Europe has recognized the myriad benefits of blockchain within its ecosystem, alongside the need for robust policy. Considering the nascent nature of blockchain, it provides a challenge for EU policymakers to adapt and be in sync with the technology. Regulation typically plays a game of catchup with technology, lagging behind the innovation curve. Blockchain creates a dynamic and disruptive presence in Europe, and regulatory bodies and the EU regulators must act quickly.
Blockchain Speeding And Facilitating The Transactions
Blockchain is a decentralized distributed ledger of activity, across different computers, storing a chain of past transactions. It is unchangeable, updating with each new transaction, providing transparency, and ensuring reliability. It has proved to be a promising new technology for payments, eliminating the middleman, foregoing the need for centralized institutions, such as banks. Reducing association with banks lowers the chance of manipulation and processing times, alongside eliminating bank fees. It is also very efficient, with transactions orchestrated with a mere mouse click, increasing liquidity and improving the efficiency of markets.
Is EU Blockchain Too Juvenile For Regulators?
Needless to say, blockchain is a juvenile technology, and the roots of traditional banks extend deep into society. However, the momentum the technology has gained is unprecedented, as the benefits are difficult to ignore. Successful ubiquitous implementation is reliant upon regulation and legislation, which addresses the concerns and issues of blockchain. Considering the different views and opinions on the blockchain, the question is deferred from whether the technology will perform, to whether regulatory bodies can all agree and become on board. Financial institutions worldwide are slowly recognizing that blockchain is not a short-lived fad, and some are adopting the technology, creating a very dynamic economic landscape.
The EU Blockchain Observatory
The EU Blockchain Observatory and Forum was a two-year project, launched by the European Commission and supported by the European Parliament. It was designed to stimulate discussion, analysis, and recommendations, to foster innovation within the European ecosystem. Mariya Gabriel, Commissioner for the Digital Economy and Society, said “I see blockchain as a game changer and I want Europe to be at the forefront of its development. We need to establish the right enabling environment… The EU Blockchain Observatory and Forum is an important step in that direction”.
Researching Global Blockchain Trends
The Observatory continuously monitors blockchain global trends, conducts research, creates forums where all stakeholders can coalesce and debate issues, alongside making recommendations. They work alongside European Commission’s Directorate-General for Communications Networks, Content and Technology (DG CONNECT) to complete these goals. Roberto Viola, Director General at DG CONNECT said “Europe’s ambition is to set the gold standard for blockchain technologies. We have implemented a strong regulatory and policy framework that supports sustainable blockchain innovation as well as the startup and scaleup ecosystems. Administrations across Europe play a trailblazing role in implementing this exciting and essential new technology”.
The General Data Protection Regulation
The General Data Protection law came into effect in Europe as of 2018, which proved to be controversial. European Parliament member, Jan Philipp Albrecht, said that the GDPR “is agnostic about which specific technology is used for the processing, but it introduces a mandatory obligation for data controllers to apply the principle of ‘data protection by design’. This means for example that the data subject’s rights can be easily exercised, including the right to deletion of data when it is no longer needed”. Deleting data does not comply with blockchain architecture, since the ledger of data is decentralized and unchangeable. Blockchain is immutable by nature, thus inconsistent with the GDPR right to delete data. John Mathews, CFO of Bitnation, said “The GDPR was written on the assumption that you have centralized services controlling access rights to the user’s data, which is the opposite of what a permissionless blockchain does“. Furthermore, the GDPR had more inconsistencies with the technology, exemplifying the dissociation between legislative and the functionality of blockchain.
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Greg McMullen, the co-founder of IPDB Foundation, outlined these contradictions, saying “The GDPR is written for a cloud services model where, say, I’m a startup and I collect restaurant order data and I store it all on Amazon Web Services, and they do my hosting for me, so I have to have a contract with Amazon that passes on my privacy obligations to them. It works really well when there are one or two providers, but when you start having a decentralized network it breaks down entirely. You can’t have a contract with [all] the nodes on the Ethereum network. It’s unfeasible.”.
EU Regulators Defensive Towards Widespread Blockchain Adaptation
Furthermore, some regulatory and legislative bodies are defensive towards the eventual widespread adaptation of blockchain. The European Banking Federation (EBF), the European Association of Co-operative Banks (EACB), and the European Savings and Retail Banking Group (ESBG), recently released a report outlining the need to meet changes in payment services within the EU. Throughout the documentation the term ‘blockchain’ or ‘distributed ledger’ was not mentioned once, indicating an aversion or negligence to the way of the future, considering its disruptive tendencies on the financial sector. Traditional banking international payments are riddled with archaic infrastructure, as fees are around 10%, and cross-border payments take up to five days.
Do European Regulators Have To Simply Embrace It?
European leaders and regulatory bodies must familiarise and embrace blockchain technology, opposed to shielding it from its potential disruptions. Claims such as ‘you cannot do everything with blockchain’, are the wrong perspective. You cannot do everything with electricity, but its introduction changed the world. Implementing blockchain technologies can change the financial landscape for the better, and extend far beyond into other areas of society.