The state of blockchain regulation – 2022

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Published On

25 Jul 2022

The BSV Blockchain Association supports an environment-friendly and regulation-compliant blockchain ecosystem that enterprises and governments want.
And yet it would be foolish to think of regulators as all-knowing wisemen (and women), rather than seekers on a journey of discovering the nature, purpose and implications of the technology they are tasked with supervising.

As the Association’s Global Public Policy Director Bryan Daugherty puts it:

‘…policymakers are frequently finding themselves unarmed and unable to call upon their regular resources to provide the latest information and research. Instead, staffers are being tasked with attempting to retrieve relevant data and insight, often from inaccurate, outdated, and one-sided sources.’

Against this backdrop, we spoke to Angus Brown, member of the Technical Standards Committee for the BSV blockchain and CEO and co-founder of Centbee about the current state of blockchain regulation.

Regulatory officials’ level of blockchain understanding

Brown believes that regulators have a reasonable understanding of blockchain as a concept, but fall short on the more ‘technical’ aspects: Blockchain has been around for long enough now that they all have an understanding of the basics of what it is. The details of how it works is often left to ‘the technical people’, as senior staff at regulators tend to have a policy and economics background and are rarely technically experienced. Traditionally, it required a lot of policymakers and governance experts to look after licensed entities. So at the technical level, their grasp of blockchain technology is quite low.’

Increasing their technical insight into blockchain would not only counter the fear of the unknown that might lead to knee-jerk regulations, but aid them in discerning the technology’s use for regulators themselves.

What does blockchain solve for regulatory bodies?

Brown regrets the impact that the cryptocurrency trading industry has had on regulatory bodies perception of blockchain: ‘I think they conflate blockchain with cryptocurrency tokens. But they haven’t yet gotten to see the many different places that a blockchain could actually help them.’ Blockchain’s transparency is a key example: ‘An immutable store of data is something that any regulator would want as it would allow them to see what is happening, and to easily track back what happened in the past.’ Not having to rely on a third-party (such as a bank) to submit such data means there’s no delay in reviewing transactional data.

Blockchain’s global infrastructure is another feature that he sees regulators benefiting from: ‘We live in a global world where businesses are connected across borders. (With a global ledger) a regulator in one country can read the information encoded in a blockchain in another country without actually having to understand or have relationships with financial institutions in that country. This allows cross-border tracing of transactions, which is an important element for solving global problems.’

The risk of blockchain regulations

Unintended consequences are the biggest risk in the regulation of blockchains, warns Brown. ‘Regulators do sometimes overreach, sometimes accidentally, sometimes deliberately. And in many cases it is because it’s a really hard job to write regulations for blockchain.’ Blockchain upends the traditional models of the roles of a third party, licensed institution and customer. While its global nature is a boon, its international nature also poses conundrums like how to deal with entities that are participating in your jurisdiction who might be located in another jurisdiction.

Brown recommends that regulators cooperate through programmes like industry standardisation. ‘You can actually reach out to global industry standards and adopt them into your local jurisdiction, which helps you to not have to solve that particular problem all by yourself.’

A blockchain for good

When asked what excites him about his participation in the BSV blockchain ecosystem (Centbee utilises BSV), Brown is quick to mention the calibre of people involved: ‘The community of people who are working in the BSV blockchain community are good natured and competitive (in a good sense). There’s a healthy collegiate atmosphere where a lot of people are solving the same problems working together.’

Impressed with the way people work together in the community, he attributes it to the vision that Satoshi put forward in the original white paper: ‘“How can we create a solution?” And he laid out a roadmap for us which we can work on and we can solve. This vision is still motivating a lot of people in the BSV and wider blockchain community to solve these problems, to create good for the world and to create value for themselves and for their customers.’

The promise of doing payments on blockchain

Given his 20 years of experience in finance and his role at Centbee, it’s not surprising that he views payments as one of blockchain’s most promising use cases. ‘I’ve been in the payments space for a long time. Centbee is a payments processor and a payments operator, and we believe that payments are a very important use case of blockchain. Payments are one of the earliest use cases of a distributed ledger – an immutable data ledger for logging debits and credits that everyone can access. So that is a very easy and very simple use case. It has not yet reached the level of adoption that it could deliver.’

The BSV blockchain’s low fees and high transaction throughput are essential elements in a payments system. ‘Any payments use case of blockchain needs those attributes – and BSV has them, which is why we believe it is an essential part of the payments use case.’

Although blockchain’s transactional functionality plays the starring role here, its ‘data transactions’ are equally important to the use case: ‘Because data can be encoded into blockchain transactions, it allows for things like identity to be permanently stamped, for example, the identity of senders, receivers, and participants in a particular transaction. And because transactions are timestamped, it tells you not just what happened but when it happened, which is also a very useful information point for logistics, supply chains and those sort of entities that want to know what event happened when.’

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