Blockchain technology is a disruptive force presenting solutions for businesses and entrepreneurs, but novel problems for regulators and legislative bodies across the world. This has led to diverging regulatory approaches across jurisdictions.
The truth is that distributed ledger technologies (the wider name given to blockchain and cryptoassets) are here to stay. The potential for innovative solutions to long-standing administrative (and other) problems are simply too numerous and too beneficial to ignore. It is, therefore, in every country’s interest for regulators to get to grips with these new technologies quickly and to provide an environment suitable for innovation.
While key stakeholders in some jurisdictions have shown an interest in exploring the possibilities of this new technology, in others, blockchain has received a much colder response from regulators.
The jurisdictions keenest to embrace the new technology are in countries which are not typically thought of as financial hubs. This shows a willingness to disrupt the existing financial environment, with new players looking to establish themselves as centres of innovation for cyptocurrencies.
It is, therefore, gratifying to see that the UK has been given a positive ‘adopter’ status in GovChain’s report into worldwide jurisdictional friendliness to blockchain technologies. This status is given to jurisdictions that have applied blockchain to a variety of use-cases and are likely to become a thriving ecosystem for new blockchain start-ups. The report notes:
“Thanks to its strong reputation as a hub for financial and technological innovations, the UK has the potential to define itself on the global stage as a blockchain haven. This reputation, along with its sophisticated legal and regulatory system, will aid the UK in creating an attractive ecosystem for businesses and entrepreneurs.”
GovChain goes on to set out five key policy recommendations for jurisdictions, which they hope will contribute to blockchain adoption and the growth of the sector:
- Governments should look to successes at the local level, learn from the experiences on the ground and carry out a cost-benefit analysis of upgrading public sector digital systems nationwide using blockchain/distributed ledger technologies.
- Governments should look to agree a set of international rules and standards, further enhancing cross-border cooperation. This would allow blockchain projects to scale-up.
- In order to mitigate regulatory uncertainty and promote innovation, governments should continue to promote sandboxes and innovation hubs, supported by adequate levels of investments and continuous dialogue through public-private partnerships.
- Governments should ensure that sufficient resources are assigned to test blockchain applications and, should the test be successful, establish clear plans to take the application forward.
- Clear and transparent purchasing and quality criteria should be established by governments wishing to work with blockchain providers to avoid potential public procurement issues.
Beyond regulators, the recommendations are also helpful for companies looking to take their first steps in understanding blockchain opportunities. Any such adoption should make use of a thorough cost-benefit analysis of the upgrade and ensure that sufficient resources are assigned to test the new blockchain, with a clear plan for wider scalability throughout the organisation.
If you need assistance in understanding the regulatory environment for blockchain and other cryptoassets in the UK, or would like further information on how blockchain/distributed ledger technologies can help your business, please contact Will Foulkes, Blockchain team lead at Thrings.
You can listen to Thrings' first Blockchain podcast here.
