As with many new technologies, blockchain can only thrive if the relevant infrastructure is in place to support it. This includes a banking system willing to accept digital currencies such as Bitcoin, developers capable of creating technologies and interfaces to enable experts and laypeople alike to interact, and of course requisite regulation to give public and industry alike confidence that the platform is sufficiently robust to thrive.
Last year the European Parliament voted for a system of ‘smart regulation’ that will see a light touch approach to regulating what is still a very nascent technology.
"To avoid stifling innovation, we favor precautionary monitoring rather than preemptive regulation. But IT innovations can spread very rapidly and become systemic. That's why we call on the commission to establish a task force to actively monitor how the technology evolves and to make timely proposals for specific regulation if, and when, the need arises," German social democrat MEP Jakob von Weizsacker was quoted as saying at the time.
In other words, they seek initially to keep a watching brief on the technology via a task force that will monitor the rate and direction of progress before instituting the necessary regulations. As with many EU documents, the sense is very much that doors are being left deliberately open for a range of different approaches to be taken, but one thing is clear is that they don’t wish to stifle growth in blockchain-based technologies.
"Blockchain technology has come of age. It's no longer experimental. Today the tangible benefits of blockchain's persistent immutability, time-stamping and consensus nature are widely acknowledged and accepted. The EU's smart regulatory approach will no doubt take this on board and ensure that this game changing technology will be allowed to evolve in an appropriate regulatory context that will benefit all," Brian Donegan, Head of E-Business at the Isle of Man’s Department of Economic Development told me recently.
This view has been echoed in the United States, where the U.S. Securities and Exchange Commission (SEC) recently made important regulatory inputs with their announcement that some tokens should be regarded as securities, and therefore they must be registered according to the laws governing such instruments. One company who welcomed the added confidence and security the SEC has brought to the sector is the Jibrel Network.
It’s an approach that they have built into their systems from the off. The network, which has regulatory compliance built-in, allows users to put traditional asset classes, whether currencies, bonds, commodities or futures, onto the blockchain. This allows licensed entities to sell regulatory compliant securities in a tokenized form. Jibrel supports the adoption and acceptance of Blockchain technology and cryptocurrencies across financial institutions, eradicating cost through automation, while simultaneously increasing transparency, auditability and accountability.
Jibrel is built on the Ethereum blockchain, ensuring a high-level of security through network effects. In addition, since each token embeds real-world rules and regulations,all network assets are always compliant with relevant laws.
It’s companies like Jibrel Network, with a focus on the promise of blockchain, that are taking advantage of the technology’s unique transactional capacity and innovative algorithms to expand the definition of financial services as we know them today.
Cryptocurrencies are undoubtedly at an early stage in their development, and there has been a recent boom in new currencies entering the market. Recent estimates pin the number of currencies at over 900, and there’s a strong belief that we are set for a considerable consolidation in the market in the coming years. Nonetheless, many in the industry believe they are a revolution that has legs. "Cryptocurrency and blockchain are here to stay. Over time, it will become quite large," Nvidia CEO Jen-Hsun Huang said recently. While the technology is in its infancy, appropriate regulation is crucial to striking the balance between fostering sustainable innovation and maintaining consumer and investor protection safeguards, to prevent fraud, theft and money laundering.
It’s early days, but it seems that the smart regulation policies currently being adopted around the world might well fall into that zone and be doing just what’s required to help cryptocurrencies shift towards the mainstream.