Blockchain Revolution

REGULATION VERSUS GOVERNANCE
To be sure, value and money are different from traditional information. We’re talking
about savings, a pension, a person’s livelihood, her company, her stock portfolio, her
economy, and that affects everyone. Don’t we need regulation, and fast? Can and
should government show restraint in the face of the seismic shifts to come?
Important shifts are revealing the limits of government in an age of accelerating
innovation. For example, the 2008 financial crisis showed how the speed and
complexity of the global economic system renders traditional centralized rule making
and enforcement increasingly ineffective. But stronger regulation isn’t the antidote.
Governments cannot hope to oversee and regulate every corner of the financial
market, technology, or the economy, because there are simply too many actors,
innovations, and products. If anything, the experience illustrates that governments can
at least force transparency to shed light on behavior and create change. Governments
can demand that the actions of banks, for example, be transparent on the Web and let
citizens and other parties contribute their own data and observations. Citizens can
even help enforce regulations, too, perhaps by changing their buying behavior or,

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armed with information, by organizing public campaigns that name and shame
offenders.
Of course, governments must be key stakeholders and leaders in governance.
They must also acknowledge that their role in governing the blockchain will be
fundamentally different from their historical role in monetary policy and financial
regulation. For millennia, states have had a monopoly on money. What happens when
“money” is not issued exclusively by a central authority but instead is (at least in part)
created by a distributed global peer-to-peer network?
While generally positive, the U.S. response has seemed at times contradictory. “In
the U.S. there is a realization from Congress to the executive branch to different
agencies including law enforcement that this technology has serious, legitimate uses,”
said Jerry Brito.
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Indeed, the Internet has shown us that, by temperament and
institutional design, the United States not only tolerates but welcomes innovations that
push the boundaries. It also fences off innovation through regulations—some of
which may be misguided and are almost certainly premature.
The risks of regulating prematurely—before firmly grasping the implications—
can have profound consequences. During Victorian era England, so-called self-driving
locomotives (i.e., automobiles) were mandated by law to be accompanied by a man
walking in front waving a red flag to alert bystanders and horses of the coming arrival
of this strange contraption. Steve Beauregard, CEO of GoCoin, a leading company in
the industry, described the pitfalls of regulating too soon: “When Web pages were
first going up, regulators were trying to determine what regulatory regime they should
belong under. One idea surfaced requiring people who built and hosted Web sites to
get a citizen’s band radio license because you’re broadcasting. Can you imagine
having to have a CB radio license so you could put a Web site up?”
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Thankfully, this
never came to pass.
Let’s be clear: regulation differs from governance. Regulation is about laws
designed to control behavior. Governance is about stewardship, collaboration, and
incentives to act on common interests. But experience suggests governments should
approach regulating technologies cautiously, acting as a collaborative peer to other
sectors of society, rather than as the heavy hand of the law. They must participate as
players in a bottom-up governance ecosystem rather than as enforcers of a top-down
regime of control.
Brito of Coin Center argued there is a role for governments, but they should
exercise caution. He advocates for a multistakeholder solution, which starts with
education: “briefing folks in Congress, at the agencies, in the media, and answering
any of their questions or putting them in touch with the people who can intelligently
answer their questions.”
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