On March 17, 2018, ConsenSys, in partnership with Microsoft and UnionBank of the Philippines, hosted the Manila node of the first annual 2018 Computational Law & Blockchain Festival (“CL+B”), a decentralized international festival with self-organized node cities from around the world. The festival focused on educating the general public through discussions on the policy implications of blockchain technology, and sponsored a 24-hour global hackathon focused on building solutions related to computational law and blockchain-for-law use cases.
A total of 130 participants attended CL+B Manila including members of the blockchain and cryptocurrency community, lawyers, high school ICT students, and policy-makers. Also in attendance were regulators from the Department of Trade and Industry (“DTI”), National Privacy Commission (“NPC”), Department of Public Works & Highways (“DPW”), Securities Exchange Commission (“SEC”) and most notably, the Bangko Sentral ng Pilipinas (“BSP”),1 including its Deputy Director and Head of the Core Information Technology Specialist Group, Mhel Plabasan.
The Discuss Track
ConsenSys kicked off the event by defining legal hacking as the process of developing creative solutions to issues at the intersection of law and technology, “inspired by the ethos of the original MIT hackers of the 1950s and 1960s. The output of legal hacking could be a tech-based solution (e.g., legal tech, reg tech, or civic tech), an improvement in legal services delivery, or a new way of addressing a public policy issue such as data protection, intellectual property, or the sharing economy.”2 Thus, the mission of the festival was made clear: to collaborate on creative solutions to the issues we are facing today in the wake of a rapidly evolving technological landscape; to equip ourselves both technologically and legally to mitigate risks to our safety and autonomy; and to pave the path for an emerging blockchain technology that has the capacity to disrupt socio-political and economic systems for the better.
As one of the leading blockchain advocates in the Philippines, UnionBank executives Justo A. Ortiz (Chairman), Edwin R. Bautista (President & CEO), and Arvie de Vera (Head of Fintech Business Group), delivered a joint keynote: “A Blockchain Future for the Philippines.” Ortiz and Bautista shared their vision of a peer-to-peer world with inclusive prosperity, which blockchain provides by eliminating the “cost of trust,” or the cost of the middleman. To some, it may seem incongruous that a bank or traditional financial institution is working to disrupt its own industry. Ortiz rhetorically asked, “Why develop systems that compete with traditional banking?” And answered by stating that UnionBank “cannot sustain business by trading on uncertainty and instability.” He asserted that empowering Filipinos through digital transformation will allow the Philippines to participate globally with significant impact.
De Vera then introduced the inter-rural bank payment and settlement platform that UnionBank is currently building, for which ConsenSys is a strategic advisor. The mission of this project is to allow for more efficient back-end operations in order to provide real-time services to the underserved rural client-base, and allow them to participate in the domestic financial ecosystem. De Vera stated, “Blockchain doesn’t just enable connectivity, it also has a real impact on productivity.” With this in mind, de Vera is hopeful that increased productivity will lead to GDP growth via financial inclusion.
CL+B Manila then began the Discuss track with a highly anticipated panel on the Virtual Currency Circular No. 944,3 issued by the BSP in January of 2017 to regulate virtual currency exchanges in the Philippines. The issuance of this circular established the Philippines as one of the first governments in the world to have a regulated virtual currency exchange industry. The panel was moderated by Rafael Padilla, Legal and Compliance Head of SCI Ventures, one of the two licensed virtual currency exchanges in the country. Panelists included Mhel Plabasan (Deputy Director and Head of the Core Information Technology Specialist Group of BSP), Maria Gainatinou (Compliance Officer of Coins.PH), the only other licensed Philippines-based virtual currency exchange), and Bryant Casiw (Managing Partner of BCG Law), who represents applicants for the virtual currency exchange license.
The discussion addressed the complexities of applying for the licence, specifically for start-ups struggling to meet the compliance requirements of the BSP. While the BSP is working to enable the cryptocurrency industry to flourish in the Philippines, it remains vigilant and selective, protecting both entrepreneurs and its customers.
Next, the panel on the “History and Future of Technology in the Philippines,” brought together two pioneers from the IT and Business Process Outsourcing (“BPO”) industry and co-founders of the IT and Business Process Association of the Philippines (“IBPAP”), Karen Batungbacal and Dan Reyes. They addressed best practices from industry builders, specifically in working with government to exponentially grow the industry in the last twenty years to what it is today: a driver of economic growth in the Philippines directly employing 1.5 million Filipinos, and through the multiplier effect, indirectly providing 3 million more jobs for Filipinos. Throughout the years, IT and BPO pioneers worked hand-in-hand with, as Batungbacal stated, “heroes in government” to influence policy and legislation to support the development in their industry, a legacy that the blockchain community in the Philippines should both maintain and further. This panel was also designed to understand the pain points that the industry currently faces, and identify how blockchain can, perhaps, fill in the gaps.
For the remainder of CL+B Manila, ConsenSys organized six breakout sessions led by members of the global ConsenSys mesh and the local blockchain community, including lawyers and technologists: Taxation, Securities Law and Regulating ICO’s/Token Launches; The Digital Divide: Democratizing the Internet; Smart Contracts as Legal Contracts; Privacy, Security and National Identity; Governance in a Digital Decentralized World (a session designed for law students); and a closed-door roundtable discussion for government, Digital Governance Frameworks within Local, Regional and National Government. Each session combined both technological and legal expertise in blockchain to provide a balanced and collaborative discussion around each topic, while honoring the decentralized nature of the Festival through video conferencing provided by the ConsenSys mesh. In addition, ConsenSys set up a viewing room for livestreams of other CL+B nodes around the world to expose participants to other contexts for public policy discourse on blockchain.
With the steadily rising number of cryptocurrencies and tokens being launched everyday, “Taxation, Securities Law and Regulating ICOs/Token Launches” attracted a large audience. This session was lead by ConsenSys’ Global Business Development & Partnerships Lead John Lilic, and co-facilitated by Colin Goltra of Coins.PH and Jin Gonzalez of the UnionBank Fintech Group. Lilic addressed the taxonomy problem of cryptoassets: they are difficult to categorize due to various and often multiple utility functions, and are likewise difficult to regulate. Both the BSP and SEC recognize this complexity and are currently coordinating their efforts to identify where their regulations will necessarily overlap in order to provide a growth-driven regulatory framework for digital assets. Highlights of the discussion from the private sector standpoint included Coins.PH’s pushback against the notion that Bitcoin is trustless as it establishes itself as a “trust-business” that chooses to comply with all relevant regulatory bodies (as the first fintech company to obtain the Virtual Currency License from the BSP). Also notable was UnionBank’s full support for the movement in blockchain towards self-sovereign identity, and for ensuring fiduciary responsibility to its clients, which requires proper checks and balances for cryptoassets.
“The Digital Divide: Democratizing the Internet” was led remotely by ConsenSys’ Thomas Miller, a blockchain developer whose passion is to empower communities to be self-sufficient in terms of access to fiber networks. His audience was comprised mainly of high school ICT students looking to improve the state of the internet in the Philippines today by improving its accessibility.
“Smart Contracts as Legal Contracts” was delivered by Rafael Padilla after a brief technical introduction by UnionBank’s Gerb Inajada. Padilla framed the discussion around the Electronic Commerce Act (Republic Act No. 8792), under which smart contracts can be considered legal contracts if key requirements such as consent, object of contract (which in substance must not be contrary to law or public policy), and cause of obligation are met.
“Privacy, Security and National Identity” was led by JJ Disini of Disini & Disini Law. In an interview regarding the session, he stated:
Because the Internet was not designed to validate the identity of users, it has become necessary for users to individually establish trust and reputation in order to facilitate commercial transactions. These have been achieved in part by online feedback or peer review mechanisms such as those employed by AirBnb or Ebay. However, we have seen such peer-review systems exploited, resulting in less-than-reliable rankings in sites such as TripAdvisor which recently saw a non-existent restaurant rise to become the top-rated food outlet in London. In the face of these challenges, blockchain technologies may prove to be useful in establishing one’s identity in a distributed network. This can be done by recording proofs of identity—documents as well as records of online transactions—on the blockchain. This allows the data subject to create an authoritative data trail that is independently verifiable, and despite being housed in separate locations, [the data is] inextricably linked by the data subject’s key pair. Additionally, the data subject can maintain control over such information by issuing tokens that permit third parties to decrypt such information for further use. Encryption can also aid the data subject to preserve a level of anonymity necessary to exercise civil liberties, and ultimately, hold State actors accountable. While the specific technology or protocols are not yet in existence, any solution will likely arise from a mixture of market-provided technologies as well as norms of behavior arising from online interactions or repeated commercial dealings.
In support of Disini’s argument for blockchain as a solution for the pain points the Philippine currently faces with regard to the legal landscape and lack of identity infrastructure, Pelle Braendgaard, technical lead for uPort (ConsenSys’ blockchain identity system), presented a demo of the product and explained its technical intricacies. The demo was well-received by the mostly public sector participants, including a member of the National Privacy Commission. Noted in the conclusion of the discussion on uPort was its need to be tested on a small scale, following the implementation of the system in Zug, before growing the user base to a national scale.