This op-ed appeared on 2 June 2020 on CityAM, a British newspaper, and was written by @Nathan_Kaiser, Chairperson, and @Hinrich Pfeifer, General Secretary of the Cardano Foundation. Artwork by @ADAtainment.
Legislation is one key to adoption through use cases of blockchain—be it in emerging markets or developed nations. Robust regulatory environments and innovation-friendly political landscapes that foster technological advancements are vital to shaping technology-driven growth.
Since the concept of blockchain was introduced in 1991, our perception of the technology has shifted and our collective understanding continues to change as we head towards a blockchain-enabled era of the future. For this to materialise on a full scale, we need laws that support ever-changing disruptive growth.
Armed with a mission to shape legislation, the Cardano Foundation is involved in leading global industry bodies to design legislative drafts and discuss their implementation with regulators. And, not without a healthy dose of interesting debates on overregulating the sector!
Transparent policies, assessing existing laws and regulations, and passing new legislation are pillars of shaping blockchain-friendly economies. The Cardano Foundation is working with regional and national governments and regulators to shape legislative norms with a view to increase accountability by all parties.
Blockchain – as an industry and technology – will hopefully afford jurisdictions to diversify their economies and help increase their innovation attractiveness. Solid and functioning legislative frameworks, in turn, will drive the adoption of blockchain-based use cases, improve the investment climate, create jobs and ensure long-term economic growth.
Shaping legislative norms and frameworks proactively will provide impetus for further development of various cutting-edge technologies. To this extent, it is with pride that the Cardano Foundation is driving the conversation with regulators on both sides of the Atlantic. Outdated laws often prevent scientific progress and risk to push technology firms into innovation-friendly jurisdictions.
As such, the Switzerland-headquartered Cardano Foundation helps law-making bodies and policymakers in Africa, Americas, Asia and Europe, together with its allies from leading industry associations. The custodian of Cardano, a proof of stake blockchain, already supports various initiatives focusing on governance, implementation, fintech conduct, smart contract frameworks and education.
More specifically, the Cardano Foundation is an active member of the Washington-based Proof of Stake Alliance (POSA), which in February sent the U.S. Securities and Exchange Commission (SEC) a set of recommendations in a white paper outlining that stake networks provide infrastructure services rather than financial products. American policymakers are keen to foster blockchain developments and see the staking industry grow – and better understand the differences between proof of work and proof of stake.
Staking taxation is one particular matter that we are pushing with our POSA allies. Last year alone, meetings with the Department of Treasury, Internal Revenue Service, Office of Tax Policy and key decision-makers were held in the U.S. capital. Scheduled one-hour meetings lasted three hours – a sign of healthy interest in the taxation principles issue.
On the other side of the Atlantic, the Cardano Foundation is working with the International Association of Trusted Blockchain Applications (INATBA), close to the European Commission, to bring together developers and distributed ledger technology projects with regulators and policymakers to future-proof blockchain.
Manmeet Singh, Vice Chairperson of the Cardano Foundation, is one of the founding members of Blockchain for Europe (BC4EU), a Brussels-based organisation, that is helping the European Union’s decision-makers to make blockchain a success.
Earlier this year, the Cardano Foundation together with the fellow BC4EU members submitted a proposal for a regulation on the EU’s framework for crypto assets. A harmonised approach at the EU level will bring much-needed legal clarity for the blockchain industry and its users given the Union’s financial services regulations do not explicitly cover crypto assets. Thus, any classification of crypto assets should be technology-neutral and based on their functions and features. This is a first step of its kind to have a common approach on crypto assets.
Blockchain technology will likely play a vital role in the European Union’s economy and the cutting-edge technology’s importance is bound to increase with more legislative recognition. With the ongoing uncertain economic standing due to the pandemic, effective policies are necessary to power and stimulate national economies.
The Cardano Foundation’s mandate to shape legislation also includes drafting policies around anti-money laundering, market integrity, tax treatments and legislation together with Global Digital Finance (GDF), a London-based industry body.
Specifically in the financial services sector, the Cardano Foundation, together with the Algorithmic Contract Types Unified Standards (ACTUS), is creating a standard framework for smart contracts in finance.
As the global economy will start to recover from Covid-19’s consequences, we hope for blockchain to become an empowerment vehicle for small, medium and large enterprises alike amid a maturing blockchain industry. This will exponentially increase the necessity but also the political will to develop robust blockchain legislation.
This will likely lead to many jurisdictions revising their innovation attractiveness. In turn, many countries will commence assessing their existing legal frameworks to accommodate cutting edge technologies and never-ending disruption. Last year, the Cardano Foundation began laying the groundwork to be at the forefront of shaping blockchain-enabled sustainable growth in Africa by advising on building governance policies. Robust legislation will help the region’s countries to boost their fintech efforts and increase their attractiveness.
However, the adoption of viable blockchain use cases not only requires legislative support, but openness from current industry leaders, as well as increased education, awareness and collaboration amongst key stakeholders.
It is key to work with policymakers, regulators and politicians to increase our collective success and ensure widespread adoption. The Cardano Foundation supports the entire industry and this revolutionary technology. Our mission then is to help blockchain reach its full potential as demand for blockchain-enabled solutions continues to grow.
While ambitious yet not impossible to achieve, the Cardano Foundation hopes to help, together with its partners and competitors alike, blaze a trail through setting legal frameworks, standards, and policies for the blockchain industry. National parliaments just began talking about blockchain legislation, which will take years, but that in itself is a significant milestone.
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