Legal and banking experts will develop a framework to regulate blockchain in New Zealand and Australia.
Led by Alex Sims, an associated professor at the University of Auckland, and kick-started by a $50,000 grant from The New Zealand Law Foundation, the panel seeks to strike a balance between lax regulation and over-regulation and will keep the interests of blockchain stakeholders – consumers, businesses, other parties – and the interests of regulators in mind.
“The danger is if you regulate too much, you won’t get the full benefits, but if you regulate too lightly, you could see problems such as money laundering,” says the Associate Professor.
Sims is joined by co-researchers Professor of Banking and Finance David Mayes from the Business School, and Dr Kanchana Kariyawasam of Australia’s Griffith University Business School.
Sims, who is head of Commercial Law at the University of Business School, says blockchain, the technology behind cryptocurrencies, has the power to transform our lives especially since it’s becoming more widely-accepted.
“We’re on the cusp of radical and disruptive change, and this poses challenges for lawmakers and regulators around the world,” says Sims. “With major companies such as Microsoft now accepting virtual currency payments, it’s feasible that blockchain technology will become ubiquitous within the next decade.”
However, the academic notes there are no regulations for cryptocurrencies in New Zealand.
“Currently, there is no law regulating cryptocurrencies in New Zealand, however people have had their bank accounts closed because their bank suspected them of dealing in cryptocurrencies,” Sims says.
Invented in 2008, blockchain is the distributed ledger technology underlying cryptocurrencies such as Bitcoin. Transactions are recorded and stored in secure “blocks” that are “chained” together using a cryptographic signature. The names of parties who make the transactions never appear on the blockchain, instead public keys are used, allowing for confidentiality.
Since blockchains are distributed across thousands of computers within the network, it is very difficult to pass off a fraudulent transaction as authentic because separate ledgers can weed out fakes and an attacker would need to compromise the majority of computers in the network to change records.
The grant for the project is the first from a new $2 million Information Law and Policy Project (ILAPP) that the Law Foundation established to develop law and policy around IT, data, information, artificial intelligence and cyber-security.
Magic Circle firm launches FinTech program
Banking and finance lawyers discuss disruption