A roundtable hosted by CIGI in Toronto, called “Regulating Blockchain & Distributed Ledger Technologies: Challenges and Opportunities for Canadian Innovation”, featured individuals from industry, government and academia.
Addison Cameron-Huff, a technology lawyer, recently blogged his thoughts about that panel. There are very important questions he feels people must ask themselves before knowing fully the right approach to blockchain regulation. For instance, regulators, lawyers and theoreticians must know what they’re discussing. The blockchain space is nascent. Huff highlights some of the aspects of blockchain that could be regulated: “Smart contracts, industry standards, technical standards, regulations, acts, common law, etc.”
Nearly one year ago, New York released the BitLicense. The license, officially called a “License to Engage in Virtual Currency Business Activity.” Thus far, a single one has been issued. That 31-page application was controversial among Bitcoiners. On that application, personal and professional references are required. This sort of scrutiny will be turned to blockchain technology.
Cameron-Huff believes, at the current stage, individuals must ask themselves, “What are the benefits of blockchains right now? What will the future benefits be? What might the downsides be?” Huff also questions where trust might lie in the blockchain world: with banks, Bitcoin exchanges or programmers? What sorts of laws, if any, would be required?
Ominously, Huff asks: “Will we still have banks in 30 years?”
He wonders how blockchain transactions will be managed, and to which sorts of taxes they will be subject. Betokening of some of the powers of distributed ledger technology: “Will government authorities take a cut of transactions directly?”
Huff is wary that too much regulation could undermine the benefits of distributed ledger technology or, at least, hurt the role of his native land, Canada, in the global blockchain industry. His piece is sort of a walkthrough of a possible future science fiction world. He ponders “programmable trust” and wonders if government functions will be embedded into blockchain protocols.
He wonders what role Canada can play “as a partner rather than a regulator?” He weighs the balances: “Is a lack of a regulation in the blockchain space a ‘gap’ in the law or an opportunity for entrepreneurs?” Further:
“Can regulatory “gaps” be filled with common law and economic behavior rather than government-prescribed rules? Are there any gaps that cannot be filled by private actors or court-created law?”
Huff also ponders the fate of blockchain developers. Generally, a corporation has certain duties revolving around answering to authorities. Huff wonders if blockchain developers will “be expected to assist the government in their traditional roles of law enforcement and taxation?”
An interesting development in 2015 and 2016 has been the rise of blockchains. Huff wonders if whether or not a distributed ledger is “public” or “private” will matter to regulators. What “jurisdictional challenges” will be presented by blockchain-based decentralized global economic system. Will blockchains flourish where there is less regulation.
He also highlights the interest of creating “good” regulations in provinces and federally in Canada.
There have been many debates regarding regulation of Bitcoin, which largely boils down to Bitcoin’s existence as a value medium and how it fits in which current anti-money laundering, know your customer, commodities and cash laws. The blockchain regulation debate will be a bit different, and some have suggested, perhaps, there will be a BitLicense scenario for encryption, whereby users of public encryption must be licensed.
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