I’m most familiar with the academic literature on Blockchain, especially within Econ and Finance. I’m also somewhat familiar with the discussion about Blockchain in the private sector, especially with respect to startups. But I know very little about the policy debate regarding blockchain. More precisely, I knew almost nothing until last week, when I have attended the OECD Global Blockchain Policy Forum a two-day events fully dedicated to discussing policy and blockchain.
Reflecting back on these two days, I think there are two common themes that were present in all presentations / panel discussions / side chat.
The first one is that regulators and policymakers are quite prepared, also on the technical aspects, but their reference point is the technology as of (more or less) 4 years ago. To some extent, I think this is normal, even healthy. You do not want to start regulate / write policy based on the latest, most frontier technology. The frontier is by definition a moving target: it constantly changes and many things that are super cool now will eventually fail and be abandoned. Trying to regulate it would be a waste of time for the regulators, and probably also a serious constraint on technological development.
However, I though that many speakers / panelists were a bit too far from the technological frontier. This came across quite clearly during a panel on the new FATF regulation. In short, this new regulation tries to impose the same anti money laundering / anti terrorist financing rules that apply to “regular” financial institutions to the crypto world - for example crypto exchanges. Someone in the room raised the issue of decentralized exchanges: the fact that we already have technology that allows people to sidestep traditional exchanges and trade/exchange crypto tokens essentially in a peer-to-peer way. Those on stage replied that they will worry about decentralized exchanges when they become mainstream, somewhat implying that the existing regulation can be adapted to cover those exchanges as well.
This brings me to the second common theme that emerged during the conference: the assumption that it is always possible to adapt the current regulatory framework to every possible new technology. Or, to say it with Bruno Le Maine (the French minister for Economic and Finance) words “as society, we have our value. Technology will not change those values. Rather, as a government, we will find a way to fit any new technology with our values” (I’m paraphrasing here, I don’t remember the exact words). But I think this is not true, which brings me (finally!) to pornography.
Before the internet, the flow of information was quite regulated. The prime example was pornography: you could access it only if you were 18 or above, otherwise no porns for you. This regulation was quite effective. But then Internet came and now the only thing that stands between anybody and porn is a checkbox. Similar rules existed for health and financial advice: before internet only some categories of people were allowed to communicate to the public regarding certain subjects, now everybody can. But porn is more salient for me, because Internet showed up in my home town in Italy when I was 14. As a boy of that age, for me the association between Internet and porn was quite strong: no more bribing the above-age cousin of a friend or a friend, everything was now at my fingertips.
So what has happened to those regulations and values? Well, regulation became extremely difficult to enforce. As a consequence, regulators and law enforcers now focus exclusively on the very nasty stuff (child pornography, revenge porn and so on) leaving alone consumers of regular, legal pornography independently of their age. With respect to our values, I think it is fair to say that we now consider the issue of access to pornography a matter to be regulated at the family level, rather than at the state level. So, yes, both regulation and our values have changed as a consequence of technological developments.
This historical precedent teaches an important lessons: that some technological developments make existing regulation simply impossible to enforce. I think ignoring this possibility is dangerous, because it could lead to years wasted trying to enforce rules that are just not enforceable, at great cost for all those people who need to follow these rules.
Just to clarify: I’m not saying this is what will happen with Blockchain. What I’m saying is simply that I wish regulators and policymakers would keep this in mind as a possibility.