Revolutionising the existing regulatory and supervisory framework through blockchain technology

Abstract

The following analysis of the traditional functioning of our regulatory and supervisory practices currently performed on our financial markets, sets out to identify shortcomings as well as to question the use case for regulatory technology and more precisely the adoption or use of blockchain technology. The evolution from an ex-post regulatory and supervisory framework to a ex-ante type of supervision and regulation has been impossible to apply to the financial markets due to its phenomenal growth and size. Identifying the many shortcomings that taint our current regulatory and supervisory landscape will be key in our analysis. The creation of bitcoin and the thereafter following emergence of the whole cryptocurrency sector has spurred on a wave of exponential increasing innovation and attracted a lot of talent to work on blockchain technology. The phenomenal success of bitcoin and ethereum created something very similar yet to a smaller extend like the gold rush of 1848. While the sector has known an impressive growth rate, the mainstream adoption encounters many hardships among other things due to the somewhat advanced technical barrier. The blockchain technology, while being an impressive innovative technology that is not hard to use and even very easily accessible, does require a minimum of research and learning in the beginning. Understanding how the cryptographic wallets work, what your public key represents and why you should keep your private key absolutely safe are key to being able to safely use the technology. The lack of understanding these fundamentals leads to reckless behaviour that gets abused by bad faith actors. Nevertheless blockchain technology is primed to revolutionise and disrupt the current traditional regulatory and supervisory landscape, changing the regulators reality as well as their abilities to efficiently regulate the financial markets. The success of the blockchain adoption has the potential to allow for the transition towards a ex-ante regulation and supervision.