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Blockchain Public Technology

Blockchain and government regulators. Will they live happily ever after?

In the following article, we want to give a brief recap of recent developments in the regulatory area of the blockchain space. We will lay down the main events that have taken place, identify trends that are emerging from them, and based on this analysis try to speculate about the future of blockchain.

Main takeaways

  • Regulators are actively investigating different areas of blockchain space including exchanges, stablecoins, cryptocurrency transactions, mining processes, and tokens status.
  • Legal frameworks are proposed to regulate the dynamically growing crypto markets.
  • Developing countries tend to ban cryptocurrencies, whereas developed countries are investigating the possibility of partially embracing them.
  • Diem, a cryptocurrency with close ties to Meta (previously known as Facebook), failed due to federal government regulatory pressure.
  • All major economies are on track to issue their own government-backed currencies.

Introduction to blockchain and cryptocurrency regulation

Currently, the words “blockchain” and “crypto” are associated in our society with a wide range of, sometimes opposing, emotions. Yet, despite the fact that we are struggling to balance our excitement and fear, trust and suspicion, urge to evangelize and contempt, we can no longer ignore the fact that the genie is out of the bottle. Especially, if its capitalization is around 2 trillion dollars USD.

As crypto has reached this cap in an extremely short period of time, it caught the attention of governing bodies that seem to feel a sense of unease with this phenomenon. The tension between the crypto industry and government regulators reached the point where actions, sometimes drastic, are taken and the very existence of this market is at stake. For instance, Diem, a blockchain project that started at Facebook, has been recently closed by the United States government as “ it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead ”.

Cryptocurrencies, laws and regulations – what is the reason for the tension?

We will start this overview with an answer to the question of why there is tension between regulators and the crypto industry in the first place. The simple response is that it is a matter of value hierarchy.

Governments tend to prefer stability over growth. They impose this inclination by regulating the activities of intermediaries which in turn offer their services and products to clients. To protect customers even more, the intermediaries usually have a duty to be transparent and substantially backed by authorities in order to eliminate i.e. risk of money laundering.

As a result, trust and security are built in a series of steps between government and market agents. On the other hand, the crypto industry at its very heart chooses growth over stability. This goal is achieved by removing the intermediaries and putting the trust in hands of cryptographic algorithms. As a consequence, retail investors are less protected, yet they are rewarded for this risk with greater returns and lower fees.

Moreover, a sense of privacy is created as transaction agents are not obligated to be transparent. Finding a middle ground between described oppositions is and will be not an easy task. Regulators differ in their strategies for finding a solution. Some, like for example the government of El Salvador, are embracing cryptocurrencies with all their pros and cons, while others like China or Russia are banning them. In sum, currently, the regulatory pressure on cryptocurrencies can be observed in the following areas:

  • Cryptocurrency exchanges
  • Stablecoins
  • Customer safety
  • Status of cryptocurrencies (what kind of assets are they)

El Salvador – a decentralized future?

El Salvador is the first country in the world to adopt Bitcoin as a legal tender. This sentence is the summary of an almost year-long story that is still unfolding.

If we briefly check Wikipedia, we will learn that this country located in Central America has a population of around 6.8 million people and before the enactment of Bitcoin Law, it was using the US dollar as a national currency. Importantly, a large part of the country’s population lives abroad and sends money back to El Salvador.

These transfers could constitute even 20% of the country’s GDP and are subjected to substantial transaction fees. Moreover, a significant number of citizens do not have a bank account. These factors could make using a cryptocurrency like Bitcoin an interesting choice. El Salvador made a bold move by adopting this concept.

Here is the list of the main events that are shaping the economic future of this country:

United States of America – stablecoins and the financial system

It wouldn’t be an overstatement to say that the fate of blockchain technologies will be largely decided by the US regulators.

Although slow in investigating digital money at the beginning, recently both public institutions and the financial services industry, started to examine the cryptocurrency space and possible financial products based on blockchain technology at a faster pace in order to allow the safe adoption of cryptocurrencies. We would like to highlight the following events:

S&P Indices are commonly used as a proxy to measure Wall Street sentiment and by extension the whole US market. Creating indices for cryptocurrencies and including them in a separate and distinct asset class is an important statement that will definitely help to legitimize the technology.

We live in the era of investments based on Exchange Traded Funds (ETFs), with their ease of investing, and usually low fees they seem to be a perfect vehicle for modern portfolio creation.

Thus, with the advent of the first ETF that has a link to cryptocurrency a window of opportunities has been unlocked. It is important to stress, however, that the described ETF does not hold Bitcoin per se, but invests in Bitcoin future contracts.

  • A new regulatory framework for cryptocurrencies has been proposed during the congress hearing

The congress crypto hearing has brought to the community a level of excitement that has not been seen since the memorable hearing of Big Tech CEOs on disinformation.

During this important meeting, a new regulatory framework was proposed by Coinbase Chief Financial Officer Alesia Haas. It has been named Digital Asset Policy Proposal (dApp) and is based on four principles, called pillars, that we will quote:
“Pilar one: Regulate digital assets under a separate framework
Pilar two: Designate one regulator for digital assets markets
Pilar three: Protect and empower holders of digital assets
Pilar four: Promote interoperability and fair competition”

  • President’s Working Group on Financial Markets, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency presented a report on stablecoins

Stablecoins are the edge where the current financial system meets the crypto frontiers. As such, they are of particular importance to government regulators whose major responsibility is to stabilize the financial system.

In the long-awaited report, regulators insist that proper legislation needs to be put in place as the rapid growth of stablecoins could create systematic stress to the financial system. Three major suggestion has been made which we will quote:

  1. “Require stablecoin issuers to be insured depository institutions, which are subject to appropriate supervision and regulation, at the depository institution and the holding company level. ”
  2. “Require custodial wallet providers to be subject to appropriate federal oversight.
  3. “Require stablecoin issuers to comply with activity restrictions that limit affiliation with commercial entities.”

If imposed, the requirements will regulate the stablecoins market in a tight manner similar to this that controls banks. For a more in-debt analysis, we suggest watching the video by Patric Boyle.

Currently, the Federal Reserve is investigating the possibility of creating a digital US dollar.

A report published by the Authors examines the current system of money and possible ways to include digital assets in this ecosystem. The analysis, surprisingly, concludes with a call-to-action to the general public. A set of 22 questions has been put forward with FED seeking comments and opinions about them from citizens till May.

Diem: a tale of a blockchain pipe dream

Poor Diem. Even the name of this digital currency has been a problem. Previously it has been known as Libra, yet under the pressure, the name has been changed to Diem.

It was supposed to be a set of stablecoins backed by the Diem Association which was a constellation of private companies that were willing to join the Diem ecosystem. Head winds were constant during the work on the project both from government regulators and technical sides.

Yet, it was the former that delivered the coup de grâce as stated in the final statement: “Despite giving us positive substantive feedback on the design of the network, it nevertheless became clear from our dialogue with federal regulators that the project could not move ahead. ”

The failure of this project could halt public blockchain development for years to come. If even a tech behemoth like Facebook has seen a regulatory setback so strong that the project had to be cancelled, then other companies are probably reconsidering their plans.

Soon after the announcement of the Diem cancellation Facebook shares plummeted by almost 27%.

United Kingdom – consumer protection comes first

The main event in the crypto space that has occurred in the United Kingdom (UK) with regard to the topic of the present post is a great example of regulatory pressure on the crypto exchanges.

Namely, The Financial Conduct Authority (FCA) has prohibited Binance, which is one of the biggest crypto exchanges in the world, from all “ regulated activities” in the UK. The reason for this action was the apparent failure of the company which governs Binance to become transparent about its structure and legal status (see section 2.5 of the First Supervisory Notice).

European Union – house of regulatory frameworks

The European Central Bank (EBC) started to examine the possibility of issuing its own digital currency. The investigation is set up to take 2 years and from the initial statement, we can conclude that many technological options are considered.

However, one of them is excluded from the very beginning. Namely, EBC is crystal clear that the “digital euro is not a crypto-asset or stablecoin”.

Developing economies: China, India, Russia

Here we present the review of important events related to digital currencies in developing countries:

Conclusion to blockchain laws and regulations

In sum, we have presented the origin of the conflict between cryptocurrencies and regulators, and the actions that are taken by them. Emerging patterns suggest that the period of hostility and mutual reluctance between regulators and the crypto space is ending in developing countries.

With the advent of proper legal frameworks and financial instruments (indices and ETFs), consumers and the financial industry will get protection and a way to structure their actions. As a result, an even greater volume of fiat money could flow to crypto boosting the liquidity and encouraging the development of more rich app ecosystems.

However, these gains will be made only if proper transparency (Binance case in the UK), and fruitful dialogue with regulators will be established (Diem case). Finally, it is important to note that all major economies are investigating the possibility of using government-backed currencies, with China leading the race.

Thus, we can conclude with a paraphrase of Warren Buffet’s metaphor, that the blockchain economic soil remains fertile even with, and thanks to, the interference of government regulators.

Disclaimer

The present blog post is for informational purposes only and is neither legal nor financial advice/statement. Cryptocurrencies are high-risk investments with the potential to lose all invested capital. Thus, before you make an investment consult proper authorities and perform due diligence.

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Blockchain Public

Blockchain in multi-domain command and control targeting

Template logo for blockchain technology. Rhombus with connected lines for brand, logo, logotype of smart contract block symbol. Design for decentralized transactions. Vector Illustration

To effectively plan and accomplish today’s complex military activities in defense of a country’s best interest calls for timely, reliable, trusted, and clear communications across a lengthy chain-of-command covering multi-national forces.

Unlike traditional guard solutions that are accompanied by several drawbacks, such as lack of trusted end-to-end data provenance, blockchain technology can facilitate and accelerate these multi-domain command and control targeting activities by offering reliable, cross-domain virtual identities and policy-based information distribution channels for the target design process.    

The problem: siloed targeting people, processes, systems, and data

Targeting is the process of choosing and ranking targets and assigning the appropriate measures to them. It is often a multi-disciplinary process, calling for collaboration from various joint force staff aspects and mechanisms aided by multiple non-military organizations to:

  • Decide which target to engage
  • Decide the best way to engage them to attain the desired impact within political, technical, and operational limits. 
  • Discover their current hideout with adequate confidence. 
  • Achieve the right effects. 
  • Evaluate the impacts of the engagement. 

data siloing greatly hinders command targeting essential to its different members. These are contributors from different countries, different operational domains (air, space, sea, and cyber), using multiple automated systems running on different networks with distinct classification, authorization levels and security policies trying to produce, distribute, plan, and execute prioritized target information. 

Coalition-based networks and computing power are set up to enable communication between co-located joint targeting squad members. Appropriately categorized information is channeled through these collective infrastructures in a regulated way through traditional cross-domain guards linked to each member’s non-shared national networks.

However, as we discuss in this article concerning cross-domain security, traditional guard methods are affected by numerous downsides, like lack of trusted end-to-end information origin for the information shared. Confidential background information and decision attribution are essential for mission sensitive targeting processes.

The challenge of providing confidential identities for the workforce- person and non-person- interacting across various domains causes lack of trust. Trusted virtual identity is the hub of all verification and approval decisions, and facilitates other integral security operations (non-repudiation, reliability, and encryption).

Traditional centralized public key infrastructure (PKI) methods with their domain-based certification authorities (CA) fail to lend themselves well to cross-domain bridging applications.        

More issues arise from the necessity to guard sensitive identity information across security domains- the subject identifying information contained in CA-generated certificates circulated to top-secret networks can also be classified and hence be shared in other security domains. 

These drawbacks disappoint and limit solid, synchronized targeting information production, collection, and circulation, inhibiting the creation of a confidential joint operational display of a target and restricting situational awareness of the targeting process itself. All these increase the probability of creating sub-standard targeting methods that could make the mission impossible. 

Blockchain-based MDC2 targeting solution

Blockchain technology, coupled with W3C verifiable credentials, offer a trustable solution that is better than siloed multi-domain command and control targeting procedures and participants. Blockchain-based MDC2 targeting solution comprises of three key aspects:

Unclassified multi-domain targeting blockchain consortium

A permissioned, private, random leveling consortium blockchain engaging all contributing security personnel offers a trusted common operational picture (COP) for the targets and situational awareness (SA) of the targeting activity itself. All proposed changes to targets are validated and circulated with the help of this targeting blockchain network. Targeting procedures and strategies, like target selection standards (TSS), are implemented through smart contracts and endorsement programs.   

For instance, a target suggested to be incorporated into the high-payoff list would first be recommended according to the endorsement rule. The recommenders would implement smart contracts with the help of confidential input argument values and requests to systems of record to confirm that the TSS had been fulfilled and create a random ledger transaction read/write set of consent and other uncategorized metadata. The uncategorized information would be dedicated to the targeting consortium blockchain nodes found in each domain to act as an immutable attribution of the policy.  

Classified verifiable credentials and unclassified verifiable presentations

Classified targeting data is confidentially and selectively distributed through digitally signed W3C Verifiable Credentials distributed to every target entity’s virtual identity to affirm its targeting-process assembled traits. A target can be defined as an entity that executes a defined role for the opponent considered for a potential engagement. The MDC2 Targeting procedure gradually creates a logical illustration of a target entity, populating appropriate features using multiple schemes and artifacts. 

These certifiable badges would act as the basis of creating presentations and zero-knowledge proofs (ZKP) to circulate suitably confidential data within and across security domains selectively. For instance, uncategorized certifiable presentations obtained from classified badges affirming high payoff target lists, selection criteria, and the commander’s goals could be distributed to every security domain network. 

Unclassified multi-domain self-sovereign identity network  

A permissioned, public, unstipulated blockchain identity network involves all contributing entities and provides random confidential digital badges and public key enablement (PKE) for all involved parties. Using blockchain-powered self-sovereign identity (SSI, or decentralized PKI), a random W3C Decentralized Identifier (DID) is allocated to each domain, immutably linked to its public key and other uncategorized metadata in its DID document, and circulated through a blockchain network to all identity network nodes found across all involved security entities without the need of third-party CAs.   

Since DID and DID documents are meant to carry only random data, they may be freely spread across all security domains through the blockchain identity network hence offering a mutual all-domain source of trust for digital identity and PKE. DID forms stipulate a DID’s certification and approval methods and also facilitate innovation and collaboration with an entity through its blockchain printed service portals. Service portals found in every network domain act as a means of accessing an entity’s conforming organization of certifiable permits, presentations, and other useful data. 

For instance, a target entity can contain a service portal positioned on both an uncategorized network and a categorized network. Uncategorized information regarding the target can be retrieved from its Uncategorized Service Portal on the uncategorized system. Uncategorized certifiable presentations of a categorized target feature can be shared through the cross-domain guard and accessed on the uncategorized domain through the uncategorized service portal. 

The diagram below shows how a smart contract on the targeting blockchain implements target selection criteria for a suggested target/weapon system arrangement:     

  • A target squad participant hands a transaction suggestion for a target (recognized by its DID) to be considered suitable for a mission using a particular weapon system (recognized by the weapon system’s DID) to approving nodes of the targeting blockchain network. 
  • The targeting blockchain network’s chain-code employs the two DID opinions to question the target’s and the weapon system’s service portals for the specific data necessary to apply the TSS strategy. 
  • The service portals return supportable presentations of mandatory characteristics sharing only the minimum contentions needed by the chain code.
multi-domain command and control targeting
Source: Blockchain Pulse: IBM Blockchain Blog

Not demonstrated in the diagram, the chain-node authenticates the provable presentation signatures using public keys from the identity ledger inputted to the DIDs, utilizes the attribute information to authorize target suitability using the chain node’s business rationality, produces a random ledger read/write set with the determination, and regenerates a signed recommendation. Then, also not illustrated, the signed recommendations are gathered and send to the blockchain orderer for circulation throughout the cross-domain, targeting blockchain nodes for commit.

  • The targeting blockchain network peer nodes give reports upon commit. 
  • After getting a commit report, the target squad member gives a certifiable credential declaring that the target is suitable for attack by that weapon system. The declaration comprises the authorizing blockchain transaction ID and other extra information for thorough provenance. The target domain retains this supportable record plus all other permits that have been dispensed to it, affirming the other attributes. Uncategorized provable presentations of this categorized certifiable credential may be formed and disseminated to uncategorized domain service portals. 

The U.S. Air Force’s senior commander has made multi-domain command and control targeting one of his top priorities. Further reports suggest that now he aspires to see it become the Pentagon’s first development initiative.

How Blockchain technology can be used to coordinate other industries

Blockchain can also be used to co-ordinate the supply chain process in the pharmaceutical industry. All transactions, from the sourcing of drugs to the actual sale can be transparently documented and kept without the likelihood of ex-post information meddling. Once a transaction is initiated, it is kept on the blockchain and is unchangeable. As a result, pharmaceutical firms will be able to prevent human errors, logistical delays, and minimize expenses. 

The technology can also be used to coordinate the energy sector. A confidential blockchain alliance chain offers an energy distributed ledger and energy trading smart contract services. Energy internet comprises of energy resources, energy transmission, energy distribution, energy consumption, energy storage, and other distributed resources, and supports coordinated control and market trading.  

The value of blockchain-powered MDC2 targeting

Blockchain-powered multi-domain command and control targeting can facilitate, speed up, and secure MDC2 targeting operations by offering reliable, trusted identity and permits for all targeting domains throughout their lifecycle. Smart contracts execute targeting strategies on a cross-domain targeting consortium blockchain. This in turn, shares targeting information selectively across domains through certifiable badges and confirmable presentations.  

A distinct cross-domain blockchain identity network acts as a source of trust for digital identities to PKE and all involved members (person and non-person) in the targeting course who issue, keep, present, and authenticate credentials and their presentations without leakage of confidential identifying information. 

When combined, these solution features offer the targeting squad and their supported operation officers with a dependable, provable end-to-end attribution for all target-based data and policy-related resolutions within and across different security domains. This blockchain-powered solution offers cross-domain, cross-national, cross-functional, cross-organizational targeteers and users of targeting intelligence with a confidential joint operational image of each target and its features, precise situational awareness of the targeting process itself, and guaranteed execution of targeting and security strategies. The ultimate result is an enhanced process with more accurate multi-domain command and con trol targeting. 

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Blockchain Healthcare Public

Lessons to learn from the UAE in blockchain healthcare

In 2018, the United Arab Emirates set out on an ambitious plan to use blockchain technology to improve the lives of its citizens. The initiative set the country on a path to become a fully functional blockchain-based government by 2021. Sectors such as banking, transportation, and healthcare in the UAE will use blockchain technology to be more efficient and responsive. While the country as a whole has made strides, Dubai is farther along than other Emirates, especially in the healthcare sector. Here are some of the ways the Emirate is positioning itself as the first blockchain-powered city.

Blockchain EHR

In January 2017, Dubai healthcare giant NMC partnered with the Emirates Integrated Telecommunications Company, or du to enhance electronic health records (EHR) with blockchain technology. EHR has already been in use since 2008 but it involves a painstaking process that often leads to errors. With the Dubai Blockchain Strategy, healthcare companies are using blockchain technology to improve EHR. In 2018, NMC started using blockchain-enhanced EHR. Du along with NMC and a blockchain technology firm, GuardTime, came together to implement it. GuardTime is an Estonian startup that helped Estonia implement blockchain solutions. Du explained at the Keynote Blockchain Technology Conference held in Dubai how the Dubai Future Foundation and the Global Blockchain Council made the EHR improvement possible.

Most importantly, blockchain technology helps guarantee EHR security. It’s also easier for clinics and hospitals to access patients records across the UAE. Patients from Dubai could visit a hospital in  Abu Dhabi and their records go with them. Patient data is easily accessible and once a doctor provides a treatment, the data automatically stores in real-time. This innovation will make a lot of difference in an emergency. It will optimize emergency healthcare since doctors and nurses can verify a patient’s medical records within seconds, thereby saving lives.

Strides in UAE blockchain healthcare

During GITEX Technology Week in 2018, the Dubai Healthcare City Authority and Dubai Health Authority (DHA) agreed to link healthcare professionals’ licensing data with a blockchain system. Using blockchain technology, both government bodies will link the Masaar e-services portal and Sheryan smart licensing system for licensed healthcare professionals from anywhere in the world.

This innovation is especially favorable for healthcare innovators and professionals who are looking to invest in the rapidly growing city. Linking the DHA smart licensing system and Dubai Healthcare City Authority portal will allow potential healthcare providers to apply to obtain a license from anywhere in the world. Given the list of over 100 licenses available on Masaar e-services, potential healthcare professionals and investors will have a wide range to choose from. Blockchain technology will make finding out license requirements, procedures, obtainment, and renewal for professionals who intend to practice in Dubai seamless. This also applies to healthcare innovators and companies seeking to invest in Dubai.

Du, Dhonor HealthTech partner up

During the Unlock Blockchain conference in Dubai in January this year, UAE’s du announced its blockchain platform as a service (BPaaS) latest innovation. Du, in conjunction with Dhonor HealthTech, a global healthcare blockchain solutions company, will provide the United Arab Emirates’ first patients blockchain-powered safety solution. The blockchain solution will make it easier for patients and healthcare providers to verify the authenticity as well as the condition of medicines. Basically, making it possible to verify the source of medicines and what they contain, therefore, protecting the lives of patients who depend on them.

blockchain healthcare

Organ donation and Dhonor HealthTech

In February 2019, the UAE’s Ministry of Health and Prevention (MoHAP) announced a blockchain-enabled mobile app, Hayat, to improve the process of organ donation in the UAE. One of the initiative’s major sponsor is Pfizer. MoHAP partnered with Dhonor HealthTech to help with creating the blockchain organ donor program. With the help of Dhonor HealthTech, MoHAP has registered UAE citizens (patients) on the blockchain healthcare platform. Dhonor HealthTech and MoHAP will link the blockchain organ donation program across all the seven hospitals that carry out organ transplant operations in the United Arab Emirates. The Hayat organ donation blockchain solutions, enhanced with AI, correctly record patient DNA, verify organs, and optimize organ transplants in the UAE.

With this initiative, UAE hospitals will be able to check whether the DNA of a donor matches the donated organ. The Hayat initiative will also improve the process of checking whether a donor matches the patient’s DNA. All this will mean less paperwork. The Hayat app collects and stores DNA data from swabs and is easily accessible.

This initiative will not only improve the UAE’s healthcare sector by optimizing organ transplant procedures but also reduce organ trafficking. This will be possible because they’ve already collected DNA swabs from UAE citizens and saved them. Everyone in the UAE will have a unique ID, therefore, once someone goes to one of the seven hospitals that perform organ transplants in the UAE, the hospital can verify if the donor’s and the organ’s DNA match. As a result, they will be able to cut down on organ trafficking. It will also make it easier for transferred patients to continue their organ transplant treatment. This is because healthcare providers in organ transplant hospitals can easily verify and match organs on the blockchain-powered Hayat app.

blockchain healthcare

Future Of blockchain healthcare in the UAE

When Dubai and the UAE at large set blockchain implementation goals for 2020 and 2021, it probably seemed like too short a time to achieve the goals. However, the future of the UAE’s healthcare is bright because they have clearly made some impressive achievements and the world should take notice. They have successfully become the second country in the world working towards becoming a blockchain-powered country. Estonia being the first. Besides having a concerned government which cares for its people’s welfare, the UAE has a young population that is always eager to try new technologies. Hence, achieving a fully backed blockchain country by 2021 – 2023 is highly likely.

By paying attention to the progress made in Emirati healthcare and how they have implemented blockchain, different countries can learn more about real-world applications of blockchain. We have learned that blockchain can store patients medical records, authenticate medicines, and facilitate organ donation. Therefore, it should no longer be hard to see blockchain beyond cryptocurrencies, the blockchain technology can revolutionize and improve any sector in a country.

Conclusion

The UAE is showing the rest of the world how to implement blockchain in healthcare, there are always annual symposia and conferences focusing on blockchain and healthcare stakeholders from different countries. The UAE is ever welcoming for investors whether small or big, it welcomed VeChain, GuardTime, as well as Pfizer for blockchain partnerships. As a result, one thing is certain about the UAE, it’s creating a better healthcare environment for its citizens.

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Blockchain Entrepreneurship Public

How blockchain regulation should look

Despite what you might read online, not all blockchain regulation is bad. Regulations are, in general, necessary. They help businesses thrive on markets that suffer from information asymmetry. What’s more, they also make the industry landscape clearer and sanction the government’s approach towards it. Regulations also protect customers’ interests if access to information is limited or if there’s a constraint on competition between market actors. However, blockchain regulation can be done wrong, as we’ve seen in some cases. Let’s raise some questions and try to look for solutions: from green addresses to exemptions.

Thinking cross-nationally

Regulations are usually national. There are certain cross-national regulations, but they happen only to some extent. You don’t want people financing terrorism, for example. However, it can be futile to try and regulate companies that operate through using blockchain technologies only on the national level . That’s because companies can change the jurisdiction of their inc. to avoid unnecessarily harsh blockchain regulation. It would be very beneficial for the whole industry to create cross-national non-profit organizations and self-governing bodies that can address policy blind spots . Their members can range from industry representatives to government representatives. They could be tasked with suggesting and promoting good regulatory practices across the members and jurisdictions they represent.

Educating

As a technology, blockchain can’t be regulated or banned , as it’s only a concept/algorithm and a technical data structure. Entities (especially those non-formalized) operating purely on the blockchain that don’t interact with real-world companies can’t be regulated either. However, regulators should also be involved in education campaigns , spreading awareness of fully decentralized schemes or pointing to risks of suspicious schemes (example here).

Focusing on entities interacting with blockchain

Blockchain regulation should be focused on the entities that interact with blockchain technologies. They operate on the blockchain network, offering their services to other real-world consumers or companies. Regulation on this level shouldn’t be much different from what we have for similar non-blockchain services. This includes any financial operations, insurance, logistics, etc.

Allowing exemptions

As the technology is very innovative and can create positive change across many industries, there should be regulatory exemptions in place. Good examples include blockchain regulations in Switzerland or Gibraltar for small-scale operations. They’re measured, for example, by a maximum value of customers’ assets held by the operation without full license or by the exemption time. In these cases, the regulation is won’t limit innovation before it’s able to prove its positive value.

Self-regulation

Some fully decentralized schemes can and will impose self-regulation practices and extreme transparency . An entire industry built around providing analytical, monitoring and transparency services to existing fully decentralized schemes may emerge . This would increase the customers’ confidence in the schemes. So, regulators should also promote these practices – or companies offering them. Regulators and Central Banks can even go one step further and create national cryptocurrencies with self-regulating capabilities built right into their scheme. Decentralized services built on top of national cryptocurrencies can be considered safer by the end customers. Of course, if the scheme can self-enforce regulation best practices (proper KYC and AML).

Anonymous schemes

It’s possible that national governments and regulators may create their technical interfaces/APIs . For example, for proper tax calculation or for direct sales tax payment. So, those fully decentralized services offering their products to the citizens can become fully compliant with the local regulations even if they lack any real-world manifestation . Schemes like that can increase the customer’s safety. What’s more, they contribute to the view that customers can operate within the law even in the case of fully anonymous schemes . At the very minimum, regulators have to clarify their stance on the sales and VAT taxation applications to transactions conducted with blockchain .

Using green addresses

In some jurisdictions (like China), capital controls, especially the flow of capital abroad, are an important part of regulatory responsibilities. It’s hard to curb Bitcoin transactions as they’re naturally borderless. However, it’s possible to control all the participants that take part in converting fiat money to Bitcoin – and vice versa. There’s also the concept of Green Addresses. These are Bitcoin addresses that belong to a known and trusted financial institution which also manages the users’ bitcoin wallets. Whenever a user wants to make a transaction from a wallet to an external party, they can send it via its Green Address provider. Then, the outgoing transactions will look as if they’re coming from a trusted address of the Green Addresses provider. Regulators can require all transactions into and out of exchanges in a given jurisdiction to go via Green Addresses.

Fixing information asymmetry

The concept of information asymmetry exists in the general economy. For example, in used cars trading. Let’s say the buyer can’t really tell if a car is good or bad. The seller can easily hide some defects, which leads to increased distrust between two parties. Blockchain technologies can help, as they can provide irrefutable provenance proves. Every object can be traced back to its producer and all the previous owners. Additionally, you have trackable quality assessments and can see all the amendments and repairs ordered in the meantime. This information can’t be removed or hidden from the blockchain. Regulators could structure market transactions so that proper provenance collection is required for every newly built product from a certain market. This way, it gradually introduces complete reliability to this market and lowers information asymmetry.

Blockchain regulation catches up

These are only some of the issues that national regulators have to face. Some advancements were impossible to predict when regulators passed resolutions. It’s a difficult game of catching up. And if you feel you need to catch up with what’s currently allowed and what’s not, go for blockchain training.