The European Union’s recent efforts to ramp up its regulatory efforts regarding cryptocurrencies and blockchain technology has caused significant issues for PICOPS, a compliance-ensuring service that helped to verify owners of Ethereum addresses. PICOPS guaranteed compliance with KYC and AML regulations by providing a way to verify the personal information of the creators of wallets on the blockchain.
The General Data Protection Law has caused significant problems on the blockchain since its conception. Though the law is poised to promise constituents the right to remove personal information—such as transaction history—from the blockchain, this humble goal seems inherently at-odds with the decentralized nature of the blockchain.
The blockchain’s goal is to provide longstanding public information on transactions which occur on the ledger. As a result, it is problematic that some major government desire to give participants on the blockchain a way to remove their information once the transactions have been concluded.
A Trend Of Problems
It isn’t just Parity that has seen issues arising from the introduction of new consumer protection laws in the European Union. LocalBitcoins, for instance, has shut down several accounts because of the new and controversial law. Speculators argue that these complications, arising from the conflict of interest between government efforts to protect privacy and blockchain commitment to anonymity and the long-term storage of financial information.
Another major issue within the law comes from the interpretation of personal data provided by the legislation. It is likely that this dispute, whether financial transaction information recorded on the blockchain constitutes the kind of data that ought to be protected in the right to deletion principles enjoyed by many citizens, will be the primary topic of debate in future legal battles all over the world.
For PICOPS, this latest conflict is a significant one. The service was shut down because the company’s technology works by storing the information (address) verified by the program. Current interpretations of the right to be forgotten used in GDPR make the fundamental principles behind PICOPS impossible, and a major legal hurdle.
One analyst tweeted that it was “very sad” that the “very useful service” fell victim to the GDPR’s recent efforts to regulate. (https://twitter.com/VitalikButerin/status/997487947820740608)
The Future: GDPR And Cryptocurrency Regulation
For Parity, GDPR has likely struck a killing blow on the new company. The very nature of the legislation makes it nearly impossible that Parity can operate in any way remotely similar to how it has in the past. However, the legal questions arising from GDPR’s attack on Parity represent a resounding debate that has significant ramifications for blockchain technology.
As right to privacy and right to be forgotten legislation continues to characterize legal movements all over the EU, judges will be asked to decide what elements of online interaction in the public sphere are eligible to be forgotten as “personal information.” For a blockchain ledger that is, by nature, a public recorder of information, this debate is of significant importance for the community of public anonymity and assured decentralization.