The General Data Protection Regulation (GDPR) passed by the European parliament earlier this year has many blockchain firms in the UK worried, according to a study conducted by Digital Catapult, an innovation agency.
The study describes how regulatory concerns are affecting many blockchain businesses (up to 74% of them) due to their conflict with many aspects of the industry. The GDPR may even pose a bigger threat to these UK companies than technical, business or even legal issues.
The EU’s GDPR was a unified regulation for the entire tech landscape addressing data issues of EU residents. It restricts companies in use of data and allows more choice to the users when it comes to viewing and using their data. The new regulation is stalling the development of many blockchain firms as permissionless Distributed Ledger Technology (DLT) inherently has some natural roadblocks when they try to come in compliance with these laws.
According to the report:
“This legislation raised concerns for companies using permissionless, public blockchains, which are open to anyone regardless of location, and where full copies of the database are replicated across all of the nodes participating in the network, making it impossible to selectively limit where the data goes.”
Perhaps the most contentious point of the whole GDPR is the Right to Erasure. The law empowers citizens to delete their personal data at will. It is naturally in conflict with the whole approach of a permissionless DLT system where information becomes immutable once it is recorded. The immutability ensures transparency for future use.
There is also the case of increased uncertainty when it comes to raising funds through legal Initial Coin Offerings (ICOs). Although the report states that the Financial Conduct Authority (FCA) has announced to regulate the ICOs, there is a delay expected in the regulations and in the absence of clear regulations, there is a lot of uncertainty regarding future ICO projects.
Despite all these challenges, the blockchain industry is growing in the country. The report states:
“…investments rose from just over USD 50 million in Q3 of 2016, to USD 150 million by Q2 of 2018 (with ICO-related investments topping USD 100 million in Q4 of 2017 and fiat investments climbing to over USD 100 million in Q2 of 2018).”
It is yet to be seen how the Brexit will affect the future of the decentralized space, both in the short and long term.
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