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Places that have adopted relatively accommodating stances, like Switzerland, have seen an influx of companies. The decentralized nature of blockchain technology can easily come into conflict with regulations requiring centralized monitoring, evaluation, and decision-making - especially when it comes to sensitive financial transactions. In recognition of this potential conflict, some countries have been creating regulatory sandboxes that enable experimentation and, potentially, more agile policy-making. For example, the Financial Conduct Authority (FCA) in the United Kingdom launched a regulatory sandbox in 2017 in order to enable more innovative businesses to test their products with real people albeit with safeguards in place. This created an opportunity for the authority to learn about policy and regulatory needs in an experiential, real-time way, and adapt accordingly (other countries including Singapore, South Korea, and India have since emulated this sandbox model). In the 2020 cohort of the FCA Sandbox, six were participants focused on distributed ledger technology (a category that includes blockchain) and digital assets. However, particularly given the borderless and distributed nature of distributed ledger technology, which enables the simultaneous recording of transactions in in multiple places, greater international cooperation with such government efforts is called for. In a repeat of the current situation when it comes to the global regulation of financial and monetary systems, fragmentation has created several barriers for blockchain-focused companies. This can exist even within a single country; many different states across the US, for example, taking varying approaches to regulating the use of the technology. And, beyond the technology itself, blockchain’s introduction and enabling of entirely new business models has brought regulators in charge of overseeing a functioning private sector into unchartered territory. Those places that have adopted relatively crypto-friendly stances, such as Switzerland, have attracted an influx of companies - a “Crypto Valley” has formed around the Swiss city Zug, for example, and many consortia including the Libra Association have incorporated as Swiss-based entities. Ultimately, the foundational nature of blockchain technology means that it intersects with an array of industries, like payments and supply chains, each of which has its own intricate set of policies and regulations. It remains to be seen whether these industries will be able to adapt sufficiently to make the best use of the technology.

Blockchain Policy, Regulation and Law