Blockchain has been there for around for a good few years now and I continue to remain skeptical of this technology platform. I have been pretty vocal about this and in the recent times am witnessing a few startups in India, that too in the regulatory domain space like finance, healthcare etc. cropping up by adopting Blockchain platform. This baffles me. Any regulatory environment involves citizen's critical data and also that it can affect the nations economy significantly. In the light this thought, I am writing this post to drill down on the legality aspect specifically, and would love to learn from those executive leaders working in the blockchain tech in regulatory space, as to what made them chose this unconventional, unpopular, untried, and untested, technology platform with unclear legality in most of the nations around the world.
Taking a step back, in a very simplistic way, Blockchain technology is a decentralized system of computing, storing and verifying data that is advertised to have many potential applications and benefits. However, as I see it, it also poses some serious challenges and risks, such as legal uncertainty, regulatory compliance, security, privacy, and scalability. For this reason, different countries have different approaches to regulating blockchain and its use cases, such as cryptocurrencies.
As things stand today:
- United States, it does not have a unified or comprehensive legal framework for blockchain at the federal level. Only some states in USA, such as Arizona, Tennessee, Wyoming, and New York have explicitly recognized and facilitated the use of Blockchain. In 2022, USA had announced a new framework for regulating Blockchain, especially with the agenda of cleaning up illegal cryptocurrency activity.
- The European Union a while back had proposed a regulation on markets in crypto-assets (MiCA) that aims to harmonize the rules for crypto-asset service providers and issuers across the bloc. The regulation intends to establish a common legal framework for crypto-assets that are not covered by existing EU financial services legislation. Even this is in the pilot stage.
- China in 2021, placed a ban on Bitcoin mining, forcing many engaging in the activity to close operations entirely. And also, since then it the country has been working on developing the digital yuan (e-CNY).
- Canada, of all the nations, has been more proactive about crypto regulation and became the first and only country so far to approve a Bitcoin exchange-traded fund (ETF), with several trading on the Toronto Stock Exchange (TSX).
- Singapore is another country that has embraced blockchain technology and fintech innovation. The Monetary Authority of Singapore (MAS) has implemented a regulatory sandbox (is this private/permissioned blockchain??) for blockchain projects and is supportive of blockchain adoption in the financial sector.
- Switzerland, Japan, Malta, Bermuda too have some regulations in place for blockchain technology as a platform.
- U.K., Australia classifies cryptocurrency as property but not legal tender, thus subjecting to taxing on its sale. There isn't anything explicitly positive in legalizing Blockchain platform thus far.
What about Blockchain technology platform in general other than cryptography? Like most nations, India has been mute on this topic. That said, tighter regulations in critical domains like finance and healthcare, can strangulate the companies that are built wholly on the blockchain platform. In India, the tighter regulations have already kick-started for public good. Given this context, until the Government explicitly pronounces laws on Blockchain, it remains to be seen as to what the Engineering Heads who have chosen Blockchain as a platform for their product suite has to say about their choice and how they intend to overcome the challenges of this platform.