supportive approach, ESMA is concerned that this does not provide for a level playing field across the EU. ESMA believes that an EU-wide approach is relevant, also considering the cross-border nature of cryptocurrencies.

Blockchain and Insurance Industry

While the banking sector’s quest for modernization was a major early driver behind the growth in enterprise blockchain technology, the insurance industry has not traditionally had such a healthy appetite for change. That is, until now.

Over the past couple of years, insurers have migrated away from their conservative image, leveraging several emerging technologies, including blockchain, to re-think their current business models.  One of the most significant technologies leading this digital transformation is blockchain which is streamlining back-office processes and systems. Heading into 2019, insurers are accelerating their deployment of the most innovative use-cases of enterprise blockchain technology yet.

Laying the back-office building blocks

Insurance companies face a complex web of challenges in today’s market. Regulatory demands are increasing; fraudulent claims are commonplace and the flow of data is ever increasing. Meanwhile, as digital technology permeates the financial services industry more broadly, customers expect a greater level of innovation than ever before.

Despite the growing demand for tailored products and services, insurers recognized that for transformation to be sustainable, it must begin in the back office. Legacy systems combined with patchwork solutions have perpetuated a closed-off insurance information environment with data silos and resulting operational inefficiencies. Building customer-facing digital solutions on these crumbling foundations would have disastrous consequences.

That is why, over the past two years, insurers have been hard at work behind the scenes deploying cutting-edge enterprise blockchain platforms to overhaul and modernize their back offices. Integrating even just the foundational technology can have a huge impact on a company’s transparency, stability and efficiency.

By taking the first step of moving its transactions onto a shared ledger, an insurer can potentially eliminate fraudulent and duplicate claims by logging each transaction in a decentralized repository. Instantly, an insurance company is able to verify the authenticity of a customer, policy or claim. This is a simple premise but a huge step forward for the industry.

In addition, with the rise of the Internet of Things (IoT) and connected devices, blockchain provides an efficient and secure way to manage, share and leverage an ever-growing amount of data. Purpose-built enterprise blockchain platforms like Corda overcome the challenges of traditional public blockchains by ensuring sensitive data is only shared with parties that have a need to see it in each instance.

The potential efficiency gains for both the insurer and the insured are dramatic. Consider, for example, a re-insurer, insurer and broker consolidating their policy data and storing it on a blockchain – the underwriting and application process could be reduced from weeks or even months to near real-time, with no burden on each entity having to gather, reconcile and submit documents.

These core benefits of blockchain technology are now being realized across the global insurance industry, with forward-thinking initiatives such as the RiskBlock Alliance and B3i leveraging the power of collaboration to drive adoption and deployment.

By moving to a model in which disparate parties such as insurers, reinsurers and brokers can share and store policy information in a cryptographically secure way, the industry has laid the foundations for the next phase of blockchain-enabled innovation.

A convergence of technologies

Insurers are acutely aware of the need to evolve in order to stay competitive, and streamlining market operations with blockchain technology is freeing up precious capital and resources previously spent on auditing and administrative costs.

Newly created roles such as Chief Digital Officer and Chief Innovation Officer are now commonplace across the industry, with firms vying to increase their market share by developing solutions that meet customers’ demands for innovation while increasing efficiency and profitability. Once data has been migrated to a blockchain platform, the potential to apply other technologies such as artificial intelligence (AI) to utilize this immutable, real-time information is vast.

Dynamic pricing is an example of an emerging blockchain-enabled innovation that benefits both the insurer and the customer, with broad-ranging potential across health insurance, car insurance, property insurance and beyond.

Taking the case of shipping insurance, advances in technologies such as AI and telematics enable insurers to access detailed, real-time information about a ship’s location, age and condition. This means, if a ship enters pirate waters, its location data would automatically be updated on the blockchain and the insurer can make the necessary adjustments to its risk profile and policy pricing. The same applies in the converse scenario – for example if a ship is young, in good condition and doesn’t stray from safe waters.

Now consider that the ship is transporting refrigerated cargo, which is also insured. How does an insurer know whether a temperature spike is taking place in a crate at sea a thousand miles from its destination that could potentially destroy the cargo? Thanks to telematics, sensors in the cargo containers can communicate accurate information about temperature, humidity and atmosphere.

This information can be updated in a smart contract on a blockchain platform in real-time, enabling an automatic pay-out to the customer if the cargo is spoiled by high or low temperatures. This saves the insurance company time and money while providing the customer with a better experience.

Dynamic pricing also has huge potential in the health insurance space. Health insurers require a vast amount of information about a customer’s medical history and lifestyle in order to piece together a policy, and provision of false or inaccurate information is commonplace. Blockchain enables insurers to accumulate data from multiple verified sources with updates occurring in real-time, allowing them to carry out more frequent risk assessments and customize pricing accordingly.

Usage-based insurance (UBI) is another innovation currently reshaping the car insurance industry. Many cars now come equipped with connected features or advanced driver-assisted systems (ADAS), which is having a profound impact on the way auto insurers handle policies.

Traditionally, car insurance policies have been based on driver characteristics like age, personal information and accident history. With UBI, insurers are able to incorporate driving behavior data such as speed and hard braking that is updated in real-time on the blockchain. In addition, telematics technology in the car can measure the time a driver spends on the road each day, opening up opportunities for pay-as-you-drive insurance policies that incorporate this data into a smart contract.

A digital future

These developments would be innovative in any sector, but when you consider the processes underpinning the insurance industry have remained largely unchanged for hundreds of years, the evolution is even more dramatic.

By harnessing the attributes of blockchain to tackle back-office challenges head-on, insurers have made the necessary investment to position themselves to take advantage of the myriad of opportunities and further efficiencies that blockchain – and its convergence with other new technologies – will deliver over the coming years.

2019 will undoubtedly see the insurance industry enter the next stage of its digital transformation, and we are proud to play an ongoing role in fostering this innovation with the launch of the first R3 Corda InsureTech Challenge.

Original Article by By: Ryan Rugg, Global Head Of Insurance, R3

The Internet of Things (IoT) in 2018 and beyond

The Internet of Things (IoT) in 2018 and beyond – towards monetization, tangible value and an increasing focus on IoT in a holistic context of transformation, strategy, multiple complementary technologies, and larger deployments.
While for many organizations IoT is still new and most investments happen in IIoT, the narrative changes.

Today it’s increasingly about value instead of potential, about the combination of IoT, AI and other related technologies to derive insights, decisions and revenues from sensor data and about IoT monetization, as scalable, IoT-enabled projects become part of less limited business objectives and digital transformation projects with a focus on services and applications.

Although a majority of organizations overall are only beginning, there is a clear shift from the age-old focus on the number of connected devices towards this broader vision in which business goals, people and value take center stage.

On top of a shift in terms of thinking about and understanding IoT there is a shift in the actual usage and deployment of it among leading organizations.

The essential definition of the Internet of Things still holds: IoT is a network of connected devices with 1) unique identifiers in the form of an IP address which 2) have embedded technologies or are equipped with technologies that enable them to sense, gather data and communicate about the environment in which they reside and/or themselves.

However, in the broader scope and amid the mentioned shifts the definition of IoT doesn’t matter that much if it isn’t put into a larger perspective.

Still, now is not the time for definitions and semantics anymore. Now it’s time for business, value, monetization, evolutions and IoT in action. And if we want definitions, to broaden them in order to finally encompass the why instead of just the essential what of IoT, would make more than sense.

An IoT 2018 business reality check

Although there are more devices active, more large scale IoT projects and a growing de facto usage of IoT, with the mentioned shifts in mind, there is still quite some work for both suppliers and organizations in reality.

  • While the narrative finally starts to shift towards value and business, many organizations still don’t know what IoT is or can mean for them. You rarely talk about IoT with a business executive, you talk about it with CIOs and people who already kind of know it, leverage it (which could be the CIO but also many others, depending on project) or are doing their homework. How do you explain IoT to those who take the big business decisions and do they even need to know what it is? Go at a random IoT event, you mainly see people who are involved in the industry or already look at the possibilities and have a decision-making or advisory role but far less people who sign off the project on a management, let alone board level.
  • Related with the previous point: IoT decisions are taken on a business level. Yet, they are not IoT decisions, they are business decisions in which IoT has a crucial role. This is a challenge for the market: on one hand you need to explain what IoT is and does but on the other hand it’s key to talk about business whereby the Internet of Things is part of bigger picture of many related technologies (once more, depending on project and scope) and an enabler, not a goal (as no technological reality ever is).
  • While IoT is highly transformational in nature (more below), digital transformation is not a matter of IoT or any technology alone. In some industries there isn’t a real case for IoT projects. In others it’s about pure tactical goals. Cost cutting, data (which is acquired and used for some insights or simple goals but often remains underutilized or even unused as has always been the case with data), automation, you name it. It’s time to go beyond selling the benefits of IoT and focus on the industries and use cases where advanced analytics and IoT really make a difference. On the other hand, it’s also important to realize that in some industries there isn’t a case for it yet and that de facto strategic and tactical goals are far higher than transformational ones. Leading project partners know how to help organizations do far more with data.
  • A large portion of companies simply isn’t ready for IoT because there are issues that should be long solved. The way in which you get the most out of your data as just mentioned is one example. Although there is IoT network coverage pretty much everywhere, there is a range of platforms offering plenty of ways to get IoT projects rolling and there are ample frameworks such as the Industry 4.0 vision for industrial markets, reality shows ample challenges in a far broader perspective. If you visit an average factory you often see they’re still dealing with paper-based processes, legacy systems and so forth. IoT deployments will continue to happen at different speeds because of the fact that in some use cases and industries there is far more value and readiness than in others.
  • Many organizations who want to start with IoT projects don’t know how. It is one of the reasons why system integrators, who know the business of their customers inside out and are their long trusted partners, often take the lead in projects where IoT is involved (as is the fact that, as previously mentioned, some organizations want to leverage the Internet of Things but have to solve other challenges first in order to be ready). The end-to-end vision and full understanding of the markets and technologies, as well as the hurdles, is key. Many companies simply don’t know where to start, where to end and how to get from start to end. Why to start is something else. Given the fact that IoT is increasingly embraced by small and medium enterprises or for very specific use cases there certainly is a market for more vertical and SME-oriented trusted partners as well.

IoT 2018 trends and evolutions

Across this overview we’ve already mentioned (the roots) of many evolutions in IoT for 2018. In fact, all the blue colored boxes contain one each.

As always several of these evolutions are hidden in the evolutions as we see them in the here and now, in real-life projects, in vendor initiatives that respond to a clear and present need, in 2017 research and so forth, yet there are also changes that might be somewhat ‘unexpected’.

As we’ve been emphasizing the importance of business, value, outcomes, real-life challenges and solutions, projects and so forth throughout this article it wouldn’t make much sense to only focus on technology trends for 2018.

Most of them were already in the make:

  • yes, blockchain and IoT becomes an important combination on various levels;
  • indeed, it’s clear that artificial intelligence will be more important in IoT;
  • true, LPWAN will continue to grow given new sensors, technologies and higher reach in combination with the nature of many Internet of Things projects;
  • and, for sure, there is a growing evolution towards the edge (with edge computing and fog computing and AI and IoT across other areas as described below),where projects demand it.

As IoT technology moves to the edge, business (re)centralizes

The movement towards to the edge by the way is nothing surprising and, just as the increasing role of blockchain, among others, fits in the overall context of decentralization and movements towards to the edge which we’ve been emphasizing in so many areas, from document capture and security to information management and intelligence in the field since years.

However, make no mistake: we are mainly talking about technologies and applications here. It’s not because technologies, some business processes and applications move towards the edge that all business aspects do. Well on the contrary: we see a trend towards a full centralization of decision power and of previously decentralized ways of working in many organizations, just as several companies start to get some workloads out of the cloud again (also a token of maturity) as organizations look more at what matters in detail.

IoT spending 2018 – approaching the $800 billion mark

According to IDC, total spending on IoT in 2018 will reach $772.5 billion in 2018. It is slightly less than was expected in previous forecasts of the firm but the main trends and evolutions haven’t changed.

There are various possible reasons why these forecasts get revised of course. Moreover, there are some evolutions which here and there could lead to a slower than expected investment. These don’t even have to be related with the usage of IoT as such. The increasing attention for changing data protection and privacy rules, for instance, are on the mind as risks for ample organizations. Moreover, these new personal data and privacy rules require budgets. And these budgets need to come from somewhere.

Source: I-Scoop
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