The state-level regulatory environment for blockchain (not crypto) and some suggestions for where state and local government blockchain opportunities exist

1. DR. JOSEPH WILLIAMS
@RHUDAUR #WABLOCKCHAIN
April 2018
REGULATORY
ENVIRONMENT AND
GOVERNMENT
OPPORTUNITIES FOR
BLOCKCHAIN

2. LET’S GET PERSPECTIVE
• Crypto versus Blockchain
• The public interest
• Government motivation
• Weird intragovernmental environments
• The courts
• Businesses and the Uniform Commercial Code

3. PART ONE: BLOCKCHAIN’S
REGULATORY ENVIRONMENT
• Is it the wild, wild west?
• Existing legal frameworks versus new frameworks
• Blockchain and smart contracts
• Blockchain and rules of evidence
• Federal regulations
• Identity
• Transparency vs. Privacy vs. Right to be Forgotten

4. WHAT GOVERNMENTS BRING TO
THE BLOCKCHAIN TABLE
• Markets need confidence in the regulatory framework for
blockchain
• Governments can signal to the market and to the public that
there is confidence in the technology
• Legislatures and regulators can remove impediments and
uncertainty in current law regarding blockchain
• Legislatures and regulators can make laws and rules that enable
blockchain

5. WHAT KEEPS REGULATORS UP AT
NIGHT
• Unknown risks
• Anything that supports the dark web or leads to fraud
• Money laundering and child porn in a blockchain
• Inability to reverse (cure) a transaction if mistakes were made
• How to measure economic activity in a blockchain world
• How to tax what should be taxed
• Particularly in hydro-rich and environment-friendly Washington, the
energy footprint of blockchain mining

6. PHILOSOPHICAL CONCERN
• No individual or entity must necessarily “control”’ a
blockchain (NIST)
• A foundation in legal and regulatory theory is that,
absent force majeure, someone can be held
accountable
• Blockchain challenges some key government
operating principles

7. WHAT REGULATORS WANT TO SEE
• Positive engagement
• Standards
• Governments tend to want to study new things – hence the
explosion in task forces / workgroups to examine blockchain –
PARTICIPATE
• Safeguards against collusion
• Assurances about security

8. ANGST AMONGST THE MORE
INFORMED REGULATORS FROM…
• Trust models
• Identity models, particularly where users can have multiple
private keys or where multiple blockchain addresses can be
derived from a single public key
• Pointers and references in the chain to assets that are off-chain
• Lost keys
• Lightning Networks
• Compliance and auditing

9. THINGS THAT GENERALLY DO NOT
WORRY REGULATORS
• Size of a block
• Speeds of transaction
• Economic incentives for miners
• Proof of work vs. proof of stake

10. POLICY ISSUES THAT NEED
ATTENTION SOON
• Jurisdiction for blockchain transactions
• Implied service levels / warranties
• Liability, particularly for malfunctioning services
• Data Privacy
• Legal framework for blockchain-stored data as evidence
• Will a jurisdiction pronounce that, prima facie, blockchains are immutable
and tamper-proof?
• Enforceability / performance

11. PART 2: HOW WILL STATES EVALUATE
BLOCKCHAIN FOR THEIR OWN USE?
• Is blockchain, as a technology, a good fit?
• Will citizens accept this technology?
• Can blockchain improve agency efficiency?
• Can blockchain improve service effectiveness?
• Can blockchain improve citizen relationships with government?

12. STATE GOVERNMENT & BLOCKCHAIN
OPPORTUNITIES
• Citizen services (voting, reporting, registration, etc.)
• Enabler for Smart City initiatives
• Regulatory compliance (reporting and enforcement)
• Identity management (birth registration, etc.)
• Contract management
• Provider registry (Medicaid, housing, etc.)
• Performance management of vendors, service providers, etc.
• Tools to enable regulators to audit and report on blockchain
• Interstate information exchange (public health, etc.)

13. REGULATORY OPPORTUNITIES IN
BLOCKCHAIN
• Legal frameworks
• Digital identity
• Signatures, records, and contracts secured through blockchain
technology to be officially recognized as having the same legal
status as other signatures, records, and contracts
• Multi-state or national policies

14. Q&A
Contact information
Joseph.williams@commerce.wa.gov