Federal Reserve Praises Bitcoin and Blockchain Assets’ Legit Privacy Protection Attributes
Central banks and financial institutions across the world ended up having to choose a stance towards crypto, and most of them decided to approach this technology with skepticism. However, as time goes by, this stance might change, and some signs of this change may already be visible.
Earlier in 2018, the Saint Louis Federal Reserve published the results of a study which focuses on cryptocurrencies. The study also explores their role in privacy protection, as well as positive effects that were noticed. Despite the fact that cryptocurrencies continuously lost their value throughout the year, the study's author argues that cryptos are here to stay. This is due to what they offer and how they function.
Furthermore, the study argues that this is the exact reason why antitrust authorities should welcome crypto, not fear it and ignore it.
Back in July, an article by Charles M. Kahn, a Federal Reserve researcher, claimed that cryptos can bring a certain degree of privacy protection, one which goes beyond what banks can provide to their customers. In fact, Kahn stresses that it is not only criminals who desire to have their payments made private. Having payments private can also protect from negligence or malfeasance by payment system providers or counterparties.
Making a payment turns the paying party into a liability, which is why contractual clauses are inserted into the process so that this liability would be limited. However, this can end up costing the paying party a significant amount of money, as some of them cannot afford to pay lawyers' fees and ensure that the agreement will be upheld.
This is where smart contracts can change this situation, and eliminate such issues. The conflict resolution can be automated, while cryptocurrencies themselves can solve this issue by allowing transactions without ever actually revealing the identity of the paying party. In a way, cryptocurrencies may be viewed as a reaction to fears of privacy invasion.
This includes a potential invasion by the government, companies, or other parties, according to Kahn. These concerns only deepened after the Cambridge Analytica incident, fake news revelations, and similar incidents. In theory, citizens should be protected by the General Data Protection Regulation. However, in practice, individuals do not seem certain that they are actually protected, which is why they are choosing to turn to more privacy-oriented payment methods, and they have found cryptocurrencies to be a proper solution for them.
The Potential Role Of Blockchain Technology
Another aspect of new technologies that should not be forgotten is blockchain itself, the technology which has made cryptocurrencies possible in the first place. Around a decade ago, when cryptocurrencies first saw the light of day, blockchain was believed to have only a single purpose, which is to serve as a place where crypto transactions can be made. Since then, this technology found countless new use cases, with cryptos potentially being the least among them.
Data diffusion on decentralized networks, which is verified by independent network participants and stakeholders is the aspect of this technology which is capable of providing privacy protection. The study also points out that privacy needs may differ in different situations, which is why numerous different platforms should be expected, with each of them offering its own type and degree of privacy.
This increase in variety should be welcomed, as different levels of privacy in an era where privacy seems to be obsolete is a very desirable feature. It also offers more protection than any antitrust law or the GDPR. And, while agencies should praise this, they usually tend to maintain their silence, which can lead to flawed judgment. Blockchain development is fast, and it continues to speed up, however, ignoring it can only lead to misjudgment of the nature of the entire competitive field.
Not only that but ignoring blockchain's very existence and potential applications may lead to engaging in even more procedures where privacy will end up being nothing more than an antitrust concern.
Different Roles for Fed and Antitrust Agencies?
Privacy offering coming from the blockchain tech might also end up leading to the change in the role of antitrust agencies, and possibly feds themselves. The study claims that the payment authorities' future is not in privacy provision anymore. Instead, it now lies in privacy regulation. Different payment platforms are offering different payment solutions, which are appropriate for different niches with different needs in terms of safety.
In the end, banks, antitrust authorities, and others should not judge the nature of business models used by digital companies, nor the degree of privacy protection that they can offer. Instead, they should make sure that there are alternatives, different options, and not try to slow down the blockchain development.
In the end, it might be better if antitrust agencies became more vocal regarding cryptos and blockchains, their benefits, use cases, and alike. They might even advise governments not to prevent these technologies. By showing that even feds are supporting crypto, it might be easier for regulators to join in without fear.
Antitrust agencies were created to help and protect consumers, and blockchain technology can do so by offering real privacy protection and returning the power to consumers' hands. If antitrust agencies that fail to recognize and appreciate this, then the question remains — who are they actually protecting?