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FinTech: Blockchain regulation needed

Blockchain, the technology on which Bitcoin is based, has spread in recent years as the main promise of the digital economy.FerrariPollini fusion

 

Bitcoin, the cryptocurrency created in 2008 by Satoshi Nakamoto, is now valued $1,243.9 on the Bitstamp Price Index (BPI), and its use is becoming more and more customary. One example? Real estate company “Gruppo Barletta” put 123 apartments in San Lorenzo ( Rome) on sale and accepts Bitcoins as payment. Thanks to a decision of the Italian Revenue Agency, Bitcoins is now equated to any foreign currency.

Despite the success of this digital cryptocurrency, according to the experts is Blockchain, its underlying technology,  the real golden pot. Its decentralized and distributed nature allows the storing of information in an unprecedented way, bringing also benefits such as stronger security and transparency in the information stored.

Such distributed ledger technology (DLT) overcomes thus financial applications, starting to serve different purposes, spacing from tracking diamonds to casting votes in elections. Recently, Cambodia’s central bank tapped blockchain for public payment system, whereas the State of Delaware issued amendments in order to allow businesses to utilize Blockchain to maintain corporate records.

However, such technology faces many obstacles, one above all: the lack of clarity from regulators. For quite some time the position taken by the legislative power across the world has been a “wait and see” one, without  regulatory instruments to catch up with the new technology developments.

Since the use of Blockchain is increasingly expanding, regulation of DLT has now become one of the top concerns for institutions as well as financial businesses all over the world. It is sufficient to mention the last reports launched by several regulatory organizations (FINRA, ENISA) in order to understand the challenges and potential risks that such technologies, growing so fast, may pose.

One of the latest intervention in this respect regards the European Commission, that is setting up an EU Blockchain Observatory in order to understand what role, if any, European authorities should play in this field.

Among the tasks of the Observatory, the provision of an overview on relevant initiatives related to Blockchain and distributed ledger technologies in general, the observation of their developments and the building of expertise on connected topics such as validation mechanisms, governance, regulatory and legal challenges stand out.

We will no doubt keep you posted!

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Alessandro Ferrari @Alessan1Ferrari / Costanza Pollini