Original title:Progressive Compliance 

Original author: Mario Laul, Placeholder

Original compilation: Qianwen, ChainCatcher

A major obstacle to the widespread adoption of blockchain and smart contract applications has been the lack of relevant legal and regulatory status and the endless controversies. To be truly innovative, a blockchain system must possess some unique properties that set it apart from existing systems, justifying its dedicated regulatory treatment. The cornerstone of this innovation is “full decentralization” – a feature designed to ensure reliability and resiliency that can be maintained even in hostile environments or other challenges. Without this feature, the network or application in question is more likely to be described as a traditional software project and therefore more likely to fall into existing regulatory categories. Therefore, although the financing, early development and launch of many blockchain projects are centrally coordinated by a small group of people, they are organized as Gradually decentralize” as one of its core long-term goals.

In theory, the last stop on the road to progressive decentralization is regulatory compliance, the legitimization of the blockchain industry without sacrificing the founding principles of the project. In the nearly 15 years of development of the blockchain industry, the requirements for compliance in practice have been a decisive point of debate. Regulators and industry players are unable to reach a clear consensus on this debate because: on the one hand, the existing regulatory framework is clearly outdated when it comes to blockchain technology and the types of organizations it supports; but on the other On the other hand, real innovation also tends to be intertwined with more traditional structures and practices that undeniably fall within established regulatory requirements. For projects that provide strong guarantees for transaction settlement and minimize central control points and failures, navigating both worlds at the same time can seem like an impossible task.

This regulatory void cannot last forever. The dynamic between innovation, structural inertia, modification of existing regulations or creation of new regulations will eventually come to an end. In most cases, the activities of traditional organizations involved in the blockchain industry are governed by existing laws in the jurisdiction in which the organization is located. The ambiguities mainly involve more novel organizational forms, such as public blockchains, smart contract applications and their communities of distributed token holders and governors (i.e., decentralized autonomous organizations), related crypto-assets, and traditional The emerging on-chain economy with increasingly integrated systems. The situation varies from jurisdiction to jurisdiction, so resolving this regulatory conundrum may still take years, but eventually it must and will be achieved, paving the way for further institutionalization of blockchain, making it becomeglobal administrative infrastructure”。

At the same time, blockchain-based projects and their supporters will continue to explore the frontiers of technological and governance innovation. Some programs may use their unique goals and circumstances to justify ignoring or distancing themselves from regulatory discussions; others actively seek and promote regulatory discussions. Some may conclude that decentralization is not the right path and return to more established traditional organizational forms. But in any case, if blockchain and smart contract applications are to complement and compete with existing institutions at scale, they must formally clarify the legal and regulatory requirements required to build, operate and interact with these systems. This is the only way to go.

Gradual decentralization and gradual compliance are two paths that go hand in hand and will eventually converge. The challenge is that while “decentralization” in cryptocurrencies has a broad global definition, regulation is and will likely remain a national-level issue, or at least a regional one. Therefore, there is no universal compliance manual, except that the following should be self-evident to anyone:

• Seek legal advice applicable to your specific situation;

• Use our best efforts to comply with all applicable laws;

• Find ways to promote balanced regulatory outcomes in areas of contention or uncertainty;

• Once legal/regulatory clarity is achieved, use your best efforts to comply with all applicable laws.

However, the most important task now is to ensure that the above goals do not come at the expense of the freedom to create and maintain open source technology, nor at the expense of fundamental elements of the blockchain value proposition: public verifiability of information, freedom from human subjective stewards Lower levels of dependence (e.g., automation by blockchain technology), a balance of power between institutions and individuals that favors the latter (self-sovereignty). As long as this is done, the unique innovative core of the industry will remain unchanged no matter how the law ultimately regulates it.