Technology-Enabled Co-Regulation for Blockchain Implementation

Abstract

Blockchain technology has great potential to reshape the financial industry. However, the existing policy and regulatory regimes fail to provide a supportive environment for blockchain technology to fulfill its potential. In this Article, I propose technology-enabled co-regulation as a new approach to blockchain implementation, especially in the financial markets. This approach has two distinctive elements: a collaborative environment and a technology-enabled mechanism. A collaborative environment consists of regulatory and industry sandboxes in which regulators and industry representatives can experiment with novel ideas. A technology-enabled mechanism is empowered by regulatory technologies (“RegTech”) and supervisory technologies (“SupTech”) that support compliance with regulatory and reporting requirements and facilitate supervisory obligations. This technology-enabled co-regulation can help to achieve policy and regulatory goals: a fair and efficient market, financial stability, consumer and investor protection, law enforcement efficiency, and, most importantly, technology innovation. Technology-enabled co-regulation is preferable to traditional commandand-control regulation and self-regulation. Its collaborative and technological elements are also more advanced than a simple co-regulation is. To reach this conclusion, this Article conducts an impact assessment of proposed regulatory options. The impact assessment consists of five analytic steps, asking the following questions: (1) what problems have emerged from existing policies and regulations? (2) what are the objectives of the proposed regulations? (3) what are the regulatory options? (4) what are the possible impacts? (5) how do the options compare? * Dr. Jiaying Jiang, Hauser Global Fellow at New York University School of Law. I greatly appreciate comments and feedback from faculty members and fellows at the NYU Hauser Program, NYU Information Law Institute, and Privacy Law Group. I also thank participants of the 2021 National Business Law Scholars Conference for their great questions and comments that shaped this project. Last but not least, I thank the editors of the Pittsburgh Law Review, especially Jean Yesudas, Jacob Dougherty, and Erin Napoleon, for reviewing and editing this piece. U N I V E R S I T Y O F P I T T S B U R G H L A W R E V I E W P A G E | 8 3 0 | V O L . 8 3 | 2 0 2 2 ISSN 0041-9915 (print) 1942-8405 (online) ● DOI 10.5195/lawreview.2022.876 http://lawreview.law.pitt.edu Table of