The NEM Foundation is mapping out its survival plans in real time after obtaining a funding injection of roughly $8 million last month and laying off most of its staff.
The request to release 210 million XEM (the native token of the NEM blockchain) from reserves was approved by key members of the community on Feb. 20. In a post published Friday, NEM Foundation leadership laid out how the first installment of 25 million XEM (about $1.05 million at the current price) will be spent.
“I think this is a vote of confidence that the industry is moving forward and that we’re ready to pivot to a very new way of working,” NEM Foundation president Alexandra Tinsman told in an interview Friday.
The move comes after major cutbacks at the foundation, which at its peak in 2018 employed 150 and had a physical presence in 20 countries.
Tinsman confirmed Friday that the foundation had laid off about 100 people – a mix of consultants and full-time staffers – over the past month. The funding proposal published in early February estimated that “88 staff (69%) will be made redundant” by the planned restructuring.
“It’s in the best interest of companies to be fiscally responsible with their platform, their products and their teams,” Tinsman said. “We need to be product-focused and that’s what we’ve done. This is a sign of good things to come.”
NEM is launching soon its Catapult blockchain engine, which is designed to power both private and public networks. “The tech itself is doing things that no other blockchain has done before,” NEM Foundation interim CTO Jeff McDonald told on Fr
Stepping back, the NEM Foundation announced in January that it was in dire financial straits. The newly elected Tinsman told at the time that the foundation was facing layoffs and severe budget cuts “due to the mismanagement of the previous governance council.”
The NEM platform is primarily used to facilitate the development of enterprise blockchain apps. Its XEM token is currently the world’s 19th largest cryptocurrency, according to CoinMarketCap.
NEM Foundation president Alex Tinsman speaks at SXSW 2018, photo via NEM/Facebook
The German Ministry of Finance has recommended that the country recognize blockchain-based securities as a legitimate form of financial instrument and regulate them as such.
In a paper published Friday, the agency said securities can be issued in electronic form and shouldn’t have to be documented on paper. “German law should generally be opened up for electronic securities, i.e. the currently mandatory documentary embodiment of securities (paper form) should no longer apply without restriction,” the paper said, according to a Google translation from German.
Legislation should create a framework for regulating these digital instruments, with the flexibility to adjust the rules to the quickly changing reality of blockchain tech, the ministry added. “In view of the fact that the technical standards and requirements can change rapidly, authorization should be provided to regulate the specific technical details by legal regulation.”
The initiative should start with electronic bonds, and only later move to digital shares, the government said, since the amount of regulation necessary for the latter would delay the timely introduction of any electronic securities. All such securities in the country should be registered in a single central registry administered by a government-supervised agency, the document goes on, “in order to avoid the possibility of manipulation,” the paper said.
Also, “separate regulations should be provided for the acquisition and transfer of electronic securities as well as good faith protection.” If digital securities are used to trade on the country’s trading venues they should be registered with the country’s central security depository (CSD), the ministry said. Retail investors should generally be able to buy tokenized securities only through an intermediary financial institution, the paper said.
Notably, the document said digital securities can utilize blockchain but do not necessarily have to:
“The use of blockchain technology should not be privileged, especially with regard to the state-of-the-art development of the sometimes high energy requirements of public blockchain technologies and their climatic effects.”
The paper also touches the matter of so-called utility tokens, contemplating that these might be exempt from the requirements placed on securities issuers.
“As a rule, utility tokens do not constitute securities, investments or other financial instruments under the German Securities Trading Act and in most cases will not be electronic bonds in the future,” although “it could be determined by law that a public offer of utility tokens may only take place if the provider has previously published an information sheet,” the document says.
Legislation on the way
The ministry’s recommendations come as a draft bill on security token offerings (STOs) is in the works at the German parliament.
“The technology sounds very interesting, but people don’t really understand it,” Senator Thomas Heilmann, a member of the Christian Democratic Union (CDU), Germany’s ruling political party, told adding that the CDU faction in the parliament supports his initiative.
The bill now exists in the form of “discussion materials” and has been discussed by German lawmakers and government bodies behind closed doors, said Richard Lohwasser, the CEO of blockchain startup Lition, which has been advising Heilmann on the new legislative proposal.
As it stands, without comprehensive regulation of security tokens in Europe, dealing with them can mean a whole range of problems: holding a token doesn’t mean holding equity from a legal standpoint, dividend payments are not legally compliant, and if a token gets sold the buyer doesn’t acquire legal rights to receive dividends, Lohwasser explained.
As a financial center of Europe, Germany can secure also a leadership position in tokenized finance, the Finance Ministry’s document states. The country might also set the tone for the future E.U.-wide security token regulations.
The implications can be important for the global blockchain community, not only Germany, Lewis Cohen, a lawyer at the New York-based law firm DLx Law told, concluding:
“Even if the German capital markets are not that significant right now, especially from the point of view of companies here in the U.S., the fact that policymakers in Germany are taking active steps to encourage the use of security tokens will be noticed, and lessons will be learned, around the world. The German experiment, if you will, is important for creating a model, in which the wider blockchain community can learn what works well and what doesn’t work as well.”
A notably blockchain-friendly member of the U.S. Securities Exchange Commission (SEC) has pushed back on an industry lobbyist’s call for a coordinated national strategy for the technology.
The Digital Chamber of Commerce’s National Action Plan calls on the federal government to “make blockchain technology a priority,” by publicly supporting development in the space, adopting a formal light-touch regulatory approach, creating clear policies and regulations based on what the technology does (rather than the type of technology used) and preventing a “regulatory patchwork” by coordinating state and federal efforts.
“If we want the United States to be a leader in advanced technology we have to take action,” Perianne Boring, who founded the Chamber, said in her opening remarks at the organization’s D.C. Blockchain Summit this week. “It is time the United States introduced a national strategy for blockchain.”
Boring brought the action plan up again the next day, during a fireside chat with SEC Commissioner Hester Peirce, whose dissenting vote to approve a bitcoin ETF earned her the nickname “crypto mom” last year. And Peirce sounded lukewarm at best about the idea.
“What types of action would you like to see the government take?” Boring asked Peirce of the plan. The Commissioner’s response focused on the need for innovation to come from the private sector, rather than having the federal government facilitate large-scale cooperation across the country.
“People think ‘oh wouldn’t it be great if we coordinated this from the government’ and that has gotten us into lots of problems in the past,” Peirce said, adding:
“We need to have clear regulatory guidelines, that’s something I think you’ve been very forthright in calling for, which I think is really important. We do need to let people know where they stand, but then within that we need to let people do what they want to do and try not to have too much government partnership with the private sector.”
The government should just set up those guidelines and “let the innovation happen on its own,” she added.
‘Come in and tell us’
That said, Peirce encouraged the technologists and entrepreneurs in the room to pipe up.
What innovators can do is reach out to the SEC and other government agencies and let them know where specifically they need clarity, Peirce said, adding that, “you all need to come in and tell us where the pain points are, where the old regime doesn’t fit, and then we can move forward with guidance.”
In her comments, the Commissioner explained that she would like to see Commission-level guidance issued which clearly outlines where the legal lines are and how blockchain projects might interact with those lines, “but we need from you examples of where that would be helpful.”
Part of the hangup between developers in the blockchain space and the SEC may be the speeds at which each group typically works. Relative to the SEC’s perspective, the agency is “moving quickly,” but from a blockchain project’s point of view, the regulator may be moving very slowly, Peirce said.
She highlighted the SEC’s FinHub division, which is focused on interacting with blockchain and other fintech startups. On the branch’s website is a submission form, which Peirce hopes technologists will use. To date, only a handful of projects have actually provided feedback:
“We’ve gotten … maybe five or six letters and I was pretty disappointed by that. It does take work on your part but we really need people to be writing in.”