Regulating blockchain: the Israeli block in the chain
Special Counsel Roy Keidar, Yigal Arnon & Co examines the emergence of Blockchain in Israel, with the assistance of Ahuva Goldstand
Bitcoin, the first truly decentralized virtual currency, emerged onto the financial markets in 2009. Its origins and the enigmatic Satoshi Nakomoto remain shrouded in mystery. What is undeni- able, however, is that Bitcoin has garnered worldwide attention and appreciated in value to about 500 euros per bitcoin today. Reception of Bitcoin by the general public, government authorities, and financial institutions has fluctuated between indifference, confusion, and recently, growing interest, although the predominant mainstream approach is still one of skepticism. Yet even Bitcoin’s greatest critics have come to recognize and appreci- ate what many argue is Bitcoin’s key innovation: Blockchain, the underlying technology on which Bitcoin is based. This is why the recent June 2016 resolution adopted by the European Parliament, a fairly conservative institution, to take a “hands-off” approach to the regulation of the Blockchain may signal a significant about- face in the approach towards Blockchain and VCs.
The resolution sets a slightly different tone than previous official ‘risk-averse’ statements. It remarks that to address the inherent risks—such as consumer protection problems, high volatility, legal uncertainty, and black market transactions—will surely require enhanced regulatory capacity and the development of a sound legal framework. However, the vital point is made that regulation adopted too early, while the field is still in its nascency, could suppress or even abort its continued development and convey the wrong message to the public about the advantages and security of VCs. Ultimately the resolution emphasizes the potential advantages of Distributed Ledger Technology (DLT) like Blockchain, to contribute positively to citizens’ welfare. Therefore, it calls for a “proportionate” regulatory approach in order not to stifle innovation or add superfluous costs. Moreover, the resolution takes a definitive stance in recognizing the potential for Blockchain beyond Bitcoin, to accelerate, decentralize, automate and standardize data-driven processes.