A Study jointly conducted by the Queen Mary University of London and the University of Cambridge have shown that it’s theoretically possible to design decentralized apps (dApps) on the Blockchain that will be fully in line with the recent European Union’s General Data Protection Regulation. The GDPR was fully issued after the Facebook data scandal that allowed for Cambridge Analytica to harvest Facebook profiles and data for political purposes.
The publication for the study was featured in the ‘Richmond Journal of Law and Technology.’ The research further concluded that firms in the region could get around the GDPR’s rules to having a Blockchain app that wouldn’t break any rules and as such, avoid any form of fines from legal bodies.
What is the GDPR?
The GDPR was proposed in the year 2012. It, however, wasn’t issued until 2016 and 2018 subsequently. The penalty for not complying with the GDPR’s regulations include a fine of 17 million GB Pounds or 3% of the company’s profits for the year. If the company’s profits for the year exceeds 17 million GB Pounds, then 3 % of that amount will be remitted as a fine.
The regulation was put in place for firms that misuse user data and do not respect the rights of their users. The GDPR’s regulations were criticized by several parties, but despite all the criticism, firms had to change a lot in their privacy policies and service agreements while others simply stopped operations in Europe.
How the GDPR’s Regulation Affects the Blockchain
A big part of the Blockchain is its immutability; data on the Blockchain cannot be changed or reversed, and this doesn’t comply with the GDPR’s regulations on removing customer data. This important value of the Blockchain which renders it valuable is now in the way of the GDPR and as such is forcing companies to avoid creating apps on the Blockchain. According to the Queen Mary University of London’s official website;
“Promising examples include encrypting entries and then deleting the relevant decryption keys – leaving only indecipherable data on-chain – or using so-called ‘off-chain’ storage models.”
The GDPR’s regulations won’t be the first region that has challenged the blockchain related industry. However, the adverse effects of opposing the Blockchain have been seen in countries like China. The restrictions in China against Blockchain related firms have stimulated digital currency firms to move their headquarters to other nearby countries such as Taiwan and Hong Kong so they won’t be penalized. The policies issued in the U.S by the Securities and Exchange Commission (SEC) have also stopped Americans from participating in cryptocurrency ICOs.
A key reason for this is because ICOs are unregistered securities. The SEC requires anyone who wants to invest in unregistered securities to need to be authorized by financial administrative bodies. ICOs generally do not register with the SEC and therefore, restrict US Citizens from investing in them. Any ICO that accepts US investors may find itself breaching US laws and may be criminally charged.