The European Parliament has published a non-binding resolution on distributed ledger technologies and blockchains (blockchain technologies).
What is distributed ledger technology?
Best known as the technology behind bitcoin and other crypto-currencies, distributed ledger technology is, in its simplest form, a ledger of digital information maintained in decentralised form across a large network of computers. The information making up the ledger is secured using cryptography and can be accessed using keys and cryptographic signatures. Cyber-attacks are considered to have less impact on such technologies as they need to successfully target many decentralised ledgers.
Positive applications of blockchain technologies
The resolution highlights the potentially positive applications of blockchain technologies across numerous industries and sectors including:
- Transforming the energy markets by allowing households to produce environmentally friendly energy and exchange it on a peer-to-peer basis;
- Improving the efficiency of the healthcare sector through electronic health data interoperability;
- Improving supply chains by facilitating the forwarding and monitoring of the origin of goods and their ingredients or components, and improving transparency, visibility and compliance checking;
- Enabling the tracking and management of intellectual property and facilitating copyright and patent protection;
- Improving transparency and reducing transaction costs and hidden costs in the financial sector by better managing and streamlining processes; and
- The potential of initial coin offerings as an alternative investment instrument in funding SMEs and innovative start-ups.
The European Parliament favours an innovation-friendly regulatory approach towards blockchain technologies and considers that the EU should not regulate blockchain technologies per se, but should try to remove existing barriers to implementing blockchains. In terms of standard-setting, the European Parliament favours a global approach so that innovative companies are not regulated out of the EU. However, the resolution also stresses that it is of the upmost importance that blockchain technologies are compliant with EU legislation on data protection, notably the General Data Protection Regulation. The resolution notes in particular that the ‘right to be forgotten’ is not easily applicable in relation to such technologies.
Although the resolution is generally positive in relation to the future development and potential applications of blockchain technologies, Parliament states that the risks and problems associated with the technology are not yet fully understood. It makes specific reference to the volatility and uncertainty surrounding cryptocurrencies and calls on the European Commission to identify dangers for the public. It also calls on the commission to closely monitor technological developments, such as quantum computing, which is often cited as a potential threat to the security of blockchain technologies (due to the increased possibility of a simultaneous attack on decentralised ledgers).
Increased awareness and understanding needed
The European Parliament recognises that, for blockchain technologies to be trusted, general awareness and understanding of the technology needs to be improved through targeted training and education. The resolution states that the EU has an excellent opportunity to become the global leader in the field of blockchain technologies, but the European Parliament urges the commission and member states to develop and pursue training strategies that can ensure Europe’s active and inclusive participation in the paradigm shift.
The resolution does not have any legally binding effect and the commission is not required to provide a formal response. However, resolutions are generally used by the European Parliament to express a political desire to act and it may influence the commission’s approach to the regulation of blockchain technologies going forward.