Innovation will always be marked by the influence of regulation around it, historically and also at present, technological entrepreneurs think that the absence of regulation accelerates innovation, while excessive regulation stagnates it. Given this, it is important the surgical system of intermediate scenarios that create innovation-friendly ecosystems in a practical way, the so-called “regulatory sandboxes” which are consistent in small ecosystems that can test new technologies in sectors and markets that are not subject to the typical regulations of the traditional industry for each case.
This invites regulators to create balanced scenarios that can be the impetus for innovation and do not hinder it, always and in any case, taking care of the stability of the technological sector that is innovating, call Fintech, Healthtech, etc.
Together with “Big Data”, biometric mechanisms and artificial intelligence, Blockchain technology and Distributed Accounting Technologies (DTL), are fundamental pieces in current regulatory and technological innovation, so in this article we will focus on in them within the scope of Regtech.
We can understand this term from two points of view, the first from the regulatory framework that encompasses technological advances (data protection, cybercrime, electronic commerce, etc.), and second, as the companies that are dedicated to providing technological compliance solutions of said regulatory framework for third parties.
We will understand this term in the words of my teacher, Lisa Rabbe, as the “digitalization of regulatory compliance”, a clear example of the different programs affected to identify AML, KYC issues that financial institutions have. In this line the Regtech.
One of the main functions of the Blockchain and DLT technologies is to provide security for the capricious invariability of the records of the databases attached to each block. This revolutionary technology undoubtedly issues of personal identification, the same modifications of AML, recruitment in general.
The redesign of the regulation for financial and all kinds of services around the final recipients and not of the product itself, can grow exponentially (and securely), the degree of use or inclusion of people in sectors to which He hardly had access at any given time.
Named in global development forums as a “mega trend,” Blockchain technology is here to stay. We have seen its development more than anything from the scope of Fintech (companies that use technology to provide financial solutions), which regulators created around the world.
However, despite its popularization through Bitcoin, the use of this technology is revolutionizing the forms of service innovation around the world, and we can say with ownership that it is, along with “Big Data” and “IoT” The most disruptive technologies of the moment.
In terms of financial and financial services, the Blockchain has allowed the growth of financial inclusion in our inhabitants are among the billions of unbanked people in the world, BitPesa in Kenya is used to consolidate different currencies of African countries to perform more Efficiently purchasing raw materials in dollars, Banqu in Indonesia offered bank services to refugees at the time. Not to be said for the sending and collection of remittances, the CASHAA service has generated hundreds of miles in saving the costs of remittance transfers between the United Kingdom, Africa, India, among others.
In terms of electricity, in Australia the Power Ledger platform (www.powerledger.io) was created, which allows those individuals who generate renewable energy to sell the excess generation to their neighbors who need it, this can be in person One person (P2P).
One of the benefits that DTL technology has and that fascinates me specifically, is the relationship with supply chains, since it allows transactions made between the components of that chain to validate the authenticity, certifications, provenance, The legality of all participants of all suppliers of a raw material for the final producer. This allows you to verify that the diamond in your engagement ring is not a “blood diamond” or that the oranges in your morning juice are not checked for farms marked with child exploitation.
From the legal point of view, the issue of identification is incredible, since DTL technology allows us to solve the problems of major frauds that we have today. Due to its characteristic of validation and strong immutability, we will have certainty of the people with the contracts, of the goods that we are acquiring, of the price that we are paying, of the consequences of the breaches, all the foregoing in an automated way and without delays.
With the use of Blockchain technology, smart contracts are created, called “smart contracts” that are self-executing programs that can be interlaced via API with the financial institutions or records necessary to ensure compliance. This would allow closing a sale of real estate in less than 10 minutes, because at the moment it can be verified with 100% certainty who is the owner of the property, if the selected property is in accordance with the title (location, extension and debt free ), if the buyer has the resources to buy it and if those resources are lawful. Not even its usefulness in promises, leases, insurance contracts, etc.
The regulatory technology issue is a great opportunity for the creation of Regtech ventures, it is something that all industries will need (Fintech, proptech, healthtech, insurtech, etc.) The great challenges we face in applying technologies for regulation, using blockchain or other solutions, implying for the ease of interlacing actors, the speed of response, the adherence to the affected legal norms and specially to keep the contents of the databases intact and private.
Senior Business Partner, Torres Legal