This May was marked by an important event: one of the largest blockchain conferences called Consensus 2017 was held in New York. For several days, representatives of companies, programmers, and representatives of state regulatory bodies held discussions on various legal aspects of the development of decentralized systems and cryptocurrencies, in particular. What is discussed at this conference, we know from the lips of lawyer Dmitry Pavlyuchenko. He shared with us information that was discussed in the framework of the meeting by jurists from around the world.
Decentralize or control?
Again at the conference, the stumbling block was the issue of state regulation of decentralized systems. What should the state do with such innovations? After all, this technology is conceived as free from intermediaries and power structures already unites many people, not only specialists, but also ordinary inhabitants. It’s simply impossible to ignore the blockchain today, and to ignore it is almost criminal.
To date, the majority of economists consider blockchain systems as, first of all, financial phenomena. They believe that this is a very promising and developed tool through which it is possible to make payments and all kinds of settlement transactions. Therefore, many monetarists in Japan, Ukraine, Hong Kong, and the USA thought about giving the proper legal basis to this phenomenon.
A lot of attention is paid to the development of this technology in the Middle Kingdom. So, during one of the conference sessions, the first issue of the new Distributed magazine was vividly announced, on the cover of which was placed Feng Hiao, the head of the first largest investment fund in China, operating with blockchain systems. It has close ties with the National Bank, which has already announced the release of its own crypto project RMBCoin. According to Asian experts, this technology will make it possible to achieve many of China’s strategic goals as soon as possible.
The debate was attended not only by representatives of Asian projects, but also by various American government agencies. So, during the conference there was a funny incident when one of the hearings turned into a kind of discussion between the American regulator and all other members of the conference. At the same time, he noted that he expresses only his own position, but not at all national.
During the discussions, it was noted that a considerable collision is ripening in the industry: blockchain systems themselves are attracting more and more investors from year to year , capitalization is billions of dollars, so states want to become a single controller of seemingly decentralized systems. This is an oxymoron, a task that needs to be solved as quickly as possible.
In this case, do not rush and scold the position of the state. So, around a lot of blockchain projects, a very extensive and very complex sphere of legal relations has developed. In theory, they should have formed into certain institutions of law for a long time, since they affect numerous relationships, for example, the right to protect personal data, private information, the rights of buyers and sellers. This is followed by compulsory licensing of economic activities, notarial services, the requirement of fair competition, etc.
But what if, during the implementation of state regulation, it is necessary to delete some personal data upon strict demand? Will it be possible to secure the blockchain system from strict observance of state requirements? These issues will be controversial in cyberspace for a long time.
Crypt does not smell
If financial regulators, as well as state central banks, take the first step towards the legitimization of blockchain systems, then what definition will cryptocurrency itself fall into? After all, it can be a digital asset, and some kind of comparison for securities, an ordinary code, a tool or a full-fledged virtual currency. Thus, a large gap appeared in cryptocurrency studies, especially legal features. However, this provides an additional chance to shine for inquisitive minds.
Developers need to worry about themselves
Many entities that are already participating in blockchain projects, in particular, are developing them, seem to be in the dark of an underdeveloped legal environment. By themselves, they carry considerable risks, especially if they carry out their operations in countries with strict regulation (USA, Russia, China). After all, the entire Internet knows examples of how bitcoin traders received real prison sentences for doing business without any license.
Thus, such companies themselves must take care of their safety and compliance with the law – no one will do it for them. They themselves must consult with regulators and lawyers. Moreover, the situation is so neglected that in some cases they will not be able to get good advice from anyone, since there are no comprehensive answers to some questions at all. Everything is so vague that it really is very difficult to regulate such issues. Therefore, today it is very important to pay attention primarily to assessing the likelihood of certain business risks, and not to ask the question “Is this legal or not?”.
Catches up with a skip
Another problem that exists between the ordinary and virtual worlds is a certain backwardness of ordinary legislation from the digital world and the lateness of specific solutions. For example, in the United States there is an Electronic Communications Act adopted thirty years ago.
In Ukraine, things are no easier. So, the Law on electronic trust services can take many years, and it is unlikely to be relevant by the time of its publication. Other legislative acts currently in service with Ukrainian jurists are also untrue.
Some experts believe that there is no need to create new rules. On the contrary, it is best to adapt the blockchain system to functioning within the existing legal framework. They give a good example: the Internet is not regulated by any special legislation, but is mentioned in many laws. If there is a need to regulate any relations, it is quite realistic to create any standards and regulations for narrow application.
This concept is used to denote innovative technological developments that are aimed at the compliance of many financial processes and all kinds of decisions with legislative acts. Otherwise, it is a digital consensus, which is very important not only in the field of big money. This is communication with consumers, and the preparation and storage of contracts, and audit. RegTech will help adapt to the ever-changing legislative environment.
It is very important that most of the digitally advanced states have already launched similar projects, where businessmen, programmers and regulators can meet in one field and discuss the most pressing problems of cryptocurrency development, as well as try specific technologies in business. In addition, some states even compete among themselves in the effectiveness of legal regulation, in the number of state bodies involved in this process, as well as in the level of activity and professional suitability. These societies can truly be called innovative and advanced.
There are many problems regarding the protection of passwords and other keys in decentralized systems. If the client loses it or for some other reason loses it, this may lead to a violation of a number of fundamental rights – for example, loss of ownership of all assets in electronic currency. Thus, the issue of standardization and legal aspects of electronic information protection is very acute.
How electronic systems will develop is a matter for the near future. It is gratifying that many states, financial companies and the crypto community have thought about how to bring legislation and the blockchain to a common denominator. Concrete results will be visible soon.