During its plenary meeting of 3 October 2018, the European Parliament voted in favour of a resolution entitled "European Parliament resolution on distributed ledger technologies and blockchains: building trust with disintermediation", presented by the committee in charge of industry, research and energy (ITRE).
This resolution follows on from the debate organised during the plenary session of 1 October 2018 on a question sent in by the ITRE committee to the European Commission on 31 August 20181. Andrus Ansip, Estonian commissioner in charge of the single digital market, responded in-session to the questions put to him by MEPs2, specifying that the European Commission was still working on the topic and that it covered the challenges of legal protection and competitiveness related to the use of DLT. For their part, the MEPs insisted on the need to guarantee the principle of technological neutrality, and to ensure the definition of rules guaranteeing the implementation, within the Union, of fair competition between the sector's main players.
Acting as a strong signal to ensure the European Parliament plays a key role in creating an appropriate regulatory framework on DLT, this resolution offers a balanced analysis of what this technology can contribute and the related regulatory challenges.
The contributions of DLT: reducing intermediation costs and trust driver
Borne by Eva Kaili3, this resolution highlights the various usages and contributions of DLT in the fields of finance (improving transparency, reducing transaction costs, rationalisation of processes), energy (e.g. for the production, distribution and consumption of energy), healthcare (e.g. for the traceability and distribution of drugs or for the management of healthcare data and its use by insurance companies), education (e.g. to authenticate university qualifications or manage credits), and creative industries (e.g. for the management of copyright or patents).
The resolution highlights that the usage of DLT also increases efficiency in the public sector (e.g. digitalisation and decentralised management of public ledgers, land registry, licensing and citizen certification, etc.).
As regards financing, the resolution highlights the opportunities that may also be offered by Initial Coin Offerings (also known as ICOs) as alternative and complementary financing opportunities alongside traditional financing methods. In this regard, the text of the European Parliament stresses that "lack of clarity with regard to the legal framework applicable to ICOs can negatively affect their potential; [and] that legal certainty can be instrumental in increasing investor and consumer protection […]".
Although blockchain technology can help reduce the costs of intermediation, increase transparency and ensure the traceability of transactions, it also poses a certain number of structuring regulatory questions.
"Right to oblivion", jurisdictional powers: how to ensure compliance with EU rules?
The resolution prepared by the ITRE committee highlights several issues pertaining to DLTs, in particular as regards the protection of personal data4. For instance, how can we ensure the "right to oblivion" in a mechanism whose constitutive parts rely on the irreversibility and immutability of data in a blockchain? The European Parliament's resolution also raises issues of legal territoriality and jurisdictional powers in the context of decentralised technology.
A call for a balanced regulatory approach to make the European Union a leader of DLT
The European Parliament's position is part of a broader regulatory consideration about regulating distributed ledgers, initiated by the European Commission with, in particular, the implementation in February 2018 of the EU Blockchain Observatory and Forum, and the publication in March 2018 of an action plan for FinTechs and the creation of the EU FinTech Lab5.
The resolution stresses that "any regulatory approach toward DLT should be innovation-friendly [and] be guided by the principles of technology neutrality and business-model neutrality". The regulatory challenge is therefore threefold: it is important to create a securing regulatory environment for European "users", which must be neither an obstacle to innovation, nor a hindrance to the development of the single market, in particular as regards financing.
The regulatory response must therefore necessarily be innovative and completely new as regards the specificities and potential of blockchain technology. It must also concentrate on framing the concrete usages of DLTs, rather than on regulating the underlying technology that is inherently changing and forces creativity as regards legal standardisation. The regulatory dynamic in which the European institutions are now involved must increasingly draw on technical and legal expertise to reach a suitable, securing and growth-boosting framework for the single market. Consequently, it is of primary importance for industry players to get involved in these debates and this is precisely the reason why Gide 255 has developed its new offer.
Gide 255 supports its clients in their regulatory review and strategic initiatives in the digital field. Drawing on its multidisciplinary experience, the Gide 255 team works with its clients on the legal structuring of their activities and the changing rules that will apply to this booming economic sector. To find out more: gide255.com
1 Questions for oral answer to the Commission. Eva Kaili, on behalf of the Committee on Industry, Research and Energy. 31 August 2018. "1. How is the Commission planning to provide the environment of legal certainty that is needed to boost DLTs and blockchains in Europe? " and "2. What initiatives will the Commission undertake to create a competitive blockchain ecosystem in the EU?"
2 Members of the European Parliament (MEP).
3 Greek parliamentary, member of the S&D group.
4 EU regulation 2016/679, or GDPR (General Data Protection Regulation).
5 The EU FinTech Lab was put in place following the European Commission's publication of its FinTech action plan in March 2018. This initiative aims to bring together European providers of DLT technologies, as well as regulators/supervisors in order to better grasp the regulatory challenges related to this technological development. The EU FinTech Lab met for the first time on 20 June 2018 under the aegis of DG CONNECT (Directorate- General for Communications Networks, Content and Technology) and DG FISMA (Directorate-General for Financial Stability, Financial Services and Capital Markets Union).