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How blockchain regulations will change in 2020
TechTalks | Andrey Sergeenkov | Feb 12, 2020
As 2018 drew to a close, crypto skeptics were ready to write obituaries after the devastating bear market that year. Talk of blockchain and cryptocurrency demise was rife among seasoned analysts. Just over twelve months later, the industry has shown remarkable resilience to rebound back.
Regulators are a segment of stakeholders who seem to be appreciating that crypto is here to stay, with Federal agencies in the US and Chinese authorities praising the potential of this technology in their respective countries’ digital future.
Blockchain technology has gained independent credibility over and above its application in cryptocurrency. The opportunities are endless as the emerging enterprise sector continues to draw plaudits. So far, this technology has grown in spite of regulatory infrastructure rather than because of it. A suitable regulatory climate is essential for widespread adoption.
See: The Decade in Blockchain — 2010 to 2020 in Review
This is how Jason Lee, Vice President of NEM Foundation, describes the industry’s evolution:
“2017 was the year of the blockchain craze. In 2018, we hit the brakes towards the end of the year. For 2019 and the start of 2020, Don Tapscott at the World Economic Forum Annual Meeting reports says that the ‘blockchain revolution ground to a halt.’ This is because not all initiatives are going past the proof of concept stage just as blockchain regulation shapes progressively as it moves forward in the right direction. In 2020, real use case projects are starting to shape up and will play a crucial role.”
Therefore, industry leaders and enthusiasts at large are eagerly following regulator sentiment. Themes like consumer data protection and harnessing tech will be constant in these discussions. What is going to be the major themes around blockchain regulation in 2020?
Privacy and anonymity on enterprise blockchain
Anonymity and privacy were defining aspects of the decentralized blockchain projects. This sector went mostly unchecked until blockchain platforms became increasingly popular.
Last year, the release of the Libra project whitepaper by Facebook brought these issues to the fore. Specifically, concerns about blockchain enterprises, including cloud services and handling customer data gave regulators an opening to legislate on such platforms. Blockchain enterprise will continue to draw unprecedented legislative scrutiny in 2020.
In late 2018, the US Department of Homeland Security started scrutinizing privacy tokens that shield user information. Similarly, G20 countries issued regulations in June 2019 for exchanges to comply with “anti-money laundering” (AML) and “know your customer” (KYC) requirements. In February 2019, the Cyberspace Administration of China (CAC) implemented additional guidelines specifically for blockchain companies.
See: Blockchain Fundraising Can Benefit African Tech Startups
Chinese regulators claimed that these measures are aimed at settings the standard for blockchain development in the country. In the US, the Blockchain Promotion Act of 2019 focuses on finding potential applications for the distributed ledger and opportunities through which government agencies can explore and incorporate the technology. 2020 is sure to bring more scrutiny and legislation on this premise.
Crypto regulation over perceived threats to national currencies
Many countries initially took a position of ignorance about cryptocurrencies. However, as bitcoin took a larger-than-life profile after the monster rally in 2017, this position was no longer tenable. The only reason that blockchain experienced the crypto winter was due to being unregulated rather than the breakdown by governments.
The unchecked printing of money before and after the financial crisis of 2008 by the Central Bank led to some people becoming disillusioned about centralized financial systems. Bitcoin and other cryptocurrencies offered an alternative to these people. As with any power structure, the entities in charge will not relinquish power with ease.
China took drastic measures against trading cryptocurrencies in 2017. Last year, India went even further and completely banned non-sovereign cryptocurrencies. The fundamental aspect of decentralization is an existential threat to the ability of major central banks to control monetary policy.
See: Visa R&D Arm Develops a Blockchain System That Could Replace Financial Data Aggregators
Even without expressly stating this position, the Securities and Exchange Commission in the U.S. decided to classify coins like Telegram Open Network (TON) as securities to regulate their rise. Regulators in the U.S. see blockchain currencies and commerce as an issue that needs to be addressed.
As 2020 begins, some countries are looking at digital currencies as an opportunity rather than a threat. China astonished the world last year when the People’s Bank of China announced that it was researching on a national digital currency. Such a development could trigger an arms race of sorts between nations that want to be the first to innovate in this space.
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