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Central banks and financial institutions around the world have ended up having to choose a position towards cryptography, and most of them have decided to approach this technology with skepticism. However, over time, this position may change and some signs of this change may already be visible.
Earlier, in 2018, the Federal Reserve of Saint Louis published the results of a study focused on cryptocurrencies. The study also explores their role in protecting privacy, as well as the positive effects that have been noted. Despite the fact that cryptocurrencies have continually lost value throughout the year, the author of the study claims that the scrambled are here to stay. This is due to what they offer and how they work.
Furthermore, the study argues that this is the exact reason why antitrust authorities should embrace cryptography, not fear it and ignore it.
In July, an article by Charles M. Kahn, a Federal Reserve researcher, argued that criptos can bring a degree of privacy protection that goes beyond what banks can provide to their customers. In fact, Kahn emphasizes that it is not just criminals who wish to have their payments made private. Having private payments can also protect against negligence or malfunctioning by payment system providers or counterparties.
Making a payment turns the paying party into a liability, which is why the contractual clauses are included in the process so that this liability is limited. However, this may end up costing the paying party a considerable amount of money, since some of them can not afford to pay the lawyers' fees and ensure that the agreement is maintained.
This is where smart contracts can change this situation and eliminate these problems. The resolution of the conflict can be automated, while the cryptocurrencies themselves can solve this problem by allowing transactions without ever actually disclosing the identity of the paying party. In a sense, cryptocurrencies can be seen as a reaction to the fears of privacy invasion.
This includes a potential invasion by the government, companies or other parties, according to Kahn. These concerns deepened only after the Cambridge Analytica incident, the revelations of false news and similar incidents. In theory, citizens should be protected by the general data protection regulation. However, in practice, individuals do not seem sure to be effectively protected, which is why they choose to turn to more privacy-oriented payment methods and have found that cryptocurrencies are a suitable solution for them.
The potential role of Blockchain technology
Another aspect of new technology that should not be forgotten is the blockchain itself, the technology that made cryptocurrencies possible in the first place. About ten years ago, when the cryptocurrencies first saw the light, it was believed that the blockchain had only one purpose, which was to serve as a place for cryptographic transactions. Since then, this technology has found countless new use cases, with potentially less encrypted ones.
The dissemination of data on decentralized networks, verified by participants of independent networks and stakeholders, is the aspect of this technology that is able to provide privacy protection. The study also emphasizes that privacy needs may differ in different situations, which is why many different platforms must be expected, each offering its own type and degree of privacy.
This increase in variety should be welcomed, as different levels of privacy in an era when privacy seems to be outdated is a very desirable trait. It also offers greater protection than any antitrust law or GDPR. And while agencies should praise this, they usually tend to keep their silence, which can lead to an imperfect judgment. The development of Blockchain is fast and continues to accelerate, however, ignoring it can only lead to erroneous evaluations of the nature of the entire competitive field.
Not only that, but ignoring the very existence of blockchain and potential applications could lead to engaging in even more procedures where privacy will end up being nothing but an antitrust concern.
Different roles for Fed and Antitrust agencies?
The offer of privacy information from blockchain technology could also lead to change in the role of antitrust agencies, and perhaps even themselves. The study states that the future of payment authorities is no longer in the provision of privacy. Instead, it is now in the privacy regulation. Different payment platforms offer different payment solutions, which are appropriate for different niches with different security needs.
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 they can offer. Instead, they should make sure that there are alternatives, different options and do not try to slow down the development of the blockchain.
In the end, it could be better if antitrust agencies became more vocal about criptos and blockchain, their benefits, use cases and the same way. They could even advise governments not to impede these technologies. Demonstrating that even the feds are supporting cryptography, it could be easier for regulators to unite without fear.
Antitrust agencies have been created to help and protect consumers, and blockchain technology can do so by offering a real protection of privacy and restoring power to the hands of consumers. If antitrust agencies fail to recognize and appreciate this, then the question remains – who are they actually protecting?
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