In the fourth episode of the ‘Ganado Meets Tech’ podcast, Ganado Advocates’ IP/TMT partner Paul Micallef Grimaud speaks with Joshua Ellul and Max Ganado about the impact digital ledger technology (DLT) is having on economic sectors, its risks, benefits and the regulatory approach to this technology.
DLT, or as it is more commonly known, blockchain, is a protocol that enables a transaction or system between two people to persist without the need for any third-party authorisation or interference, for example a bank or authority – thus the concept of decentralisation.
The authenticity of the data stored on the system is guaranteed through the use of keys and cryptographic signatures and the peer-to-peer authentication system. As DLT continues to gain ground in common day applications, it is expected that central banks will soon be adopting blockchain technology (albeit not decentralised) through the issuance of digital currencies.
In the eyes of lawyer Max Ganado, who is synonymous with a number of legislative projects that have helped develop Malta’s main sectors over the past years, it was evident from the start that this technology had many more commonalities to public registers that are central to regulated spheres, such as land, shares in companies, ships and aircrafts. At the same time, he said it could provide innovative solutions to the issues encountered in more conventional, centrally-controlled registration systems that could be subject to manipulation and bad faith actions.
The immediacy and accuracy of the blockchain peer-to-peer system provides solutions to issues such as that of two notaries attempting to register two sales of the same piece of land by the same vendor.
Joshua Ellul, director of the Centre for Distributed Ledger Technologies (DLT) at the University of Malta and chairman of the Malta Digital Innovation Authority, is of the opinion that, despite ongoing development and advances, the technology as well as the tools to instil trust in it are still at a nascent stage.
This ‘trust’ element is, unsurprisingly, a running theme throughout debates on emerging technologies, as is the need to educate society at large, including legislators, on the significance of these innovative solutions.
As Ganado puts it, we do not only have an “economic battle but a battle of fundamental importance in terms of the continuity of our legal systems in relation to the technology which is emerging, and if we do not think about it we are going to have major problems going forward”. Ellul echoes this view, stating that for the consumer to be adequately protected “both law and technology need to meet somewhere and this is the challenge we are seeing around the world.”
Carrying on from the first episode of Ganado Meets Tech, where Information and Data Protection Commissioner Ian Deguara admitted that blockchain is one of the biggest challenges to the data protection legal framework, there seems to be a clear conflict of philosophies between General Data Protection Regulation (GDPR) and blockchain.
For starters, the GDPR is aimed at regulating the actions of the data controller, whilst DLTs are databases with no unitary actor in control of the data being appended onto the system. This issue is less accentuated with permissioned or controlled DLT systems.
Another fundamental debate is whether data typically stored on a distributed ledger, such as public keys and transactional data, qualify as personal data for the purposes of the GDPR. Although the data has been hashed or encrypted, this does not necessarily mean that the data subject cannot be identified by applying reasonably accessible measures. This means that such data likely does qualify as personal data for GDPR purposes.
The ‘trust’ element is, unsurprisingly, a running theme throughout debates on emerging technologies, as is the need to educate society at large on the significance of these innovative solutions
Another clash rests in the data subjects’ rights to modification and erasure of personal data under Articles 16 and 17 of the GDPR, whereas blockchain technology is intended to render the modification and erasure of data onerous in order to ensure data integrity. Similar challenges arise with the concepts of data minimisation and purpose limitation under the GDPR.
Despite obvious challenges, regulation remains key to this form of technology, which in itself can provide invaluable solutions to regulation. Ellul is of the opinion that the technology is a tool capable of far more efficient processes than those which we are traditionally accustomed to in the fight against criminal activity. Blockchain offers a means of identifying fraud through transparency which counteracts criminal activity.
Ganado adds that the amount of data coupled with the pace of development in technology is so huge that “no amount of human beings sitting at desks will ever be able to deal with it”. This is where regulators need to use technology to assist them in overcoming the mismatch between the lack of human resources and the vast amount of information that needs to be vetted.
RegTech is indeed the solution to many issues faced by regulators today. Embedding trust in the technology to encourage its take-up in providing innovative solutions is what prompted the birth of the Malta Digital Innovation Authority (MDIA).
The MDIA is not tasked with telling people what to do but rather with carrying out a qualitative assessment of the technology for the purposes of certification on a voluntary basis. The assessment is aimed at ensuring that the technology does not cause loss to third parties and that it does not breach mandatory laws.
According to Ganado, law and technology can, together reach a common goal – that of “guiding the way an economy or a society develops towards a law-abiding reality”. The challenge lawyers face today is finding a way of modifying the approach of law to a situation while respecting the demands and developments of technology.
Ultimately, technology can moderate human behaviour by making it impossible for transactional fraud to occur. Creative thinking should lead to technology being used to find solutions to issues that have been around for centuries. This is the goal that sector leaders should seek to achieve.
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