Throughout this report we have observed the central but ambivalent role played by public actors in the construction of blockchain. We have seen how knowledge regarding cryptography, distributed systems, and, more generally, the architecture of the internet, is fundamentally structured by the relationships between governments, companies, and universities. We have observed how issues such as the security, privacy, auditability, storage, and ownership of information have frequently been problematised in the interest of maintaining independence from governments. The explicit intention of the Bitcoin project -- to do away with all forms of trusted third parties (financial and governmental institutions and centralised servers) in the context of electronic financial transactions -- follows a similar logic.
The Bitcoin project is entirely non-governmental in nature; it is an autonomous project with no centralised management and is conceptually uncontrollable. To illustrate this situation, we examined how Wikileaks used Bitcoin to counter the global financial blockade it found itself subjected to. More generally, we observed how the Bitcoin protocol was quickly integrated for use in global trade and finance. Although Bitcoin is not associated with any particular legal entity, it cannot avoid national regulations altogether. The desire of governments and companies to regulate Bitcoin and its derivatives and to control how they are used has given rise to some innovative normatives strategies.
We have seen how the financial involvement of major industrial and financial actors in Bitcoin's technical structure -- its blockchain -- has largely determined the ways in which it has evolved in terms of functionality, terminology, and outlook. Major industrial players have adapted blockchain to suit their own operational constraints and have created systems to address problems associated with permissions -- in other words, how transactions are validated. The introduction of the distributed ledger concept made it possible to distinguish between different types of blockchain, such as public and consortium. We saw how this concept was quickly adopted by governments and other international institutions (see the governmental report titled Distributed Ledger Technology: Beyond Blockchain). The introduction of distributed ledgers has objectified and subsumed blockchain.
For their part, governments around the world are still seeking the perfect formula to approach the regulation and governance of the sector. These most often involve the implementation of measures to prevent certain uses of cryptocurrencies within national territories. The very design of blockchains can also be regulated through technical standardisation and the establishment of international legal frameworks. In order to gain a better understanding of blockchain technology, governments have also used case studies and experimental frameworks to test services and applications before putting legislation in place. An example of this is the usage of a regulatory sandbox. Some state actors have attempted to create their own infrastructure, which can then be adapted to their regulatory frameworks, such as the European Blockchain Services Infrastructure. No longer able to ignore the systemic transformations cryptocurrencies are engendering, countries like Russia, Iran, the UK, and China are assessing the possibility of creating their own national cryptocurrencies using blockchain technology.
Thus, the willingness of states to regulate the blockchain must be examined. We have noted that, in both concrete and conceptual terms, blockchain technology has created new situations that have called the prerogatives of national governments into question. As an illustration of this situation, we have seen how the technical ability to hold and transfer value through cryptocurrencies can go beyond the framework of national legal systems when the financial institutions of the countries in question find themselves in difficulty, as in Venezuela in 2019. Using domain-name management as an example, we have also seen how certain responsibilities can be transferred to the global community through distributed systems. Lastly, we noted that blockchain has posed profound questions about the conventional systems used by governments to manage identities. These examples demonstrate the ways in which blockchain technology and distributed systems are propelling certain activities beyond national and international jurisdiction. Some of these activities affect the global community and are out of step with legal systems designed and conceived at the level of sovereign states.
Since these states are unable to regulate activities at the global level, the regulation of blockchains must be looked at through the prism of new regulatory regimes. Embodied in global law and soft law, these regimes seek to create the conditions to regulate global phenomena, such as environmental risks. In the context of blockchain, this global, non-sovereign law is conceptualised through what we would term the private and advisory dimensions of standardisation. In other words, it is implemented through the development of technical standards such as ISO, or through the formulation of codes of conduct, charters and other advisory approaches. States are key players in establishing the normative architecture in this domain, but they do not pass laws in a vacuum; a whole series of private actors and non-governmental bodies are also involved.
The intention of this normalisation regime is to define a framework of constraints designed to regulate the use of blockchain technology, in order to guide behaviours in directions assumed to be the most correct. However, because they do not fall under the purview of national legislative bodies, these rules lack the legitimacy that would be conferred on them by democratic institutions. Within these new contexts, no single institution is capable of determining whether a particular decision safeguards the general interest. Nor can it determine, what constitutes fair behaviour, or who is to be responsible for taking decisions that will necessarily have an impact on society. As a last resort, some of those involved in this field have looked to the disciplines of ethics and morality to inspire new standardisation systems. Theories surrounding global administrative law raise questions regarding equity and justice in decision-making processes in order to attempt to make global legislators more accountable.
Blockchain was designed to bring about and manage activities which go beyond national government jurisdiction. These new, unlegislated activities can catch some actors by surprise, leaving them stunned and baffled, unable to respond to the change. We noted that governments are merely able to react to these situations by noting the effects of new services after the fact and attempting to contain those effects that seem to them to be detrimental. If we agree that the role of government is to act in the general interest within the public arena, the question then arises as to how it can continue in this role given the unprecedented social upheaval created by blockchain -- and by digital and IT services more generally. How can governments not only anticipate, but also become involved in, the design and execution of these new activities?
Among the institutional instruments we have looked at in this study, the regulatory sandboxes produced by the financial sector appear to be the most advanced. The frameworks put in place by financial regulators to enable private firms to test small-scale applications in controlled environments, under the watchful eye of the legislator, appear to provide the necessary conditions for legislators to revise and adapt their regulatory frameworks with flexibility. We believe it will be necessary, at the very least, to roll out these types of systems in other sectors as well. This will involve the formalisation of sandboxes to experiment with and test a variety of regulatory environments, in sectors including agriculture, hospitality, and health. Sandboxes could also be created to explore, model, prototype, and test new democratic ways of designing and drafting normative texts.
These instruments, however effective, cannot remove the need for collective reflection on the new institutional frameworks that need to be modelled. As a society, we must address this issue as a matter of urgency to guard against greed and the risks posed by disruptive elements. The challenge is to guarantee -- in a democratic and thoughtful manner -- the general interest in a public space expanded by information.