“We do not need regulation for blockchain”, said Austrian minister for digital and economic affairs Margarete Schramboeck, during the ANON Blockchain Summit discussion panel on “The role of government in the age of blockchain”.
Schramboeck, who previously served as the CEO of major Austrian fixed and mobile network operator Telekom Austria, was amongst the 80 esteemed speakers at the ANON Blockchain Summit took place in Vienna, Austria from April 2 to April 3. The conference is all about focusing on real life applications of blockchain in business, government, banking, finance, healthcare and energy. As she spoke about the development of appropriate regulations particularly towards blockchain, she said:
Europe has a strong tendency to over regulate. […] And then we are surprised that there are no European companies in the top 10 worldwide.
She was referred to the proposal from board directors of the Austrian Financial Market Authority, Klaus Kumpfmueller and Helmut Ettl whereby they proposed stricter regulations on cryptocurrencies and Initial Coin Offerings (ICO).
Surprisingly enough, Schramboeck herself was an advocate for the regulation of cryptocurrency but as it turns out she holds a different opinion for blockchain. She believes that the blockchain technology is of significant interest at the state level, and for it to be utilized properly it needs to grow without being choked by strict regulations.
She isn’t the only one who feels this way about regulations on the new technology. Petal Walker, who is Special Counsel at the American law firm WilmerHale, is of the opinion that strict regulations on non-established networks that are trying to establish themselves may be dangerous to innovation. She said during a Bipartisan Policy Center panel held on Feb. 12.
“If you are not an established network and you’re trying to create one then you have to deal with whether or not your security under the SEC jurisdiction [..] I do think there’s a danger that this paradigm is preventing potentially powerfully innovative methods of engaging in ecosystems from coming to fruition because the business cannot just start with the network”.
Another individual who isn’t much for regulations on the blossoming technology is Jimmy Wales, an American internet entrepreneur, best known as the co-founder of the online non-profit encyclopedia Wikipedia. Despite not having any particular interest in blockchain-based projects, Jimmy doesn’t deny the possibility of diving into the pool if any idea was meaningful. He pointed out:
“Blockchain as a technology is not something that needs regulation. You’ll occasionally hear a politician saying, “We need to ban cryptography,” but that’s stupid and crazy and you’re never going to do it with math. You can’t ban math. You can’t ban blockchain. It’s math”.
However he still believes that it is extremely necessary to innovate in a legal framework that is new and is specifically adapted to this new reality of blockchain.
When cryptocurrencies and blockchain technology first came around, they were associated with hackers and suspicious activities. Later on, experts dismissed them as a fad even though people were beginning to realize their potential. And now everyone is exploring all that they have to offer. Of course, it was only a matter of time that regulations infiltrated the world of cryptocurrency and blockchain.
Could it be that regulations aren’t all that bad for the blockchain world? It is possible because the important thing to remember is that regulations isn’t a new challenge. And it certainly doesn’t mean the end of cryptocurrency as we know it. Regulations are actually a sign that the industry has matured enough to be taken seriously by governments.
At the end of the day the purpose of laws and regulations isn’t to stunt the growth of any particular industry, rather it is to lay down some set of rules in order to avoid misfortune. Just as fouls in sports don’t prevent a sport from growing and maturing, the use of regulation doesn’t prevent a technology from doing the same.
The challenge however, is determining when to move on to regulations. If they are slapped too soon the technology is stripped from the freedom which is needed in order to foster innovation. If they are enforced too late there could be significant repercussions.
According to SEC commissioner Hester Peirce, this process requires patience because regulators are slow and the technology is complicated. At DC Blockchain Summit, she further said that there’s a learning curve. People at the SEC are trying to learn about this space and understand where the pressure points are.
Some of the countries that are leading in the area of blockchain and cryptocurrency have regulations in place. Malta has one of the most progressive approaches to the technology. In fact it is now being called the “Blockchain Island” for its liberal outlook towards crypto and blockchain. And it achieved this status all the while creating official regulations for crypto operators.
Another example is of a lakeside town called Zug in Switzerland, now termed “Crypto Valley” due to the massive amount of investment it attracts in the blockchain space. The crypto and blockchain businesses in the country are subject to effective regulations. However, they are significantly encouraged.
The EU has openly admitted that they want to be the leaders in blockchain technology.The European parliament agreed to pass a resolution on the technology, the key points of which are:
- The EU should not regulate the distributed ledger technology per se instead should remove existing barriers to the implementation of blockchain.
- Any regulatory approach to the technology should be innovation-friendly, should be guided by the principles of technology and business-model neutrality.
- Regulators and the Commission should be well read when it comes to the technicalities of the technology.
- The Commission should develop a European framework for the purpose of tackling fraudulent blockchain projects.
The EU stepped up its blockchain adoption game when the European Commission (EC) launched the EU Blockchain Observatory and Forum. The main purpose of this forum was to support European cross-border engagement with the technology itself as well as it’s several stakeholders, all the while uniting the economy around blockchain. Other than that there are a few sectors efficiently leveraging the technology with healthcare sector being one of them.
The health care sector was among the first ones where the potential of the distributed ledger technology was applied by the EU. The EU even funded a project with the name My Health My Data (MHMD) with an aim to leverage the blockchain technology for the safe and effective storage and transmission of medical data.
Moreover, since one of the fundamental purposes of the blockchain tech involves improving transparency, reducing transaction costs and other hidden costs in the financial sector, the EU is looking into that as well.
Coming back to Austria, it has demonstrated a rather proactive approach in regard to research related to blockchain and even in its application. Only last December, the COMET Centers approved the Austrian Blockchain Center in Vienna. COMET Centers are coordinated by the Austrian Research Promotion Agency. The newly approved center is said to be multidisciplinary and will be focusing on various aspects, like the Internet of Things, finance, energy, logistics and applications in public administration.
Only time will tell if the EU will join the list of countries that are a haven for blockchain technology and cryptocurrencies any time soon.