Originally born as a system to retain or keep track of virtual-currency transactions such as Bitcoin, Blockchain is receiving steadily increasing attention from players in a range of sectors, such as banking or financial institutions.
Blockchain may be defined as a database in which the information is split into blocks interconnecting the members/users of the network through a digital signature. One of the main features of this system is that it allows –at a lower price- quicker and safer transactions in comparison to other similar systems currently used. Both the high expectations put on this system and the lack of express regulation on the matter provide additional examples of how peer-to-peer technologies never stop posing challenges to legislators.
Little have we had to wait for opinions on the matter from regulators, mainly dealing with the far-reaching influences of this technology in various sectors. Among them, the European Securities and Markets Authority has set up a permanent committee on financial innovation in charge of finding a harmonised approach on these matters among the national regulators of the Member States.
Also, the Committee for Economic and Monetary Affairs of the European Parliament issued a draft report on virtual currencies, which, among others, contained a proposal of resolution by the European Parliament on this matter, welcoming any proposal by the European Commission for the inclusion of virtual currencies exchange platforms into the Fourth Anti-money Laundering Directive.
All these initiatives are focused on the use of Blockchain technology by banks, financial institutions, and payment services institutions as this sector –the financial sector in broad terms- is the one in which the use and development of this system is more relevant. However, it should not be overlooked that the features and potential usages of this technology may lead to generating legal implications in relation to civil/contractual matters, or even criminal contingencies, chiefly due to the lack of transparency of the private Blockchain networks. One of the main risks perceived by the sector from these technologies relates to the potential modification and tampering of transaction data stored in public transactions registries, which might undermine legal certainty in a crucial economic sector.
While we still await regulators’ stances on the topic, there are those who advocate in favour of regulating the matter in the shortest possible time, but also those who would allow some time for the development of these technologies to be better understood. In any event banks, financial institutions and those operating in the Fintech sector, as well as those intending to base their business on Blockchain, will have to gather advice on the potential implications these technologies may have in the various jurisdictions in which they act with a view to adapting, by way of compliant contractual obligations and procedures/protocols, to transparency, data protection and consumer protection.
Finally, legislators at national and EU level shall bear in mind, when regulating, the potential utility of this technology and its potential application in various spheres such as Cloud Computing, Internet of Things, payment methods, Fintech, Smart Contracts, health-related uses, or copyright management. The wide variety of applications of this technology in various spheres may make it necessary to adopt important modifications at both a national and EU level in fields such as data protection, consumer protection, or e-commerce. All in all, no material regulative changes are expected in the short-term. This makes it necessary that those intending to use this technology keep paying close attention to the legal implications that their services –based upon this system- can have according to the interpretations or re-interpretations of the current regulation in relation to matters as particularly sensitive as these.