When we first started hearing about blockchain technology, its potential may have sounded miraculous, with the promise of no third-party involvement, low to zero transaction fees, higher transparency in storing data and much more besides. All the hype might have sounded far-fetched but still a worthwhile technology. Aiming to solve issues of scalability, interoperability and ease of use, blockchain platforms have proven themselves again and again as a disruptor in how we view technology and the impact it has on our lives. So why is it that regulations are getting in the way? Why are regulatory agencies, governments and banks eyeing this technology like it is something to be dreaded?
Despite the benefits mentioned, certain countries have already put laws in place to stop blockchain companies or limit what they can do.
The General Data Protection Regulation (GDPR) came into force on May 25 and received both praise and backlash. The goal of the regulation is to protect users’ information and give them the ability to have all their personal information held online, deleted. This received a lot of support from those who fear having their private data available on the internet, especially without their consent. However, when it comes to blockchain technology, problems arise, because data stored on blockchain cannot be modified or deleted. how can there be transparency if the GDPR allows information to be erased and made private? This goes against what blockchain is all about and how data stored on blockchain!
East Asia and China’s Cryptocurrency Ban
Near the start of the blockchain era, East Asian countries were one of the more advanced countries when it came to blockchain and cryptocurrencies. With their mentality of “business first, regulation later”, companies were given the freedom to operate without restriction.
One of the countries at the forefront of it all was unsurprisingly China. However, it didn’t take long for this potential to be restricted. In fact, the restrictions started as far back as December 2013 when Chinese ministries started taking action against Bitcoin. In January 2017, an official notice was published against cryptocurrencies and again in September 2017 to ban ICOs. Not long after, Chinese exchanges and mining factories were forced to shut down. Obviously, this ban affected the international community, including other nations.
South Korea and Japan followed suit, although not as severely as China and introduced similar restrictions. ICOs have been banned in South Korea, even though blockchain technology is generally encouraged. The government has yet to take a stance on the legal and regulatory aspects of funding and trading cryptos.
Since the start of the blockchain era, Japan has been one of the first countries to recognize Bitcoin as currency. Still, its regulatory bodies have restricted their assessment of cryptocurrencies to Bitcoin alone and are not ready to accept other blockchain-powered businesses.
America’s “Regulation First, Business Later” Approach
U.S. government agencies, on the other hand, have taken a “regulation first, business later” approach, in which overwhelming skepticism prompted regulators to limit the mainstream applications of blockchain projects using cryptocurrency. The U.S. Securities and Exchange Commission has instructed that cryptocurrencies will be considered “assets” under governmental purview, deterring many major international cryptocurrency companies from wanting to run in America.
It is understandable why there needs to be some regulations to restrict the use of blockchain technology that is used in promoting any form of investment, especially with the rising number of fake cryptocurrencies. What could be of utmost benefit to the industry is if a unified regulatory framework was implemented. This was attempted in March when members of the G20 met to discuss the future of cryptocurrencies on the international stage, but no consensus was reached. Right now, it may seem like there are more disagreements than consensus, but this is all expected to change as blockchain becomes recognized as an important technology for companies worldwide.