Categories: Bitcoin Tech

Blockchain Regulation: Is Europe Getting It Right?

Click here to view original web page at

Noelle Acheson is a 10-year veteran of company analysis and corporate finance, and a member of CoinDesk's product team.

The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to our subscribers.

What do we mean by 'blockchain regulation'?

It's something we hear governments, incumbents and startups say we need, but no one seems to be clear on what it involves. For example, this past week Russia's government announced that it will have blockchain regulation in place by 2019, though details were hard to come by.

Yet broad promises like that reveal a lack of understanding of what blockchain technology offers. While it's possible that the reports don't carry all the information, assuring regulation of an evolving technology within any time span is a vague promise that can't be kept.

An event at the European Parliament this week highlighted a different approach: a focus on discovery. Rather than start with what the technology must be stopped from doing, the idea seems to be to first figure out what it can do, help it develop and then work on how to protect the consumer.

Yet, even this approach has its drawbacks. First, regulators will have to decide what exactly it is that they're regulating. The underlying code? Or the uses?

Regulating software is like regulating a car. If it isn't used, it's not dangerous. Yet, once someone is behind the wheel, that can change. Rules exist to regulate intended behavior.

Also, car design requires certain security precautions. Drivers need to know that the brakes will work and that the engine won't blow up when ignited. True, hardware is not the same as software, but the premise that some guarantees of security are necessary still holds.

An argument can be made for letting the market decide. Just as car makers that don't take extra steps to ensure design integrity tend to go out of business fast, so could market rejection render shoddy blockchain craftsmanship irrelevant.

However, when distributed ledgers are used to transfer value (money, securities, titles, etc), waiting for the 'market to decide' could have systemic consequences. So, the security measures of the underlying technology will need to be regulated, according to its use.

Defining use

The problem is, we don't yet know what the uses will be.

The hundreds of pilots and proofs-of-concept currently in motion are but a tip of the iceberg when it comes to potential applications.

Second, the unusual schism (for a technology) of private vs public networks requires two different approaches. While it's possible to draft laws regarding the development of private blockchains, regulating public networks according to their uses is obviously a non-starter given the international, free-access nature of the distribution. Who would do the regulating?

It's not even possible to apply the jurisdictional laws of the domicile of the creator, since no one knows the founder of bitcoin's identity, let alone the location of his (or her) legal base.

However, the main public blockchains have been rigorously tested by the market, and have – to date, at least – proven to be resilient.

So, focus can shift to the applications built on top of public blockchains. Even here reach will be limited, as apps can be launched from anywhere, by anyone, in some cases with indeterminate jurisdiction.

In this case, regulators have no choice but to let the market decide.

Stamp of approval

This could highlight an evolving role for lawmakers: as a seal of confidence.

Regulated apps and use cases would imply a certain level of security, which the market will likely prefer. Even if more innovative opportunities arise in unregulated areas, competitors would soon emerge with the advantage of approval.

The EU appears to be following this path. Its innovation-first philosophy could end up supporting development from two angles: 1) encouraging the exploration of use cases to test impact and laws, and 2) giving entrepreneurs confidence that their 'approved' applications will be more trusted by their target markets.

This approach, combined with the EU's scope as regulators for a 28-country economic bloc, could not only encourage an ecosystem of thinkers and doers. It could also end up making Europe a prime destination for blockchain development, as businesses choose the continent for their domicile and as talent flocks to the area.

Hopefully, the economic boost would inspire other areas to adopt similar measures. Shedding defensive regulation in favor of a more supportive approach could change the perception businesses and citizens have of their government.

As MEP Eva Kaili said in this week’s event in the European Parliament:

"Maybe this way we can regain some trust."

Question in the sand via Shutterstock

Disclaimer: The views expressed in this article are those of the author and do not necessarily represent the views of, and should not be attributed to, CoinDesk.


Illuminati, Mason, Anonymous I'll never tell. I can tell you this, global power is shifting and those who have the new intelligence are working to acquire this new force. You matter naught except to yourself, therefore prepare for the least expected and make your place in the new world order.

Disqus Comments Loading...
Published by

Recent Posts

Should You Use MST Gift Cards at US Casinos?

US-facing online casinos don’t exactly feature a robust selection of deposit methods. Most gaming sites only offer a couple of… Read More

23 mins ago

Bitcoin {BTC} the reigning asset: Why Gold Barons and Value Investors constantly shun the king coin

Warren Buffett is a popular investor who was once one of the richest men in the world. He has claimed… Read More

23 mins ago

Bitcoin’s Bull Run Could Be Just Getting Started—Here’s Why

Bitcoin has soared so far this year, with the bitcoin price rising more than 200% since the beginning of the… Read More

23 mins ago

Late Hal Finney Predicted $10 Million Per BTC After Satoshi Release

Although some Bitcoin critics will spite anyone who believes that the cryptocurrency will be worth more than 1000× its current… Read More

6 hours ago

Bitcoin {BTC} adoption: chief as well as U.K. Central Bank leader are optimistic about virtual currencies

Bitcoin is placed right at the top of the market, with the BTC dominance rate currently at 68.7%. The trading… Read More

6 hours ago

Top Pro Athletes Like Messi Would Make a Killing in Bitcoin Earnings

According to Messari research, Lionel Messi's take-home pay would be "12,700 $BTC" annually. Cristiano Ronaldo's would be 10,000 bitcoins. |… Read More

6 hours ago

This website uses cookies. We use these cookies to collect data about your interaction with our website for the purpose of continuously improving your experience with our site. For more information we encourage you to read our privacy policy.

Read More