Are regulators ready for blockchain?

Your weekly grocery shopping, high street fashion, designer goods, and bottles of whisky. These are just some of the many products and markets that have employed blockchain technology to manage supply chains, track goods, prevent counterfeiting, increase security, and ensure traceability.   Soon the technology, which goes beyond cryptocurrencies such as Bitcoin, will change the way multiple companies do business.

Indeed, in a recent survey of global leaders by KPMG, 48% of respondents stated they believe it is highly likely that blockchain will change the way their companies do business over the next three years, and 41% stated that their company intends to implement blockchain technology during the next three years.

But are competition regulators ready for such a revolution?  

Most recently, the Australian Competition & Consumer Commission ("ACCC") has received complaints around the plan by the Australian Securities Exchange to adopt a blockchain ledger as a replacement for its clearing and settlement system.  There are concerns that the exchange may use the blockchain ledger to expand its footprint and leverage its current position as a monopoly as the blockchain ledger will centralise more information and may reduce or remove the role of existing share registry companies.

The ACCC complaint is perhaps the first competition complaint which is directly related to blockchain.  As disintermediation is one of the objectives of blockchain, it is likely the first of many.  Already the UK Competition and Markets Authority ("CMA") is currently investigating the acquisition of Earthport by VISA, which is indirectly related to blockchain.  Earthport is a partner of Ripple, a real-time gross settlement system, cryptocurrency exchange and remittance network, and itself provides cross-border remittance services.  As in the ACCC complaint, the issue is that a single entity is being perceived to be extending its reach through disintermediation.

What is distinctly missing from these first forays into how blockchain fits into the competition law landscape is the multiple efficiency benefits that such technology can bring.  Whilst it is the case that blockchain has the potential to raise other competition issues beyond concerns of leveraging monopoly power (including increased potential for collusion, facilitation of anti-competitive behaviour, and softening price competition), blockchain technology has the potential to revolutionise the way that multiple companies do business and how consumers transact on a daily basis.  Disintermediation through the use of blockchain also brings multiple benefits including greater efficiency and lower cost for businesses achieved by reducing the number of transactions and processes involved.   

The ACCC complaint shows that recognition of competition concerns surrounding blockchain, both by regulators and businesses, is increasing.  But regulators will need to ensure that they fully grasp the potential that exists in blockchain technology for increased efficiency and positive benefits to business, whilst continuing to ensure they are alive to potential anticompetitive abuses of such technology.  Otherwise regulators will not be ready for this revolution.