It is happening in silence. Even as its arrival is being whispered about, it is laying the foundation for an inevitable future. It is the new digital revolution1 and it is based on the new technology called Blockchain.
Technological innovation has always meant structural changes with deep implications for the social, political and economic fabric of the world. In a broad sense the chapters of our history have all been written by these changes- from coal to the steam engine, from the invention of electricity to the use of petroleum. Today we are setting off into a world of virtual transfers and this revolution will perhaps be the most compelling because it will involve every sector and will dismantle the world as we know it.
Since the very first blockchain application – Bitcoin - was created, many further uses of the technology have been invented and developed. Unsurprisingly, there has also been a large movement of regulators looking to find any pretext to regulate the use of this emerging technology. The result, however, has not led to a real solution to the problem posed by this technology, which is capable of changing the rules of the game.
Now that the future situation has come into view, the focus has been placed on the practical applications of the blockchain and on their inevitable social, political and economic consequences. This has opened a debate, therefore, on the need, or not, to shape ‘legal’ rules to accompany these changes. In fact, the impact will involve various sectors such as finance and politics, where the need for a central authority will be diminished. This concept was already widely accepted after the ‘phenomenon of Bitcoin’ and ‘Ethereum,’ but the establishment of regulations may have repercussions not only for the ECB  and the Fed but also for all those who pose as intermediaries: financial markets, banks, payment managers/handlers. All this was foreseen beforehand by Microsoft . According to a report by InnoVentures  it is estimated that by 2022 between 15 and 20 billion dollars could be saved on average on charges on payments and money transfers in the world if the blockchain system is used instead of the traditional one. To this we must add the possible implications of the weakening of political control of the central state and its central bank. The application of the new technology could lead to a different relationship between the public administration and citizens, where the latter could assume a less passive role towards the administration and could force a wider reevaluation of the principle of res pubblica.
The impact may stretch even beyond these borders. One of the goals of this research is connected to the conceptual and ethical issues surrounding the necessity, or not, of trying to regulate this upcoming wave of innovation. Although it is true that we will be moving towards more decentralization and transparency as guaranteed by the blockchain system, the problem of understanding, as Juvenal wrote around 50 AD, quis custodiet ipsos custodies?  remains.
The aim of this research is twofold: on one hand, performing an analysis of the blockchain technology and of its innovative implications so as to understand why it will lead to an unstoppable alteration of society and the economy, and on the other hand, imagining how and in what way regulating the technology and the dynamics surrounding it is necessary. Should there be freedom to self-regulate or should it be directly regulated in some way?
Chapter I will concentrate on the technology called blockchain, which is simply a ‘type of database that is shared, replicated, and synchronised among the members of a network. The distributed ledger records the transactions, such as the exchange of assets or data, among the participants in the network’ . Blockchain innovation may decrease the role of a figure placed between the principal parties in most financial and administrative transactions – the intermediary. By enabling individuals to exchange a one-of-a-kind bit of computerized property or information directly with others, in a protected, secure, and pre-set, fixed way, the innovation can make: advanced monetary standards that are not upheld by any administrative body; self-authorizing computerized contracts (called keen gets), whose execution does not require any human mediation; decentralized commercial centers that expect to work free from the range of direction;
decentralized correspondence platforms that will be progressively difficult to wiretap; and web-empowered resources that can be controlled, like computerized property . Chapter II will enter into the ratio behind regulations in general, exploring where and why the needs of a
community caused the rise of institutions with the power to issue rules and how these can influence the natural flow of markets and socio-economic developments. In Chapter III some of the initial frameworks and plans regarding the applications of blockchain, as well as the purpose behind them, will be illustrated. Finally, Chapter IV will present an analysis which seeks to answer if, how and by whom the DLT technology will have to be regulated, and especially with what process and in what way.
TABLE OF CONTENTS
I CHAPTER – BLOCKCHAIN TECHNOLOGY AND ITS APPLICATIONS
1.1. BLOCKCHAIN: A DISTRIBUTED LEDGER TECHNOLOGY
1.2. BLOCKCHAIN FROM 1.0 TO 3.0.
1.3. A GLANCE AT THE IMMEDIATE AND DISTANT FUTURE
II CHAPTER – THE OBJECTIVES OF REGULATION
2.1. UNDERSTANDING REGULATIONS
2.2. THE BIRTH OF NEW REGULATIONS
2.3. THE PURPOSE OF REGULATIONS
III CHAPTER – CURRENT SITUATION
3.1. EARLY REGULATIONS AND ACTIONS BY STATES
3.2. CASES AND EARLY FRAMEWORKS
3.3. SHOULD THE TECHNOLOGY ITSELF BE REGULATED AS DISTINCT FROM THE APPLICATIONS?
IV CHAPTER – ANALYSIS
4.1. WHAT: IS IT THE DLT TECHNOLOGY OR THE APPLICATION WHICH MUST BE REGULATED? AND WHEN: BEFORE OR AFTER CREATION?
4.2. WHO AND HOW: DO WE NEED A SPECIFIC NATIONAL OR INTERNATIONAL ORGANISATION OR WHO SHOULD HAVE THE POWER TO DO SO?
1 Yochai Benkler, The Wealth Of Networks (Yale UP 2006) 62.
2 Blockchain, also known as distributed ledger technology https://en.wikipedia.org/wiki/Blockchain.
3 Lawrence Trautman, ‘Virtual Currencies; Bitcoin & What Now After Liberty Reserve, Silk Road, And Mt. Gox?’ (2014) 20 Rich JL & Tech 13.
4 Paolo Fiore, ‘Cosí Draghi per liberare la BCE pensa alla blockchain’ (Smart Money, 25 February 2016) www.smartmoney.startupitalia.eu/banche/52084-20160225-draghi-bce-blockchain accessed 8 May 2017.
5 Jemima Kelly, ‘Microsoft launches cloud-based blockchain platform with Brooklyn start-up’ (Reuters, 10 November 2015) www.reuters.com/article/us-microsoft-tech-blockchain-idUSKCN0SZ2ER20151110.
6 Oliver Wyman Survey, ‘The Fintech 2.0 Paper: rebooting financial services’ www.oliverwyman.com/content/dam/oliver-wyman/global/en/2015/jun/The_Fintech_2_0_Paper_Final_PV.pdf accessed 2 July 2017.
7 Juvenal, translation from Latin, “Who will watch the watchmen?”.
8 Solane Brakeville and Bhargav Perepa, Blockchain Basics: Introduction to Distributed Ledgers (IBM Developer Works,
9 May 2016) www.ibm.com/developerworks/cloud/library/cl-blockchain-basics-intro-bluemix-trs/index.html accessed 4 July 2017.