Saturday, May 25, 2024

Regulate blockchain ‘actors’ not technology, says fintech lawyer

There aren’t enough regulations in place for blockchain utilization in the Philippines but once policymakers buckle down to work, a lawyer advises that it should be the actors, services, and applications which should be regulated, not the technology itself.

Rafael Padilla, head of legal and compliance at fintech firm Satoshi Citadel Ventures, speaks at the Business Law Conference 2018 at De La Salle University in Manila on July 28

The term “actors” refers to the intermediaries and operators running applications on blockchain networks.

Rafael Padilla, head of legal and compliance at fintech firm Satoshi Citadel Ventures, made this statement during the Business Law Conference 2018 held at De La Salle University on Taft Avenue, Manila on July 28.

Regulating the “actors” instead of the technology helps prevent the stifling of innovation, said Padilla. Other countries including the United States are adopting this regulatory approach.

Another reason is that the regulators may lose credibility as they try to regulate the underlying technology of something as powerful as blockchain.

He explained that from a policy perspective, the idea that blockchain eliminates the intermediaries in a transaction may be problematic.

“If we now have a technology that could potentially make the services of banks obsolete, then how would the Central Bank for instance regulate these various financial services?” asked Padilla who is also co-founder of the Blockchain Association of the Philippines and FinTech Philippines Association.

As a whole, smart contracts, decentralized applications, and tokenized digital assets will raise critical challenges to existing legal frameworks.

Without legal safeguards, blockchain could be taken advantage of to regulate people’s behaviors. The technology, Padilla warned, could go the same route as the Internet and eventually become a tool for control and mass surveillance.

“What we foresee is that eventually we will have new intermediaries,” he said. The emergence of these new intermediaries is similar to the rise of mobile apps, Uber, and other disruptive technologies available today which people could not have imagined 10 years ago.

“And that same thing will happen again with technology such as blockchain,” Padilla revealed.

Given these, he recommends that blockchain developers consider the legal architecture as they develop their technologies while government should find new innovative ways for regulation.

“Blockchains can be used both for good and evil. Bad actors will always be the early adopters of the technology. That has been the consistent experience,? said Padilla. ?This gives more reason why the government should be able to draft regulations to address these illicit activities and new regulatory approaches should be adopted.”

Meanwhile, DLSU commercial law professor and legal consultant to the Cagayan Economic Zone Authority (CEZA) Mike David told Newsbytes.PH that blockchain technology cannot be breached.

“The whole chain is built on trust wherein that chain is built on information verified by a large number of networks. Once that information is locked in, it will be permanently cemented to it. It’s virtually unalterable, it’s open to everyone, it can assure integrity, and it cannot be taken by a third party,” he said.

CEZA teamed up with blockchain platform provider NEM Technologies to put up the first blockchain hub in the Philippines. The Memorandum of Understanding between the two parties was signed during the Business Law Conference 2018.


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