Blockchain technology, and the token economy it has sprouted, has been heralded as one of the biggest advancements in our technological age. However, like with any new technology, a key factor in determining its success is how well adopted it can be.
We are starting to see adoption in the blockchain space at governmental and institutional levels, and even the interest in cryptocurrencies – some decentralized, some not – are starting to peak at a mainstream level.
However, the biggest handbrake is not the potential or interest from individuals, retailers and institutions, it is how the regulators see the disruptive space. Because there is an anarchistic edge to cryptocurrencies, as they have the potential to usurp the banking system, there is a lot of scepticism coming from regulators.
However, the view of regulators when dealing with cryptocurrencies and blockchain can also determine how much innovation we see, so they walk a fine line, and one that is essential to the future of this space.
Nudge rather than push
In a new paper by Two Israel-based academics, Hada Jabotinsky and Nassim Cohen, published to the University of Oxford Law Department blog, the argument has been made that regulations need to find a middle ground sweet spot between free for all and overbearing control.
The issue currently with new age technologies which rapidly gather steam is that as they are progressing, regulators are often left behind. This leads to a rapid clamping down from the authorities as they try and get a handle on things, and often stymied innovation.
“A nudge is ‘any aspect of the choice architecture that alters people’s behaviour in a predictable way without forbidding any options or significantly changing their economic incentives,’” the authors expressed when describing how regulators should approach the industry.
In a better space
There is no doubt that a lot of progress has happened between regulators and the cryptocurrency industry, and this has helped normalize and legitimize the space. Moreover, though, the regulations have predominantly been progressive and have aimed to cultivate innovation.
However, the real problem is the lack of regulation or the regulatory ambiguity which dogs the space. When companies try and innovate with cryptocurrency or blockchain there are no hard and fast rules to stick to, rather an interpretation of other rules to try and makes sense of it all. This often leaves companies in a grey area or shut down when they unwittingly go too far.