The EU takes the right approach towards Blockchain

14 September 2017

Author: OpenForum Europe

On 13 September 2017, OFE participated in the Blockchain and DLT Policy and Standardisation Workshop, organised by the European Commission. From the workshop it was clear that Blockchain technology is a concept without a single formal or legal definition, which  in many cases is confused with the Bitcoin cryptocurrency or with Distributed Ledger Technologies (DLT). This being said, whilst it may be difficult to agree on a specific formal or legal definition of Blockchain, at the same time it is difficult to ignore this technology: for example, in 2016 the World Economic Forum acknowledged Blockchain as third in a list of the top 10 emerging technologies. Not only that, the International Standards Organisation launched recently a Task Force on Blockchain technologies that could share the future of this technology.

Overall, the extensive potential of Blockchain applications across industries and product or service offerings is evident. Blockchain technology may not be the solution for every problem, may not always be as decentralised as we might think, and will probably not lead to a revolution. However, it does appear likely that it will live up to at least some of the hype, and could have a substantial impact in many areas of our lives.

Therefore, some parts of the world have created regulatory initiatives around Blockchain. For example, in May 2017 the Russian government announced that it intended to have Blockchain regulation in place by 2019, though details were hard to come by. Also in Europe, Gibraltar has announced its intent to regulate Blockchain businesses by January 2018. In other parts of the world, such as in Ecuador or Bolivia, legislation goes as far as to heavily limit the use of Blockchain in the area of finance. While the intention may be legitimate, the results of this initiatives is to limit the grow of this potentially revolutionary technology.

The European Union is taking a different, potentially better, approach.

Indeed, a recent (May 2016) European Parliament report on virtual currencies (rapporteur, Jakob von Weizsäcker (S&D, Germany)), recognises the many regulatory challenges presented by Blockchain technology, whilst calling for a proportionate approach at EU level, so as neither to stifle innovation nor to impose superfluous costs at this early stage. This report also calls for the creation of a horizontal task force, led by the European Commission and consisting of technical and regulatory experts.

In February 2017, the European Parliament Research Service also published a report, which recognises the potential that Blockchain technologies could have in several sectors.

Beyond the financial domain, the European Commission is also looking into the challenges and opportunities of Blockchain technology for various industrial sectors. In cooperation with DG GROW, in March 2017 the European Commission’s Joint Research Centre (“JRC”) science and knowledge service, or policy lab, began the initiative #Blockchain4EU: Blockchain for Industrial Transformations. This project explores possible uses and impacts of these technologies across a number of areas, including connected things, autonomous systems, supply chains, asset monitoring, logistics, intellectual property, authentication and certification, and digital manufacturing.

Moreover, as Blockchain technologies and their related applications quickly evolve, following the mandate of the European Parliament’s Horizontal Taskforce on FinTech and DLT, in the last two months the European Commission announced that it is setting up a pilot project, to be known as the “EU Blockchain Observatory and Forum” and to act as a European Expertise Hub on Blockchain and DLT. This pilot project is to include an observatory and a forum to gather input on Blockchain technology. The main goals are to establish an EU expertise resource for forward-looking Blockchain topics, and develop EU use cases; another goal is to assist the EC in determining what role – if any – government authorities can play to encourage the creation of such technologies and to develop policy recommendations.

Therefore, as shown above, contrary to what we can observe in some other parts of the world, the EU is taking a “wait-and-see” approach that is very much to be welcomed in a context where it is not even clear what must, or indeed can, be regulated. At the same time, it is also to be welcomed that the EU is trying to gather the different stakeholders by means of a platform that will allow the best solutions to be developed and nurtured. OFE will support this.