Mutual Distributed Ledgers (aka blockchains), Regulation and Standards

23 November 2016

A new report, “The Missing Links in the Chains? Mutual Distributed Ledgers (aka blockchain) Standards”, reviewed regulatory and user issues surrounding mutual distributed ledger (MDL) risks and concluded that, while existing legislation is sufficient to cover the activities likely to be delivered 'on the blockchain', voluntary standards may be required in order to protect users.  Such voluntary standards can work within existing accreditation & certification agency market-based systems.

Sponsored by the States of AlderneyPWC, and Cardano Foundation, the report was compiled by Z/Yen’s Long Finance initiative following extensive interviews with developers, lawyers, standards agencies, regulators, and the financial services sector.

The research for the report found that standards may be useful in a number of fields where MDLs are considered potentially valuable:

  • Taxonomies & performance standards; to ensure that an organisations purchasing distributed ledger technology understand precisely what it is they are buying;
  • Data governance & liability standards; to ensure that civil liberties are protected and that procedures are put in place for correcting errors and removing data.
  • Commercial governance & liability standards; to manage the risks associated with governance, liability, identity, responsibility, and compliance. 

Business and technology commentators believe that mutual distributed ledgers (aka blockchains) have enormous potential to transform business and finance over the long-term.  In this context, standards may help regulators to support innovation whilst ensuring that markets and consumers have confidence in this exciting new technology."The Missing Links in the Chains” confirms that the establishment of a voluntary standards market may be beneficial in promoting the uptake of MDLs by providing certainty to both users and developers, while assisting regulators in fulfilling their duties.  A PAS route seems the most likely, but further consideration is needed on the scope of ‘taxonomies and performance’, ‘data governance’, and ‘commercial governance and liability’.  And of course, what group is prepared to pay to take standards forward?

Bob McDowall, Chairman of the Policy Finance Committee of the States of Alderney, comments: "This report provides an early indication of the path ahead that we may travel from early stage prototypes of MDLs towards a reliable piece of technical architecture."

The States of Alderney is the legislative assembly of the Channel Island of Alderney, which remains a separate jurisdiction within the Bailiwick of Guernsey. The main economic drivers on Alderney include business services, finance, eGaming, tourism and energy. Alderney seeks to become the leading centre for regulation and standards for mutual distributed ledgers. 

At PwC, Our purpose is to build trust in society and solve important problems. We're a network of firms in 157 countries with more than 208,000 people who are committed to delivering quality in assurance, advisory and tax services. PwC refers to the PwC network and/or one or more of its member firms, each of which is a separate legal entity.

Cardano Foundation is a blockchain and cryptocurrency organisation based in Zug, Switzerland.  The Cardano Foundation is dedicated to act as an objective, supervisory and educational body for the Cardano Protocol and its associated ecosystem.  The Foundation aims to influence and progress the emerging commercial & legislative landscape for blockchain technology and cryptocurrencies. Its strategy is to pro-actively approach government and regulatory bodies and to form strategic partnerships with businesses, enterprises and other open-source projects.  The Foundation's core mission is to "standardise, protect and promote" the Cardano Protocol technology. 

Z/Yen is the City of London’s leading commercial think-do tank promoting societal advance through better finance and technology. Z/Yen helps organisations make better decisions about enhancing reward, controlling risk and increasing certainty. Z/Yen’s clients are in many sectors, most often where technology and finance try to achieve a social purpose. Z/Yen works with clients to discover, solve, and act on opportunities by managing programmes and projects, building systems, and creating collaborative communities. Z/Yen implemented its first mutual distributed ledgers (aka blockchains) in 1995.

When would we know our financial system is working?” is the question underlying the  Long Finance community’s goal to improve society’s understanding and use of finance over the long term. In contrast to the short-termism that defines today’s economic views the Long Finance time-frame is roughly 100 years. Long Finance aims to develop methodologies to solve financial system problems, provide evidence-based examples of how new financing methods work, and build communities of interest through research, networking and events. 

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