The following article is an exclusive contribution to CoinDesk’s 2017 in Review.
The internet is another time during a period of transition.
The “cloud era” that served consumers and firms so well thus far , little by little, gives its place to the “era of decentralization,” or the age wherein the end-users of computers won’t only own and manage their hardware during a decentralized way, but also own and manage their own data during a decentralized way.
DLT is that the technology which will enable this transition.
Neither an infant nor an adult, the technology is sort of a teenager who has already shown strong potential and raised great expectations. But, because it happens with all the teenagers, so as to materialize their potential, they have a disciplined framework, some boost of confidence, a sense of certainty and therefore the wisest possible direction when necessary.
In the case of a technology, this role is played by the enthusiasts who adopt it and people who resist it. Resistance to the technology isn’t bad or negative. Historical experience has proved that within the course of your time resistance was undeniably essential in advancing a technology and making it useful.
In the case of DLTs, we see real enthusiasm, but we also see resistance coming from incumbents and traditional players and business models.
We can see the potential in every sector for the users both in their capacity as consumers, but also as citizens. i will be able to not repeat the advantages of DLTs here. The market has already unveiled tons of them, and lots of more are yet to return .
Moreover, it’s not necessary to worry the disruptive impact of disintermediation. Emerging business models democratize the worth chains, remove transaction costs, optimize the allocation of resources and risks, expand the social inclusion and improve the standard of services and products we receive as customers and as citizens.
We, as “blockchain evangelists” contaminate our enthusiasm and faith, while startupers everywhere the planet tirelessly produce fantastic white papers and make radical value propositions and more and more governmental institutions answer the new challenges, sometimes reluctantly and sometimes bravely.
Level playing field
So far, the ecu Union has had an enthusiastic approach.
I have the respect to be the rapporteur of the primary Blockchain Resolution of the ecu Parliament, and my task is more or less to propose a framework of rules which will be adopted because the regulatory basis within the EU area.
Moving from the role of the believer to the role of the regulator is basically challenging. it’s challenging because suddenly my job isn’t to convey to others the advantages of blockchain, but to make a pathway which will allow us to travel there as fast as possible with the smallest amount possible frictions and U-turns.
The first requirement is to make A level playing field for both DLT firms and consumers that guarantees legal and institutional certainty.
Without certainty, we cannot have the specified scalability for the technology. Moreover, institutional and legal certainty, at a eu Union level, has got to be harmonized.
Otherwise, a regulatory fragmentation will create frictions which will kill the smaller firms. this is often the rationale why we’d like some level of standardization and a versatile but functional policy of EU-passport for blockchain products and services.
For me, blockchain isn’t just a gorgeous technology. it’s an infrastructure. it’s capacity building. Thus, standardization isn’t just a vehicle of cross-border commercial activity . it’s also a prerequisite for infrastructure interoperability.
There are thousands of platform options and no-one knows what percentage DLT alternatives and business models. The question is: How will this constellation of DLT ecosystems work together?
In my deem a regulator, linking scalability with interoperability is strategically critical.
Standardization are often simple or complicated. I even have a proportional attitude toward this issue. as long as we cannot regulate a technology intrinsically , the extent of standardization should be proportional to the principle of innovation. this suggests that we cannot regulate a technology that’s still evolving. Let the innovation deliver its fruits first.
A corollary principle is that regulation must be technology neutral. for instance , a cryptocurrency should be considered as a way of payment, not a way of exchange.
The third regulatory principle is that the regulator must be business model neutral. for instance , within the case of payments, the KYC requirements for a bank can’t be less strict than they might be for a non-bank firm.
No kitchen utensil
When we say standardization, we must ask about what we are standardizing.
Well, supported the use-cases that have reached a trustworthy level of maturity, i think that having a thought of some limited standards about identity, smart contracts, data protection and cybersecurity, would be very useful for both firms and consumers.
Obviously, the aforementioned regulatory principles and approach betray the preference of the regulator to introduce a framework with impact. to possess impact, you would like to travel further than a “light touch” approach. we’d like smart regulation and smart regulation isn’t necessarily a regulation that parcels new ideas in old regulatory boxes.
New challenges require new definitions, new categorizations and a few kind of creativity. Thus, a sensible regulation is that the regulation that fit the aim we’ve in our mind.
To make this statement obvious check out the discussion about ICOs. there’s a really interesting debate that tries to resolve the matter of what an ICO is – is it a security or a commodity? The immature U.S. regulator defines it as a security.
In Europe, we believe that this old regulatory box doesn’t fit with what we even have before us. Why must an ICO be defined as a security or a commodity? An ICO is an ICO, and that we need a particular enabling regulation which will help firms to expand their crowdfunding activities and at an equivalent time, the investors to feel comfortable with it.
The regulator must be generous with a replacement technology, for instance through the creation of regulatory sandboxes, and this is often my attitude toward DLTs.
Regulatory generosity is critical within the early stages of a technology because it’ll allow the emerging business models to maneuver fast from a “proof-of-concept” mentality to a “delivery of quantitative and qualitative results” stage.
Only then we will see the particular impact of the technology on the markets and society as an entire .
Charting the way
To sum up, EU institutions have taken a positive approach, but this is often by necessity a multi-level approach.
Different directorates of the ecu Commission have different concerns. Other directorates are concerned with the infrastructure dimension of the DLTs, others with the financial impacts and therefore the market structure, others with the social impact on employment and therefore the quality of democracy.
In the European Parliament, i will be able to attempt to remove any fragmentation and supply a “global view” on the topic for the EU.
Blockchain may be a highly political subject. it’s not economical. it’s not about speculators making money, but about reinventing the concept of trust during a period where our societies need trust quite ever to take care of and improve social coherence.
By necessity, blockchain is an exercise of institutional transformation during which no citizen and no politician can stay indifferent.
Blockchain requires our care. it’s a new-trust mechanism but not a careless one. It can make the planet a far better place.
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