United States:
Antitrust Enforcers Preview Incoming Spotlight On Blockchain
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The tide of regulation of cryptocurrency and blockchain could be
turning in the United States. Following comments by newly-confirmed
Treasury Secretary (and former Federal Reserve Chair) Janet Yellen
describing Bitcoin as “inefficient” and
“extremely volatile,” the price of the coin dropped 10%
in 24 hours. During her confirmation hearings, Yellen described
cryptocurrencies as a “
particular concern” and signaled that the Treasury would
begin examining blockchain-based financial networks. On the heels
of Secretary Yellen’s comments, Congressman Patrick McHenry
(R-NC), head of the House Financial Services Committee, and
Congressman Stephen F. Lynch (D-MA), Chair of the Financial
Technologies Task Force, introduced
H.R. 1602, bipartisan legislation which directs the CFTC and
the SEC to “jointly establish a digital asset working
group” to “provide regulatory clarity” and to
“create a critical collaboration [between the two agencies to]
create fair and transparent markets.” Notably absent from this
proposed collaboration is any mention of antitrust enforcement or
involvement of the DOJ antitrust division or the FTC. However,
recent comments by outgoing DOJ chair Makan Delrahim provide clues
as to how antitrust may play a part in the regulatory framework for
blockchain and cryptocurrency.
Speaking at the 13th Annual Conference of Innovation
Economics at Northwestern University’s Kellogg School, Delrahim
spoke broadly about the importance of innovation and ensuring
competition in digital markets. Referencing Nassim Taleb’s
seminal book, “
Antifragile,” which posits that embracing randomness and
volatility can strengthen economic systems, Delrahim commented
that, in order for the Antitrust Division to become
“antifragile” it must be prepared to confront and address
how blockchain technology will impact competition in multiple
markets. Delrahim explained that he, along with other senior
enforcers at the Division, had been enrolled in a course in
blockchain technology offered by the MIT Sloan School of Business.
This course, Delrahim claimed, imposed upon him and his colleagues
the “transformational effect” that blockchain will have
on certain markets – but warned that while blockchain
“carried the promise of toppling existing monopoly
structures,” it also presented the “prospect of new
monopolies emerging and seeking to entrench themselves.” He
then declared that the Antitrust Division “will play a
critical role in ensuring market conditions are conducive to
unleashing blockchain’s revolutionary potential.”
Delrahim explained that the Antitrust Division shares in some of
the goals offered by the promise of blockchain technology –
specifically achieving network cost reductions that can offer
consumers “lower cost or higher value options.” At the
same time, according to Delrahim, DOJ must prevent
“competitive abuses” in those same markets. But the
examples of such competitive abuses Delrahim identified did not
consist of the “new monopolies” he warned of moments
before. Instead, he cautioned against competitors either
conditioning access to industry blockchains as part of a tacit
agreement to collectively fix prices or output, or to use the
anonymity of blockchain as a cloak to share competitively sensitive
information with impunity.
Delrahim’s comments regarding monopolies suggest an activist
focus that could draw parallels to the agencies’ current
enforcement actions against digital platforms. Indeed, many of the
practices that the FTC, DOJ, and state enforcers are investigating
concerning Big Tech – issues of lockup/lock-in, bundling,
refusals to deal, and purchases of competing technologies to stifle
competition – all could conceivably emerge as private
blockchain gains prominence. But the specific examples of
“competitive abuses” Delrahim focused on were not of
dominant technologies, but instead focused on the garden variety
horizontal collusion that has been the subject of government
enforcement since the dawn of antitrust enforcement. Nor did
Delrahim’s comments, made just weeks before he left the
Division, lay out a specific plan of action for enforcement in
cryptocurrencies or blockchain. Instead, his comments could be seen
as an acknowledgement that enforcers’ efforts were better spent
trying to understand blockchain and its implications, or otherwise
risk “fall[ing] behind and learn[ing], only too late, that
entrenched monopolists have taken anticompetitive actions to
eliminate the threat from blockchain technology to their business
models.” As enforcers get further steeped in the issues,
industry observers expect further guidance from regulators,
particularly new DOJ leadership, on threshold issues including
potential refusals to deal, and the impact of network effects
within and throughout blockchain ecosystems.
Antitrust Enforcers Preview Incoming Spotlight on
Blockchain
Originally Published by Proskauer, March 2021
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