Rebuilding the System: Creating Truly Global Markets
Regulators and politicians are discussing blockchain again, the technology is regaining momentum. However, most debates take place at the national level – although digital technology provides the opportunity to create a truly globalized market.
Legal certainty and a clear regulatory framework are paramount for emerging technologies. Businesses, investors, and users need lawmakers’ reassurance that their investments won’t be nullified some years down the road because of sudden legal changes.
That’s why certain countries – for example Liechtenstein – have introduced regulations enabling the successful built-up of a digital ecosystem. Most nations, however, have not yet taken any steps in this direction. That seems to change now. During the last months, blockchain has been part of many regulatory debates.
There could be several reasons why blockchain is back on the agenda: Bitcoin’s recent rally has proven many digital currency skeptics wrong. Facebook’s Libra currency has sparked controversy among lawmakers, and politicians have started to push blockchain higher on the political agenda.
Regulatory debate stuck at the national level
Last week, the CDU, Germany’s center-right political party and leader of the current government coalition, has published suggestions on how the government should use blockchain technology.
The paper discusses a wide range of applications, such as a government-run “Bundes-Chain” that private businesses can use to develop their own applications.
Thomas Heilmann, member of parliament and a co-author of the report, says, “Germany cannot miss another digital revolution. If we create the right framework now, we can take a global lead in blockchain applications.”
This report mirrors the view of a single political party, but it shows the tune has changed in Germany. The technology is gaining momentum and has become part of the public and legal debate.
That’s a step in the right direction, but the debate is stuck at the national level. What we really need is a global debate, not single-country solutions.
Multinational bodies enforce existing regulations on a new technology
While national legislators are discussing national solutions, multinational bodies try to enforce the existing regulatory regime on a technology that brings a new paradigm.
Last week, the Financial Action Task Force (FATF) issued guidelines imposing the same data recording requirements on digital exchanges which traditional exchanges have to adhere to.
In the future, digital exchanges will have to identify the senders and receivers of digital transactions. While the reason for these guidelines is honorable – combating money laundering and terrorism financing – the rules are outdated and might even trigger the reverse.
As a result of the FATF guidelines, Virtual Asset Service Providers such as exchanges will face higher compliance costs, which might lead to the shut down of leading exchanges and will push actors off the radar.
Instead of making a 21st-century technology subject to a regulatory regime designed for the 20th century, regulators should come up with new ways of regulating a technology that has the potential to disrupt international markets and society significantly.
And what’s most important: Regulators need to get together and create a truly globalized system, not siloed solutions.
Blockchain offers the chance to rebuild global markets from scratch
One of the enormous opportunities the token economy provides is the chance to reset the global financial system and build it up again almost from scratch, based on new, global rules.
Instead of repeating the mistakes from the past and creating a fragmented, pseudo-harmonized system that has been built on nation-states, we could create a truly globalized market.
To make it happen, regulators worldwide need to get together and come up with a structure that works for everyone, globally. Otherwise, we’re simply rebuilding the same system that we currently have, just based on new technology.
That would be a missed opportunity. Let’s do it right this time, from the very beginning!