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What Lawmakers Make Of The Term ‘Blockchain’ In 2020?

March 9, 2020

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What Lawmakers Make Of The Term ‘Blockchain’ In 2020?

While Blockchain technology and its fruits, including cryptocurrencies, are undeniably recognized on a global scale and on a governmental level, it seems that most regulators although got into subjecting digital assets and/or distributed ledger technologies under existing or new laws, hardly understand what blockchain technology really is or how it actually works.

In this article, we’re dive into the regulatory aspect of DLTs and point out some interesting cases worth of mentioning, in an attempt to clarify what blockchain is to those who barely understand its concept, as well as put a thumbs up to those who took the extra mile with exessive research and came up with clean-cut determinations.

What Is Blockchain? No, Really…

For starters and those of you who are new in this new-born fintech sphere, blockchain technology was indistinguishable from cryptocurrencies by regulators until the last half-decade and many lawmakers took for granted the rumor that suggested blockchain is Bitcoin and vise versa. 

Of course, saying that Bitcoin is also a blockchain, or that it is directly entangled to blockchain is not a false statement, but blockchain in its essence is far from being just an alternative monetary system of the likes of Bitcoin.

To give you a child-level example, imagine that blockchain is paper, and Bitcoin is money. Calling every piece of paper, disregarding its use, money is pure nonsense. If that was the case we would all be rich at the expense of a couple toilet-paper packs.

Taking it one step further, one could say that blockchain is not as simple as paper when compared to money, or in this case digital money, but more of a printer. Sure, the first guy who used the printer printed Bitcoin to demonstrate the printer’s capabilities, and after its tremendous success, all users to come would print similar pasta. 

If Bitcoin was a printed duck, suddenly every-one started to print their own respective versions of a duck or some self-proclaimed sophisticated projects took it as far as printing alternative bird species, yet the context remained the same.

What I am trying to land on, is the fact that nowadays we understand how complex blockchain technology really is, and researchers who forgot about monetary systems and Bitcoin copy-cats, are utilizing the printer to print cars, boats, and anything you can imagine instead of being stuck at a strictly Bitcoin-inspired concept.

It’s not hard to understand, it just needs the excitement regulators lack

Now back on track. The key issue with lawmakers failing to truly conceive what a blockchain really is would be their lack of interest and inability to perform excessive technical research on the matter.

Let’s be honest, most financial regulators should be already retired like 40 years ago, and I am being polite here. It makes absolute sense that they have lost their spark and understanding a breakthrough technology that shapeshifts social constructs from the inside out, is a life challenge on its own. Just ask Bill Gates about that time when he tried to explain personal computers to the power-brokers of his time.        

Before the internet became a global standard, we had to endure the era where regulators were still in a “meh” mood, thinking that it (the internet) is a thing, but it’s not as important as tech gurus preached it is. The same happens with blockchain technology in our times, and whether regulators understand it or not, eventually it will be the dominating means of intel exchange. 

To better understand how outdated policymakers are nowadays when it comes to technological advancement, read this piece by CoinDesk where Preston Byrne explains how ridiculous America’s state laws are in subjecting blockchain technology. 

The piece entitled “The States Can’t Blockchain”, goes through a series of mocking examples of blockchain laws that clearly have no idea what they are talking about. 

In some scenarios such as local California laws, blockchain is supposed to be “a mathematically secured, chronological, and decentralized ledger or database”. – right.

What’s even worse is that you can monitor more than a dozen states copying other states’ versions of what blockchain is without internal research or any other commitment whatsoever which makes me conclude to our initial point: they are lazy, outdated, and commit no time or will in order to understand what blockchain is, not to mention how it works.

Blockchain across the world

More mature regulators such as China, and the EU have slightly detailed regulations, definitions, and examples of what blockchain is, and in some cases, even instances of DLTs or specific cryptocurrencies have their own set of rules attributed to them.

In China’s case, which is currently the most aware country on a state-level when it comes to blockchain technology, DLTs are not just an important catalyst of future industries, but president Xi Jinping was among the first to praise the benefits of blockchain technology publically, saying that the country intends to be the global leader in the scene. 

On the other hand, the EU keeps its distance from blockchain technology and digital currencies for the time being, yet it has a clear understanding of the technology underlying Bitcoin and has over a hundred different rules that subject different blockchains, and/or digital assets under various umbrellas.

Germany’s Financial Supervisory Authority (BaFin) recently released a document that defined cryptocurrencies as financial instruments, spilling more light on the subject, and at the same time helping businesses who practice DLT to have a clear understanding of their position in the legal sphere.   

Although the true reasoning behind the EU’s upscale on the matter is hiding between anti-money laundering directives and increased concerns over Facebook’s Libra cryptocurrency, it doesn’t change the fact that the EU has a decentralized approach to what blockchain is and if anything they love to put their own labels to things, instead of copy-pasting their neighbors’ laws as happens in the US.

Concluding, some of the most advanced blockchain lawmakers based on their understanding and unique regulatory approach would come from Switzerland, China and HK, Japan, Germany, France, and Russia, while countries who don’t really understand what blockchain is, even if they desperately pretend otherwise include the US, Canada, and Belgium, which ironically enough is the capital country of the European Union.