Block-chain technology: CCI issues discussion paper

Block-chain technology: CCI issues discussion paper

The nature of block-chain, which is decentralised and distributed, implies that there is no central authority that has control over it

Challenges pertaining to jurisdictional, data protection and privacy and competition, might be posed by block-chain technology, according to a discussion paper by fair trade watchdog CCI. Grouped together in a sequential manner, a block chain is a virtual chain consisting of information on various blocks (transactions). It maintains a decentralised, distributed, immutable and secure record (or ledger) of the transactions.

The nature of block-chain, which is decentralised and distributed, implies that there is no central authority that has control over it, making it challenging for the competition authority to enforce an order against any anti-competitive conduct in this, as per the discussion paper.

It is difficult to understand which jurisdiction’s policies and regulations might apply in case of any legal, policy or regulatory issue, the paper on ‘block-chain technology and competition’ noted.

In terms of identifying liable entities and penalising them for wrongful conduct, policymakers and regulators are also likely to face enforcement challenges. It is because network participants in case of permission-less block-chain may be anonymous or pseudonymous, the paper said.

Further, it said that an authority in block-chain can be totally decentralised and it might be difficult to understand who is responsible for the actions of a block-chain that might not be fully compatible with the current privacy and data protection frameworks.

This raises the question if a block chain application can be viewed as a dominant enterprise. One possibility could be to consider all participants together as collectively dominant, it added.

However, collective dominance is not yet recognised in India, the paper noted.

According to the paper, awareness about competition issues that may emerge in the case of block chains may help in the development and use of block-chain applications in line with the principles of the competition law.

“This may be achieved by proactively engaging the block-chain stakeholders (miners, developers, users, etc.) at an early stage while the technology is still being developed, making these stakeholders aware about the likely concerns of competition law that may arise and how competition authorities deal with them”, it added.

Including that block-chain application should not be used to exchange competition-sensitive information among competitors; the 49-page discussion paper has provided some broad-level guidance for various stakeholders in a block chain ecosystem.

The paper said that block-chain or smart contracts should not be designed for enabling enforcement of any collusive or anti-competitive conduct of any form.

Consideration should be made for the possible changes in compliance relating to any requests or orders issued by CCI, while designing the governance mechanisms of a block-chain, the paper noted.

The paper has been prepared by leading consultancy EY along with the regulator.

“The aim of this paper is to provide broad-level information to all stakeholders on the interplay between block chain applications and competition law. Its contents should, in no way, be treated as the official view of the CCI, or CCI Officers”.

“The examples or possible situations related to competition issues discussed in the paper are purely hypothetical in nature. This paper is merely an intellectual exercise and not a regulatory or investigative guidance”, it said.

Also read:Digital transformation: A required change and a new operating model in the BFSI industry

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