In order to fully realize the potential of blockchain and cryptoassets, a serious conversation needs to be held about how commonsense policies can facilitate a pro-growth environment.
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Any time a new technology or new technology paradigm enters the market, there is going to be an expectation for some sort of regulation, or framework, to help facilitate the integration of this technology. This is as true for blockchain as it is for anything else.
It is also important to note that the blockchain and cryptoasset conversation is not centered or located in any single geographic location. That means that any blockchain or cryptoasset framework will need to be able to be applied across jurisdictional lines to maximize effectiveness.
A blockchain or cryptoasset policy will, by definition, need to be comprehensive in nature, and that means that it will also involve input from a number of stakeholder groups. While this might make the initial creation and implementation of a comprehensive blockchain policy more difficult, it will result in a superior product.
While every country is different, let’s take a look at some of the characteristics and traits that should be a part of any blockchain and cryptoasset policy.
Smart contracts are essential. A piece of the blockchain and cryptoasset conversation that can be overshadowed is just how important smart contacts are for wider implementation. Blockchains, in and of themselves, are simply a record of transactions that have already happened, and in order to communicate with other systems a connective application – like smart contracts – are required.
One other item that should be a part of any blockchain policy is how smart contracts are to be enforced. Although, in theory, a smart contract is simply a blockchain-based representation of existing contracts, the enforcing of such applications can raise additional issues linked to cybersecurity, interoperability, and maintenance.
Blockchains and cryptoassets should be differentiated. Much has been written about the cryptoasset evolution, but in order for a blockchain and cryptoasset policy to facilitate a pro-growth environment, there needs to be differentiation between the array of options that exist. Not every blockchain will be used for the same purpose, and establishing policies that are flexible enough to accommodate this reality should form the basis for any wide ranging policy.
For example, and something is beginning to be discussed and examined from a regulatory perspective is whether or not – depending on the functionality of the cryptoasset – these different items should be classified and treated differently. This can take the form of different reporting and disclosure requirements, or it can be as fundamental as which individuals and institutions consider even using the different classes of cryptoassets.
Data governance should be a priority. With any national level blockchain policy, there are going to be a wide array of stakeholders involved in the development, implementation, and maintenance of this blockchain. Additionally, and depending on how quickly or broadly blockchains are integrated in the economy at large, the sheer amount of information stored and managed on these blockchains can potentially be massive.
The tamper resistant nature of blockchain records is simultaneously one of the most important strengths of the technology, but can also create a situation where data privacy and security can be called into question. Especially for projects operating in jurisdictions with differing consumer data protection regulations, ensuring that rules governing the access to, and the security around this information are clear, needs to be a priority.
Competition should be encouraged. It would be naïve to think that blockchain technology will develop and mature in a vacuum, and it is equally as foolhardy to try and artificially restrict or mandate how the space will develop. Just like it is clear that other technologies such as increased automaton and the Internet of Things (IoT) will develop alongside blockchain technology, there are bound to be different models and versions of blockchain policy.
As with any other industry, competition and competitive forces will lead to the development of the blockchain framework most attuned to the needs of the marketplace, and that is something that should always be encouraged.
Collaboration will be integral. Although the initial appeal of a national blockchain policy may be something akin to the industrial policies of the 1970s and 1980s, the reality on the ground is that collaboration and cooperation will be essential for blockchains to deliver on their promise. Taking a step back, the true benefit of blockchain – be it implemented at an organization or at a national level – are the efficiencies that are able to be created between the individuals and institutions that are members of the same network.
In other words, even as competing blockchain models develop, organizations may find themselves cooperating on an increasing basis.
Any time a paradigm shifting technology comes onto the scene there is a scramble between the private sector and governmental sector to assume a leadership role. Blockchain is no exception to this rule, and will require a coordinated effort to not only have the promised benefits materialize, but to do so in a transparent and equitable manner.