Despite a meteoric rise in both the public interest and popularity of both cryptocurrencies and blockchain technology in recent years, there is a very limited understanding on both how this technology works and its broader societal impact.

Most importantly, as evidenced by the discussion held on October 11, 2018 at the U.S. Senate Banking Committee’s Hearing on “Exploring the Cryptocurrency and Blockchain Ecosystem”, this lack of understanding extends to regulators, policy makers, and politicians. As U.S. Senator Mike Crapo (Chairman of the Committee) mentioned in his remarks: ‘in order to move forward in a productive way and give these innovations the room to flourish and develop in a safe and sound way, we need to sort through the static and better understand what exactly are the opportunities and challenges facing this ecosystem.’

This Policy Analysis Exercise is precisely a response to the above comment. It begins by explaining what distributed ledger technology is, continues by introducing a framework that describes the main regulatory challenges, and concludes by presenting a series of high-level guidelines for regulators to follow if they wish to accomplish the dual goal of protecting consumers while enhancing blockchain-based innovation.

Lastly, a recommendation for the creation of a new corporate vehicle known as the E-Corporation is made as a way to provide clarity for innovators on how best to structure their blockchain-based startups so that they: (1) operate within the confinement of the law, (2) preemptively address several of the challenges that come with distributed ledger technology, and (3) give consumers and users increased confidence and trust moving forward.

Article by

Rico Garcia Ondarza