The PAYTECH Book

Regulation and the Future of Blockchain: Which Approach Will Succeed?

By Judie Rinearson

Partner, K&L Gates

One memorable moment at Money2020 USA in 2018 was when Sopnendu Mohanty, the influential Chief Fintech Officer of the Monetary Authority of Singapore, was asked to give one-word replies during his interview:

Moderator: Cryptocurrencies?

Mohanty: Over-rated.

Moderator: Blockchain?

Mohanty: Under-rated.

Mohanty’s comment on blockchain flies in the face of those who have argued that the blockchain has become over-hyped and cannot live up to the buzz that surrounds it. Yes, there is no question that the blockchain has been hyped, but this is still early days and the good news is that the significant opportunities presented by the blockchain or, more appropriately, distributed ledger technology (DLT), are now being realized around the world.

As a lawyer, one concern I have is the impact of premature regulation. We know that it’s not really the DLT itself that is regulated, but the applications that work on the technology. The most famous application using DLT is Bitcoin and other cryptocurrencies. From my review of global regulatory trends, there are four distinctly different regulatory approaches:

• Early and distrustful regulation. As seen in the USA, where regulators early on passed a range of anti-money laundering (AML), licensing and consumer protection laws. US law enforcement has also pursued punitive enforcement actions against DLT startups.
• Initially open but with ...