9 minute read
A decade since the launch of Bitcoin, blockchain technologies and cryptocurrency have had some profound impact across many countries – reshaping the way societies, businesses and organisations operate.
To explore the range of this impact in the future, a panel of leading experts from The Australian National University (ANU) weighed in on the topic in a recent panel discussion.
The event, jointly hosted by the ANU College of Business and Economics (CBE), the ANU College of Engineering and Computer Science (CECS) and the ANU College of Law (CoL), explored the opportunities and challenges of blockchain technology and digital currencies for industry, investors, regulators and policy makers.
Dr Priya Dev from CBE asserted how blockchain technology could save capitalism in the digital age. Dr Philippa Ryan from CoL provided a comprehensive overview of the legal layers concerning cryptocurrency. John Powers from CECS spoke of cyber security and contended that we are not going to witness widespread use of cryptocurrency by transnational terrorists.
A collusion resistant system
With experience as a lecturer, researcher and co-founder of a financial technology start-up, Dev kicked off the discussion with her dual perspective from academia and industry.
"Blockchain is about more than money. [It] represents decentralised governance that could save capitalism in the digital age,” said Dev, particularly with respect to restoring private data ownership rights for citizens of the internet.
We do not treat our data like our own property...blockchain could restore digital ownership.
“Capitalism is a belief system based on principles such as [an individual’s] right to own property. If you look at private property ownership in the digital age, it extends to the data we generate online through various platforms. We do not treat our data like our own property but give it away freely to tech companies who monetise it. Blockchain could play a role in restoring this ownership,” she emphasised.
In addition to using blockchain to address the issues of data ownership, Dev contended that the technology could facilitate healthier financial markets by safeguarding against information asymmetries and opaque banking practices. To describe the core innovation behind the first blockchain (Bitcoin), Dev explained the concept of decentralised governance by comparing a blockchain to a bank.
“Consider a blockchain and a bank, where the only thing these two entities do is process transactions. In the case of a blockchain, it is politically decentralised because nobody is in charge, whereas the bank is politically centralised because a few people are in charge. Both can follow a common set of programmable rules to process transactions, but a blockchain’s decentralised governance method enforces those rules publically so those rules are difficult to break, whereas a bank enforces those rules privately, so it is subject to intermittent audits. The Royal Commission demonstrated how banks broke rules but passed audits. This is unlikely to occur with a decentralised system. Hence, blockchain is said to create a collusion resilient set-up,” she said, so it could be used in the future to solve the problem of broken rules, overlooked by audits.
How to regulate cryptocurrency?
At the event, Ryan classified the legalities of cryptocurrency into three basic layers. At a base level, she laid out the legal expectations of cryptocurrency.
“With cryptocurrency, it’s really important to have the expectation that you’ll only be able to use it where it is accepted, such as the way we use Australian Dollars and frequent flyer points. It has similarities to most currencies but as an asset, it is more problematic because it fluctuates in value. The reason why it fluctuates so wildly is because it can be easily manipulated. Hence, at this level the law is a bit scratchy,” she said.
There's a philosophical question of what cryptocurrency means for the sovereignty of governments.
In the subsequent layer, Ryan discussed the implications for regulators. She argued that any tax office would be most verbal in these circumstances since cryptocurrencies are being bought and sold with the tax office being left out of the process.
In the Australian context, Ryan identified three other regulators that could be affected. Firstly, the Australian Competition and Consumer Commission (ACCC) who would be worried about the consequences of purchases and investments. Secondly, the Australian Transaction Reports and Analysis Centre (AUSTRAC) that would be nervous about the size of the transactions made. Lastly, the Australian Securities and Investments Commission (ASIC) would raise concerns about the investments related to cryptocurrencies.
“On the top layer, at a very philosophical level, is the question of what it means for the sovereignty of governments when some corporation can step in and say: Can everyone please stop using Australian Dollars. We have something better.
If this did take over, what would this mean for the economy, the markets, the fiscal policies and the regulators?” she questioned.
Drawing on the differences between “conservative” terrorist groups such as the Taliban and Hamas, and “innovative” ones such as Al-Qaeda and Daesh, Powers referred to the latter as the “cyber natives”. “As cryptocurrencies evolve, especially in securing the identity of those conducting the transactions – the more innovative transnational groups will adapt.” However, he emphasised that we are not going to witness widespread adoption of cryptocurrency by most groups in the foreseeable future.
Until there's more anonymity, we are not going to see widespread use of cryptocurrency by transnational terrorists.
“They have established networks to move and launder money and want to ensure their anonymity is safeguarded. The way cryptocurrency works nowadays is that every time it goes through the blockchain process there is a confirmation and that is why these groups and other cyber-criminals don't like it. You can see a chain and who is doing what to a certain degree and they don't have the same anonymity that they like and once had,” said Powers, who led defence and intelligence operations in the Middle East, North Africa and the Balkans for over 40 years before becoming the Chief Strategist of the ANU Cyber Institute.
He contended that the cryptography associated with quantum computing would be a game changer for nations and organisations who are consistently keeping pace with the dynamic world of cyber security. However, he stressed that these groups will still not prefer blockchain technology unless it protects their anonymity.
“In the short term, until there's more security, more anonymity, and more users, I don't believe that we are going to see widespread use of cryptocurrency by transnational terrorists,” he emphasised.