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13 April 2017
First conceptualized back in 2008 by an unknown person or a group of individuals under the name of Satoshi Nakamoto, blockchain at the very inception of it along with the bitcoin currency it underlay featured low popularity. Starting the middle of 2012 bitcoin currency has been gaining momentum with interest to blockchain technology rapidly growing either. Today blockchain is adopted by many industries other than cryptocurrency, including medicine, crude oil supply and voting. While promising much in terms of security and impossibility to corrupt data in the shared ledger due to reproduction of hashes in every subsequent block, there are still many gaps in the standardization and regulation of the process. Yet, international community much as individual nations don’t stop short of making efforts to address this deficiency as you may see it further below.
Key advantages as key challenges
While decentralization is presented as the main advantage of the financial process powered by the blockchain scheme, it still poses a number of risks both for governments, businesses and customers. Territoriality of the blockchain control is a real brain freeze as distributed ledgers have no specific locations without any authority responsible for each particular distributed ledger, which also gives rise to a question of liability, as there might be no person with overall responsibility for distributed ledgers and the data they include.
Another advantage of the blockchain technology – saving all the records in the ledgers without any possibility to delete, remove, edit or distort the data has its dark side, as it violates the legally acknowledged ‘right to be forgotten’ excluding the opportunity for consumers to have their personal information removed from the network upon request.
Proceeding with the list of problems posed by the blockchain technology, we should note legal validity of the financial instruments issued in the blockchain networks, especially taking account of the fact that blockchain services mostly issue money, and another point of concern is regulatory framework for smart contracts that is obscure in view of the above mentioned lack of territory-based jurisdiction and control to ensure and enforce such contracts in case of disputes.
Technical committee 307 for blockchain technology is a first substantial effort to standardize the nascent practice launched by the International Standardization Organization. The committee secretariat is chaired by the Australian non-governmental body Standards Australia and has such organizations on board as ANSI from the United States, GOST R from the Russian Federation, Japanese Industrial Standards Committee from Japan, Schweizerische Normen-Vereinigung (SNV) from Switzerland and 13 other members.
ISO/TC 307 elaborates on its scope of activities this way: ‘Standardisation of blockchains and distributed ledger technologies to support interoperability and data interchange among users, applications and systems.’ This manifest is the most specific action pace currently existent in the area, given multiple roundtables held by various financial market players and authorities around the world with no clear outcomes yet defined for regulation of blockchain.
Earlier last month Standards Australia published its Roadmap on further framework for developing the unified guidelines for blockchain technology, stressing that first terminology standards underlying the blockchain and distributed ledger should be defined, based whereon other issues will be consequently addressed, including privacy, security and identity standards. After the fundamental standards are ready, notes Standards Australia, they may go ahead with addressing the governance and risk-related questions at ISO/TC 307. Next meeting of the board is scheduled for November 14-17, 2017 in Japan.
Global Blockchain Business Council
This January at the World Economic Forum 2017 Annual Meeting in Davos, Switzerland, The Bitfury Group, a company developing software and hardware solutions for blockchain-based businesses, in cooperation with international law-firm Covington unveiled the launch of Global Blockchain Business Council (GBBC). Unlike ISO initiative this project features more extended and ambiguous mission and route forward, as it aims to create a forum for outstanding corporate players and business leaders for promoting the most cutting-edge developments and innovations in the sphere of financial technologies, providing training, partnership and cooperation in the blockchain plane.
The council members include Founder and CEO of The Bitfury Group Gabriel Abed, Vice Chairman of The Bitfury Group George Kikvadze, former Prime Minister of Haiti Laurent Lamothe, former President of Estonia Toomas Henrik Ilves and many other heavyweight personalities in total representing 28 countries.
Well, having such a strong team of leaders involved into the operation of GBBC looks very impressive, but so far the organization has very few things to boast in its achievements list, if opening a branch in Washington, DC, could be considered as an achievement. Next meeting of the council is scheduled for May 05, 2017, and, perhaps, we will see something more ‘tangible’ on the agenda for global blockchain collaboration.
One of the strongest calls to action with the most comprehensive and full-scale outcomes to be felt at the blockchain development arena is the proposal put forward by G20 Insights, a new initiative of the Think 20 Engagement Group in the framework of Group of Twenty forum. The gist of the proposal is for G20 countries to take proactive steps in decisively breaking in the blockchain implementation, standardization and regulation sphere as there are risks to miss the right time forever in light of the viral expansion of blockchain into the financial and other areas of life threatening to run outside the governmental control and influence.
The key proposals of the G20 Insights include establishment of the internationally agreed regulatory framework for properly addressing and interoperating with blockchain projects and businesses while also ensuring support for public and private blockchain initiatives and innovation programs.
Further G20 Insights promotes the idea of expanding the understanding and applicability of Basel agreements, WTO agreements, the Paris Agreement on Climate Change and their consideration and revision in the context of emerging blockchain technology influence and impact, take into account potential of blockchain to replace ICANN domain name registry system. G20 nations should also provide for establishing regulatory sandboxes for blockchain use cases which will ensure broader cooperation between local and international regulators and blockchain developers and innovators in addressing cross-border regulation challenges.
Besides, G20 Insights believes that for the purpose of supporting economic stability on a global scale, the G20 countries should also incorporate a Central Banks Blockchain Consortium for researching into probable implications for monetary and fiscal policies borne by cryptocurrencies and various blockchain-based solutions. The full text of the proposal could be read here.
Blockchain is a unique innovative concept, definitely offering extensive opportunities for the humanity across endless industries and spheres while featuring a woe in the regulatory and legal enforcement context, yet still people tend to over- and underestimate risks and threats and given the misuse and violation in the areas supposed to be highly regulated, does it make any significant difference after all?
Exciting articles several times a month