The Federal Financial Supervisory Authority, also known as BaFin, has expressed its „perspectives“ on the challenges for a possible regulation around the blockchain technology.
Blockchain, Bitcoin and regulation – a trio that still hasn’t become quite warm with each other. While the US Securities and Exchange Commission (SEC) is currently primarily concerned with the possible introduction of Bitcoin ETFs, the authorities in Germany are also concerned. In its annual report published on August 1, BaFin commented on the challenges of a possible regulation of block-chain technology and its manifestations. Relationship status: It is complicated.
Blockchain offers challenges and opportunities
One of the core properties of blockchain technology is therefore both a great opportunity and a challenge. Satoshi Nakamoto already made this strong case for Bitcoin in his white paper: The lack of intermediaries, i.e. mediating instances. This is how BaFin writes:
„One of the core questions of sustainable business is how to establish trust between unknowns in order to facilitate transactions. So far, intermediaries such as banks and central securities depositories have made this possible, but their role has led to higher transaction costs and less efficient markets. Block-chain technology can help to minimize the necessary trust and thus the transaction costs between the parties involved in the transaction, for example by reducing their dependence on intermediaries.
Because the question that follows is this: How can we regulate something that does not have any responsible parties? Another problem that BaFin sees is a point that is often celebrated as an advantage, especially among Bitcoin and cryptenthusiasts: Their unchangeability. To this end, the BaFin continues:
„For example, it is still questionable how existing requirements, such as the European Data Protection Basic Regulation (DSGVO) and the „right to be forgotten“ contained therein, could be fully implemented with the currently known procedures using blockchain technology.
BaFin stresses the revolutionary potential of the blockchain
Nevertheless, BaFin highlights the revolutionary potential of the technology that has made Bitcoin so well known. According to this, it has great innovative power across all industries and the potential to influence the financial industry in many ways. Ultimately, however, the technology still has to struggle with start-up difficulties, which should „call for caution“.
After all, BaFin’s report addresses a topic that is of particular concern to authorities around the world. Cryptotokens, payment tokens, virtual currencies, securities-like tokens, utility tokens and above all: your distinction. This is done in the German bureaucratic manner as a delicate basis for future regulatory approaches. (The details should be spared to our readers at this point. Those who want to check the distinguishing features themselves can do so in the entire report here on pages 54 – 65.)