During the last couple of months, as blockchain technology gained significantly more popularity, governments have also started discussing about blockchain-related regulation. According to recent reports, it seems like the United Kingdom may be the world’s first country to present its regulatory framework for the blockchain network.
It seems like the Fintech Accelerator deployed by the Bank of England is one of the main reasons why this regulation will be put into place, considering the fact that blockchain networks now represent the basis for new innovative financial products and services.
There’s no need to worry however. To put things better into perspective, most of the times when a government talks about regulating the distributed ledger, they are talking about permissioned ledgers instead. What this means is that the actual Bitcoin blockchain cannot be regulated, as governments have no control over it whatsoever- if the network itself refuses a change, then nothing can be done to make it go into effect.
Things are slightly different with permissioned, private blockchains, where laws have to be followed and the decentralized status of the network isn’t implemented. At this moment in time, regulators are mostly concerned about risk mitigation and what owners of these networks will do to handle aspects like this. This is mostly due to the fact that permissioned blockchains do not require network consensus or proof of work, which means that anyone with high permissions on the network will be able to issue changes affecting all of its other members.
It seems like the UK regulators are also taking a look at the risks associated with permission-less blockchains. There are situations where amateur coding is involved, alongside with other issues such as the DAO hack which has proven that unregulated blockchain networks are at risk as well. Reports indicate that a couple of changes can also come from the European Commission, which has set up a department meant to discuss how they can allow private blockchains to enter the financial market. However, while doing this, they also wish to avoid criminal issues like money laundering, where transparency will not suit the authorities.
It’s worth pointing out that even if these regulatory frameworks are completed by the UK government, chances are that they will not be implemented for a couple of months, or even years. Creating a draft is relatively easy, yet getting everyone to agree over the finished product can be quite difficult.
Based on everything that has been outlined so far, what do you personally think about the UK Government’s plan to regulate permissioned blockchain networks? Let us know your thoughts in the comment section below.