A hard fork in the road: developing an effective regulatory framework for public blockchains

Abstract

ABSTRACT Over the past decade, public blockchains have emerged as innovative, technology platforms capable of highly secure and sophisticated peer-to-peer online transmission of data between unknown parties. However, public blockchains challenge traditional regulatory models that assume centralised, single points of control facilitated via established intermediaries. In such a context, the present paper analyses the potential liability attaching to blockchain participants and considers how privacy laws apply to blockchain transactions, given the immutable nature of blockchain records. The paper then recommends reforms to strengthen blockchain regulation, including statutory recognition of fiduciary obligations for elite developers with super-user access to allow recourse for loss resulting from hard forks. A ‘hard fork’ is a radical change to a network’s protocol that leads to formerly valid blocks and transactions becoming invalid or vice-versa. Finally, the paper considers changes to privacy laws to permit ongoing consent and cross-border disclosure of data to accommodate blockchain operations.