It’s time to stop dreaming and start applying. Blockchain is here – and it’s ready for the PoC stage.
In my previous blog, I explained how security should be a factor when determining which type of blockchain is right for your business. Now let’s dig a little deeper and see how regulations affect blockchain, and go over the hard facts on what you need to know to adopt effectively.
This blog continues to highlight best practices on how to start your blockchain journey – fast. While blockchain regulations may be few in number, they affect adopters around the world.
Stage two: Understanding the lack of regulations – It’s not necessarily a bad thing
A lack of regulations can seem scary, and is a popular topic when it comes to blockchain. Shifting trust from a centralized institution to a decentralized network with little regulation is a major step that some businesses may have trouble taking. Because blockchain reduces oversight, adopting it can be a significant loss of power for many companies.
In addition, technology regulations are continuously struggling to keep up with technology advancements. The same is true for blockchain – there isn’t much regulation yet, and the ones currently in place have their fair share of issues.
In the European Union, the European Markets Infrastructure Regulation (EMIR) states that all counterparties involved in transactions must report contract details to a trade repository by the end of the next working day. This is tricky for blockchain, since reporting these transactions is a process-heavy task. With reports riddled with subpar quality data and requiring large reporting costs, the EU plans to enact new regulations to mitigate this issue.
Meanwhile in the USA, the Dodd Frank Act is causing trouble for banks. It requires all transactions, or “swaps”, to be reported to swap data repositories (SDRs). To make matters worse, each of the 4 registered SDRs has different system architecture and regulating technologies, making them completely siloed and difficult to create regulations for.
But maybe…a lack of regulations isn’t all that bad?
Think about it this way – a blockchain allows two parties to complete a transaction without the oversight of a third party, strongly reducing or even eliminating counterparty risk. This can be a strong option to have, as one company never knows if the other company will live up to its obligations in a contract. But with blockchain, transactions are executed exactly as the protocol commands. Blockchain’s transactions are also immutable, which is further proof that blockchain doesn’t need constant oversight.
In addition, storing personal information on the blockchain isn’t allowed anymore according to GDPR. As a workaround, you could store a reference of your personal information on the blockchain (along with a hash of the data and other metadata) while the personal information itself is stored elsewhere. This makes the blockchain help control the access to your personal information, but reduces transparency, data ownership, security and makes the process much more complicated than it should be.
While it’s hard to say how GDPR will affect blockchain until it’s actually put into action, these predictions definitely provide some food for thought in the meantime.
Making the seamless transition – Are you ready to move forward?
While blockchain may promise benefits, integrating it into your legacy infrastructure can be difficult. It’s a transition that could initially slow down procedures or interfere with scalability…if not integrated seamlessly.
But Luxoft is all about providing seamless experiences.
With technology experts across the board, we can determine if blockchain is right for your business. In order to help you get ahead in your industry, we offer end-to-end solutions that improve your operations, workforce and customer experiences exponentially. It’s time to move forward.
An executive and leader with extensive experience across a broad range of industries and technologies. He is dedicated to helping his clients develop and integrate digital transformation strategies by incorporating Big Data, AI/ML, Cloud and IoT solutions into the fabric of their IT systems. He is a proven expert in client engagement, analyst and investor relations, Enterprise Systems Architecture & Governance, Big Data, Distributed Computing, SaaS, Infrastructure and IoT.
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