UK may issue first regulatory guidance on permissioned blockchain

Like it or not, blockchain technology will eventually be regulated. In the coming months, the UK is likely to become the first country to come up with regulatory guidelines for blockchain. The Bank of England’s Fintech Accelerator Program is one of the reasons why such regulation is about to come to fruition.

Regulated private and permissioned blockchains are a good thing

When governments say they will regulate blockchain technology, remember that we are talking about permissioned distributed ledgers. Bitcoin’s blockchain cannot be regulated because no one controls it. If the Bitcoin network rejects any proposed changes or guidelines, they will not take effect. Private blockchains, however, are very different.

Regulators are particularly concerned about risk mitigation and want to know how permissioned distributed ledgers handle this aspect. Since these systems do not require a proof-of-work (PoW) mechanism, these technologies present a lot of risks. One element of deception between trusted parties can cause a lot of havoc.

In addition to UK regulators, the European Commission is also keeping a close eye on permissioned blockchains, which are seeking to integrate private blockchains into the financial sector while preventing money laundering. The transparency of blockchains should help in this regard, but permissioned chains may not provide complete records.

One thing to keep in mind is that these regulatory requirements may not be implemented for a while. It is one thing to establish a draft regulation, but the final version of the regulation will always be very different. At the same time, these regulatory guidelines may affect companies in the cryptocurrency field (including exchanges), which may be a good thing or a bad thing.