EU plans for blockchain 'observatory' raise concerns, says expert

€500,000 to improve expertise and regulatory capacity


The European Commission plans to set up an observatory and forum on blockchain and distributer ledger technology (DLT) to help it understand what role public authorities should play in developing and helping uptake of the technologies.

The plans raise concerns over the role that the Commission expects to play, said technology law expert Luke Scanlon of Pinsent Masons, the law firm behind Out-Law.com.

Blockchain is best known for underpinning trading involving the digital currency bitcoin, but it has many other potential uses. Broadly it is a shared digital ledger for recording information, such as the transfer of assets between two or more parties.

The European Parliament has told the Commission to set up a pilot project to build up technical expertise and regulatory capacity, the Commission said. The Commission therefore plans to launch a call for tender for a service contract to set up the observatory and forum, which will gather opinions and concerns around the use of blockchain and DLT.

The estimated budget for the project is €500,000 over two years.

"The purpose will be to inform and assist the European Commission in understanding what role, if any, European public authorities should play to encourage the development and uptake of these technologies and to formulate related policy recommendations," it said.

The observatory will create a platform for the European blockchain community and provide up-to-date information on relevant initiatives around the world as well as development of the technology and related opportunities and challenges, the Commission said.

It will also develop expertise on infrastructure, governance and validation mechanisms, contracts, regulatory and legal challenges, interoperability and standards, and will explore possible use cases within the EU, the Commission said.

"My concern is the tender approach and 'building up expertise'," said Scanlon. "If the Commission is to play a useful role, it need not build up 'observatory expertise' but ought to follow the approach taken by the UK financial services regulators and focus on sandboxing technologies in order to understand how they will apply in different contexts. If the European Commission were to take this approach, it would develop skills at a greater pace than if it takes a tender for an expert supplier services approach."

Copyright © 2016, Out-Law.com

Out-Law.com is part of international law firm Pinsent Masons.

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