Technological advancements are rapidly changing the global financial infrastructure, including the way in which people and companies transact online. The current rise of companies in the Financial Technology (FinTech) sector, together with new and innovative technological solutions such as artificial intelligence, cloud computing and Distributed Ledger Technologies (DLT) are quickly changing the way companies and customer interact online. Here, it is particularly the “blockchain” which has become one of the buzzwords of the new digital and financial industry.
What is a blockchain
“Blockchain” technology has become the most widely known application of Financial Technology and, according to some analysts, it has the potential to radically change the foundation of how business operates and how states manage identity schemes. A blockchain is a distributed database that maintains a continuously growing list of ordered records called blocks. Each block contains a timestamp and a link to a previous block. Once recorded, the data within a block is tamper resistant and cannot be further altered. Each time a block’s data is changed a new block is recorded, which is “chained” to the original data-block. Through this, blockchains are inherently transparent and traceable which makes them suitable for the recording of events, medical records and other records management activities, identity management, transaction processing and proving data provenance.
A need for an EU framework?
With the technology moving towards market applications, international and European legislators are increasingly considering possible regulatory measures on blockchain. In Europe, Members of the European Parliament (MEPs) have already prepared non-legislative reports on FinTech and the role of technology in the financial sector and more specifically on Virtual currencies. While MEPs believe that blockchain technology has potential transformative powers, they agree that it would be unwise to consider any potential legislative proposals until any real-life market applications are known and established.
Meanwhile, following on from a public consultation on FinTech it held earlier this year, the European Commission is currently analyzing the results and is considering taking legislative steps to regulate blockchain companies. The Commission argues that, in order for blockchains to follow in the footsteps of transformative technologies like cloud computing, regulators need to ensure that business applications are built upon a common cyber-security and infrastructure ground.
Ecommerce Europe welcomes European legislators’ recognition of the importance of FinTech for the future of the payments landscape, and stresses that regulatory initiatives should only be taken when proven necessary, in dialogue with the industry and when market self-regulation cannot provide for sufficient coverage or solutions. Potential legislation should be limited to initiatives of standardization and designed to minimize any negative future implications on online businesses and customers.