Why technology assurances are a must for crafting EU crypto regulation
When Malta set out to provide a regulatory framework for the cryptocurrency sector, policymakers and advisers recognized how blockchain, distributed ledger technology and smart contracts, as well as related technologies, imposed new challenges to providing consumer protection and to fitting within existing legal structures.
Immutability of data — and subsequently code, or rather smart contracts — is a desirable feature to provide guarantees to users that data (and smart contracts) cannot be tampered with. However, this also poses a critical challenge: Often, it is impossible, or infeasible, to change code once it has been written to such a distributed ledger. This potentially means that code can be deployed that ends up managing millions to billions of dollars worth of funds, and if a bug is found, it may be impossible to update the code to get rid of it.
Joshua Ellul is the inaugural chairperson of the Malta Digital Innovation Authority. The MDIA provides a regulatory framework for instilling higher levels of technology assurances into innovative technology arrangements including blockchain, DLT and smart contracts. Ellul is also director of the Centre for Distributed Ledger Technologies at the University of Malta, which runs a multidisciplinary master’s program in blockchain and DLT.
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