It will sound crazy to some but the government’s increasing interest in blockchain technology means that regulated blockchain is coming, whether you like it or not.

For nearly a decade, blockchain has remained the fascination of a small niche of financial and technology enthusiasts who, for the most part, reject any involvement by the government in this realm. Now, things are changing. Some of the leading nations around the world are carefully examining how they can use blockchain to power the Central Bank Digital Currencies or CBDC they are keen to issue.

As they do, they will find that existing decentralisation solutions do not offer the answer to their requirements. Rather than reject the technology entirely though, they will look to adapt it to suit their needs. In doing so, I believe they will turn to new regulated blockchain, in order to enable fast and efficient digital economies – whether the blockchain community likes it or not.

Existing blockchains won’t work for governments

The mere idea of a regulated blockchain will have most cryptocurrency enthusiasts turning away in disgust. That’s because many of the people who have joined this movement over the last decade did so because they saw the allure of a financial system outside the control of governments.

These people have embraced the decentralising power of blockchain technology. Their main intention is to disintermediate all manner of middlemen and interact in a peer-to-peer manner without the oversight of a central authority. In many respects, this efficient exchange of value between participants has benefits that anyone can see. However, their advocacy of anonymity above all else means that all manner of clandestine transactions can occur in a way that representative governments with responsibilities to their citizens could never accept.

At the same time though, some governments have embraced blockchain technology. Estonia, Sweden and Georgia are all countries that have used blockchain to underpin some sort of government registry in order to provide transparent and efficient government services. Furthermore, there are countries such as Portugal, Switzerland and Japan that are establishing friendly regulatory environments for crypto companies.

What hasn’t occurred is mass adoption. Yes, some governments are using blockchain and some of the biggest companies in the world have deployed it in production. But to say that this, in combination with the Bitcoin, Ethereum and cryptocurrency communities, amounts to more than a small cohort of enthusiasts would be overstating the point. For mass adoption to occur, I believe governments will have to be a driving force behind the technology. This will not just be a decree from above that forces people to use it but rather the natural and sensible extension of the societal and governmental structures we are all familiar with.

Regulation by government is necessary

What is often missed in the debate about decentralisation and a lack of government involvement is the fact that, in many situations, regulation by the government is a good thing. As a society, we elect our leaders to represent us. We do this so they can protect us from harm and help us prosper because we know that there is a collective benefit for us all in doing so.

This is why we have regulated markets for things like finance, healthcare and food. Some believe that this should be done away with entirely and individuals should be left to fend for themselves. However, we only have to look at a new and growing market such as Cannabis, which has been legalised but regulated, to see what success looks like.

Most people would agree that a cannabis market needs to be regulated in order to protect certain individuals from harm. At the same time though, there is no reason why a business operating in this sector, which uses a vetted and transparent supply chain to produce controlled amounts of product, should not have the opportunity to succeed. This balance of regulated enterprise has resulted in a global legal cannabis industry that is set to be worth over $100 billion by 2024.

Examples like this show how regulated economies can and should work. They can benefit businesses and consumers while allowing governments to wield a certain level of control that they will always want to. The need of governments to regulate will never go away. What can go away is the regulatory burden that comes with it, in the shape of inefficient, manual and paper-based processes that rely on human judgements rather than automated adherence to law.

Regulated blockchain can benefit us all

A future where blockchain enables regulated digital economies is the vision that drove the creation of L3COS, the world’s first regulated blockchain-based operating system. It enables businesses and individuals to operate in a decentralised, peer-to-peer manner, with government regulation of the system ensuring this happens in a safe and secure environment.

The system includes a unique triple layer consensus that is made up of governments, businesses and individuals operating separate mechanisms at their respective layers. At the top layer, governments operate super nodes that run a Proof of Government consensus mechanism, allowing them to communicate with each other and control onboarding to the system.

These government nodes onboard companies into the second layer, who can operate a Delegated Proof of Stake mechanism to act as pillars of the economy and onboard more businesses and individuals on behalf of the government. In this way, a regulated digital economy is established that allows individuals to interact with businesses and each other via efficient, smart contract-based decentralised applications.

All of this activity is facilitated by the government’s CBDC too, so all interactions are regulated and automatically comply with the frameworks laid down by the sovereign state. When you see the full potential of this type of system, not only does the chance of government involvement in blockchain look more likely but so does the mass adoption of the technology, by people who have never experienced its power before.

Which is why fighting the inevitable rise of regulated blockchain is a fool’s errand, whether you like the sound of it or not.

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President, @B2BNewsnetwork (launched Nov 2014). Content, community and analytics obsessed. Inventor @squeezecmm. Past chair, @itac_online @whiteribbon