February 2, 2017 – Canadian regulators need to start preparing now for the rapidly approaching blockchain revolution, according to a new report from the C.D. Howe Institute. In “Blockchain Technology – What’s in Store for Canada’s Economy and Financial Markets?,” authors Thorsten Koeppl and Jeremy Kronick unveil the potential of blockchain technology and offer guidance to regulators on how to approach the challenges this technology entails.
“Blockchain technology has the potential to transform how a modern economy deals with maintaining and updating records, and has already created lots of turbulence in financial markets,” commented Koeppl. Kronick added: “The challenge for regulators is to balance letting markets figure out how to best use this technology while ensuring consumer safety and efficiency.”
The authors note that the potential application of this technology reaches much further than merely being a currency like bitcoin or a record-keeping system. Early applications of this technology include smart contracts and attempts by governments to build universal online identification systems. It also introduces new concepts such as cryptographic communication protocols and distributed data storage.
The authors identify the areas where blockchain has the most potential to be impactful, including financial services, retail payment transactions, large-value transfers, and private equity markets. Many elements of this new technology offer a unique opportunity for intermediaries to modernize their infrastructures and offer their clients safer and cheaper systems, they note.
To help ensure the benefits of blockchain are passed on to the economy as a whole, the authors recommend regulators focus on the following three priorities:
- Design a principle-based regulation regime that achieves high safety standards, legal certainty and a stable environment for transactions based on distributed ledger technology;
- Ensure that this technology leads to appropriate end-user cost efficiencies rather than simply a redistribution of above-normal profits among intermediaries; and
- Determine areas where government involvement is advisable, be it in the role of facilitator for a private or public distributed ledger, or as a direct central node that applies elements of the technology but retains the monopoly of managing the ledger entries.
The authors conclude: “It is crucial to achieve safe and secure applications of this new technology without stifling innovation.”
The C.D. Howe Institute is an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Widely considered to be Canada's most influential think tank, the Institute is a trusted source of essential policy intelligence, distinguished by research that is nonpartisan, evidence-based and subject to definitive expert review.
For more information contact: Thorsten Koeppl, Associate Professor and RBC Fellow, Queen’s University; Jeremy Kronick, Senior Policy Analyst, C.D. Howe Institute: 416-865-1904 or email: email@example.com.