Governments are hyper-aware of the need to ensure that nascent or emerging technologies aren’t being abused at the expense of their citizens, and blockchain has caught the attention of regulators worldwide. With Europe’s Organization for Economic Cooperation and Development leading the way, more than a dozen countries are likely to roll out near universal regulation soon. Here are some insights on regulation that everyone should be aware of.
A major misconception about blockchain is that it’s all about the technology. The reality, though, is that this couldn’t be any further from the truth. In fact, the systems based on blockchain all rely on humans in order to interact.
Think about bitcoin. Or Ethereum. Or any of the blockchain-based technologies you’ve heard about. They all require human connection. And connection is exactly where regulation starts.
After consulting with dozens of financial leaders, regulators and governments – from G7 and G20, to the Organization for Economic Cooperation and Development (OECD) – here are some insights on regulation that everyone should be aware of.
The hunger for clarity and insight
To quickly understand why the OECD is so hungry for clarity and insight, we have to understand why it was created.
In 1961, still shaking off the shadow of Nazi Germany, dozens of European countries formed the OECD. The intent? Focus on global governance and ensure that a balance between governments, businesses and people could ultimately lead to better lives. Funded by its 30-plus member countries, the OECD is independent in the policies it helps write – policy that enables the Know Your Customer (KYC) and anti-money laundering (AML) laws that are active today.
Naturally, then, when blockchain technology started to really emerge, the OECD realized that it would impact the three areas it was looking to balance: governments, business and people. The members knew it would impact lives. And so their hunger for clarity and insight drove them to seek new understanding.
A seat at the table
Being in the cryptocurrency space, we (i.e., grassroots blockchain technologists) recognized long ago that we weren’t part of the conversation.
Governments and industry regulators were looking at this space and would likely start talking behind closed doors – if they hadn’t already. We though if we didn’t become part of the conversation that we’d constantly be sitting on the outside looking in, while others determined our fate through regulations.
We needed to be involved in the discussion. The alternative was to risk dying on a hill where innovation was stifled by a misdirected – and likely misinformed – regulatory environment.
So we jumped in, and for more than 2.5 years worked to educate, share insight, and bring the right players to the table to discuss blockchain topics alongside governments and regulatory officials. Over time those discussions evolved. Now the regulations and frameworks are just around the corner. The OECD is where much of this movement is taking place.
Insights from the latest OECD Conference
Right from get go, the OECD Blockchain Policy Forum felt different.
The OECD’s Paris headquarters was filled with senior decision makers, experts, academics, and other stakeholders from dozens of countries. The international event set its focus squarely on impact, which is why it felt different. Impact on our society. Our economy. And naturally, our very lives.
Governments are hyper-aware of the need to ensure that nascent or emerging technologies aren’t being abused at the expense of their citizens. Every country has concerns that if they create a misstep and people are adversely affected by it, that it will harm the country’s ability to do business in the future.
That’s why regulation is so important and why blockchain is such an important discussion to have right now. No one wants it to be that potential tool that could be abused – think: terrorists, drug cartels, political manipulation, etc.
Which leads us to the areas of regulation and frameworks moving forward.
The first areas that will be affected are Identity Systems within governments. These systems tie directly into KYC and AML topics. Topics which directly influence every government’s concern about making a misstep.
Look to Bermuda as an example. Bermuda has led the charge forward with its blockchain-based identity systems. This coming year you’ll see the first pilot developments in action. Developments that have resulted from the careful coordination of financial institutions, telecommunications providers, central registries of government, and the Department of National Security.
The movement forward will be very quick from here. By the end of next year, I think it would be safe to say that 13 to 15 other countries will roll out near universal regulation.
From here, the rest of the world may follow.
Joseph Weinberg is the CEO and Co-Founder, Paycase Financial Corp and Chairman of Shyft Network International. He also acts as an OECD Advisor.