Jhe cliché is that the only inevitable things in life are death and taxes. We can probably add new technologies to the list as well. Artificial intelligence (AI), the metaverse, self-driving vehicles, flying cars – they’re all coming.
Lawmakers, if they want to be on top of a paradigm shift, must approach technology regulation in a thoughtful, insightful, and comprehensive way. But reaching consensus in our state houses is difficult, and finding common ground in Washington, DC, is virtually impossible.
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Worse still, a blanket approach to tech policy usually only happens after a crisis has forced the hand of lawmakers and the media is everywhere, which only increases the risk that the law will be hasty or wrong. designed.
While new regulatory frameworks will be needed in some areas of Web3 – the blockchain-driven version of the internet – there are other areas where innovators and investors can drive the ball forward based on existing laws and regulations, while simplifying the task. for decision makers.
So let’s talk about technological neutrality.
By “technology neutrality” in the context of Web3 and technological innovation, we mean this: if the new technology enables activities that are mostly the same as existing activities, assume that the law addresses both activities in the same way.
In other words, to the extent possible, the law should be technology-neutral and any variation in legal treatment should arise from (and be responsive to) significant variations in business or associated risk. to technology.
US President Joseph Biden’s recent executive order on crypto, while leaving a lot of things up in the air, gives an implicit nod to this approach by stating “same company, same risks, same rules”. The crypto community will probably hate the approach taken by the Securities and Exchange Commission (SEC), but at least it’s now in a context we can all relate to.
See also: As Federal Agencies Organize, US States Continue to Dominate Digital Asset Regulation | Opinion
In Web3 and crypto, regulators and innovators have sometimes backtracked. For example, amidst the initial coin offering (ICO) boom; an SEC chairman once said that every ICO token he saw was a security. This suggests that while the digital tokens on distributed ledgers are infinitely variable and can represent anything from book club points to company stock, the legal risks in Web3 stem from the technology rather than what what lawyers call substantial activity.
According to this paradigm, tokens on distributed ledgers were/are “high risk”. However, that hardly makes sense. This kind of thinking is undoubtedly part of the failure of the United States to effectively regulate crypto today and – if we don’t learn from it – Web3 in the future.
Seeking a unified regulatory regime to oversee “distributed ledgers” — a general-purpose technology with widely varying uses — is like seeking a unified regulatory regime for spreadsheet uses.
Rather than start with technology as a silo function, let’s start with how people actually use technology (their background activities) and the presumption that blockchain technology is irrelevant.
What is the business? What rights are created between the parties? How are these rights communicated from seller to buyer? What are the risks associated with the business?
If we start with these questions, we generally find that there is relevant precedent in existing laws, regulations or case law. And more importantly, if innovators, investors, and regulators can use this as a common starting point, we could take some important steps.
First, technology innovators and investors should have a common framework for assessing the risks associated with cutting-edge companies. A vague feeling that Web3 businesses are “risky” can be replaced with focused questions and answers. What existing businesses is this most like? How are these companies regulated? How is this company different from these companies? Which of these differences are legally significant and what are you doing to address the associated risks? What really affects ordinary people and how?
Second, the task of decision-makers can be simplified. With technology as broad as Web3 and crypto, asking a regulator for clarification on Web3 and crypto is understandably daunting. The internet is a wide technology, and the regulations will of course change depending on whether you are discussing e-commerce or social media, consumer protection or data privacy, etc.
If our starting point of technology neutrality can give us good answers on most problems associated with a particular Web3 activity, then we can rely on decision makers for a smaller subset of truly novel problems.
See also: Dragonfly’s Haseeb Qureshi is still optimistic in the crypto winter | The knot
There will inevitably be areas where comprehensive regulation and legislation is needed – and industry should not shy away from championing this. But there will also be vast swathes of Web3 and crypto that are simply new ways of doing the same old things. Not everything is revolutionary. And where that is, let’s look at the clarity that exists under the law.
In other words, if the government’s failure to properly understand and regulate Web2 has taught us anything, it’s that we need to make it easier for them. Even if we do, they can still drop the ball. Or their politics may cause them to favor entrenched interests, regardless of the impact of a particular Web3 business.
Protecting consumers, protecting businesses from fraud is what matters. Do not make value judgments about the merits of one technology over another.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.