Algorand, Eva Kaili and CBDCs — What Regulation Could Be Imposed On Blockchain?

Published in

Coinmonks

8 min readDec 12, 2022

This blog is digital collectible on the Algorand blockchain. If you want to buy the publishing rights to this article go to tokenblogs.app

Algorand & The EU

I was lucky enough to be invited out to Dubai for the Algorand conference last week and had a marvellous time not only pitching my startup, Tokenblogs, but was also able to meet a bunch of super talented founders and put .algo names to the faces of the Algorand community.

However there was another perhaps overarching motivation for me taking the 6 hour flight out to the middle east and that was to see the Vice President of the European Parliament speak at the event. As an ardent follower of European politics particularly Brexit, censorship and the new Digital Services Act — seeing what a senior EU representative was doing at a blockchain conference, specifically my beloved Algorand — made me deeply suspicious.

However it turns out Eva Kaili pulled out and did not make the event…

So who is Eva Kaili?

Eva Kaili is the Vice President of the European Parliament until 2024 and has an impressive resume. Ms Kaili is from Athens, Greece — my favourite place as it must be said.

She is anti Brexit and thinks Greece is better off remaining in the EU — a peculiar opinion as seeing the decade long austerity measures her party agreed to over a decade ago one would think she held a different view?. But as the phrase goes: “if you can’t beat them join them” thus it’s great to see a Greek so high up in senior ranks within the EU. Must be water under the bridge.

Upon deeper research and hours of interviews, it turns out Eva is massively pro crypto.

Is Eva Safe Hands & A Good Association Algorand Want?

It’s no secret Algorand are positioning themselves as the future of finance offering blockchain solutions to governments and institutions, so having senior representatives from the EU, at Decipher, makes sense. The EU loves to regulate and rein in tech companies so it is not surprising with the awesome tech coming out of Boston that Algorand’s on their radar.

Recently passed was the Digital Services Act enforcing the Strengthened Code of Practice on Disinformation which aims to prevent the sharing, in private messages, of what the EU deem fake news. The bill also has quotas and KPIs to measure the speed and amount of content big tech takes down in an effort to not be fined 6% of global turnover by the EU.

So you can see we have the European Union putting legislation on international markets and global companies who are outside of Europe. Thus the thought of a blockchain, which operates on a borderless economy, is something the EU NEED to get ahead of to rein in before their citizens get too much freedom. right? 💀

Now, Eva’s role in the blockchain regulation does not come off authoritarian at all, she clearly is an advocate and correctly understands how blockchain can innovate sectors such as combating hidden fees in payments that banks earn.

Kaili also wants to allow innovation to sprout prior to pushing through regulation. Good to hear.

Just the other day Kaili and Algorand founder Silvio Micali were speaking at the ACE BRAIN event with participation of some of the blockchains from Algorand’s Centre of Excellence university program.

The launch of ACE BRAIN, a new research centre dedicated to the analysis of the compatibility between blockchain technology and EU legislation, the promotion of (sustainable) blockchain technology as a pillar of the future EU Single Market, and as a foundation for a more democratic, resilient and sustainable society.

What Regulation Do The EU Want To Put On Blockchain ?

Will GDPR Kill Blockchain?

Personal data is anything that can be linked back to a real person. A wallet address can certainly be linked back to a human.

There are a few key Articles to know about when talking about data protection such as Article 17 which is the “right to be forgotten” and Article 18 which is about restricting access to your data. Now upon reading those statements you may be, like me, thinking — isn’t blockchain HR’s worst nightmare as this is the most non-compliant thing ever ! yes.

Article 17

This gets broken because blocks are immutable meaning the data cannot be changed, therefore the info is permanent.

Article 18

Impossible to restrict access to your data as it’s on a distributed public ledger.

There are two key parties involved in GDPR:

Data controller — The data controller determines the purposes for which and the means by which personal data is processed.
Data Processor — The data processor processes personal data only on behalf of the controller. The data processor is usually a third party external to the company.

“So who do we regulate?”

Its not Algorand Inc, the protocol developer, fault for creating the tools.
You can’t blame the permissioned nodes for allowing the txns go through?
Or should we just blame rand labs for developing an Algo Explorer to make it easy for consumers to read the blocks?

What can be done?

There are two obvious options:

Private co-chains

Honestly there is no point in a private chain. Most companies have super quick internal processes and computer power that are probably faster than blockchain. The main benefits of blockchain is the decentralised aspect of it. So the minute that’s gone — there’s no point.

Zero knowledge Proofs

Zero Knowledge Proofs proves that something is true without revealing the actual data to the blockchain, it essentially reveals the absolute minimum data required. It’s great. zCash and Monero run on these and are some of my favourite cryptocurrencies.

But ultimately, why would the EU, regulators or central banks actively be pro zero knowledge proofs? Some would argue the whole point of governments and central banks getting involved with blockchain is for increased surveillance of citizens.

Algorand’s Role In Government Plans

Digital IDs and CBDCs are the main products that spring to mind for a government to get involved with any blockchain company.

Just because it’s on Algorand doesn’t mean its a good thing.

One must be very cautious when being an advocate of tech. Increased technology leads to increased isolationism and I would argue the term “metaverse” actually is something we already live in — it just highlights how digitally connected humans are and the demise of real world interactions.

CBDCs 💀

One piece of tech that makes me run to the hills is Central Bank Digital Currencies ( CBDCs ).

“Central banks are not keen on cryptocurrencies chiefly because they are not backed by a central authority, which means that they are not subject to the same regulations and oversight as traditional currencies. Cryptocurrencies are decentralised and their value is determined by supply and demand, their value can be volatile — which makes them a less stable form of money compared to traditional currencies. Plus, some central banks may be concerned about the potential for crypto to disrupt the traditional financial system, which could have negative consequences for the economy.” ChatGPT

I would argue that the potential for crypto to disrupt TradFi is just what the populace needs to get greater financial freedom. But the introduction of a central bank that issues money direct to consumer poses greater threats- not only does it destroy commercial banks as they no longer have customer deposits to finance their loans but it also gives rise to programmable money.

The severe consequences of CBDCs

“Digital cash could be programmed to ensure it is only spent on essential or goods which an employer or government deems to be sensible -” Daily telegraph

I fondly remember Rishi Sunak’s (UK PM) “eat out to help out” scheme which ran in lockdown, to stimulate spending in the food and beverage space. This brief program gave a £10 coupon for everyone to go to a restaurant and get a discount when eating out — could this be a precursor for the programmable money that Rishi intends to bring in ?

Two Tiers

CBDCs are no laughing matter. I am predicting a two tiered system of class:

Working class will have tailored, programmable money based on their health and spending history and will be issued directly by the central bank. This will be their UBI ( universal basic income ) and issued out to masses based on their compliance with the green agenda; such as recycling, electric cars, correct immunisation. The money will also have an expiry date to eradicate savings.
Elites — the upper class or elites will not have any restrictions on their payments, they can spend as they like and not be limited at all — The property, businesses, cars, farmland and utilities will all be owned by them and only given out to the other citizens with their approval/rental payments.

Now I know, crickey, that’s a bit dystopian and I hope I am wrong!

But this is why web3 is so great, whether its bringing dollar stablecoins to the unbanked or the ‘to-earn’ crypto models offering greater income opportunities to communities in the developing world- blockchain is an empowering piece of tech that must not be taken advantage of by governments.

Blockchain is for the people not for the governments.

What Does This Mean For Cryptocurrency?

$BTC, $XMR etc are, in my opinion, the obvious hedge against CBDCs. I predict a massive black market loophole around KYC to allow an easy onramp to crypto with merchants accepting crypto over cash and CBDCs in the future.

Conclusions

I would just say be careful what you wish for with blockchain, the power it can wield is insane. Generally increased technology will further destroy the social fabric in which humans communicate resulting in a systemic change in the human psyche, probably for worst in my honest opinion.

If there’s any EU politician to be regulating crypto, Eva Kaili is a great pick — now how she plans to tackle the GDPR issue is something I am fascinated by, along with their approach to regulating decentralised finance (DeFi). I expect that a euro CBDC will be rolled out, but my fear is that the adoption will be mandatory. Greece, where she is from, loves cash — I spend three months a year there and I know merchants actively want cash over card. Therefore, whilst the introduction of CBDCs will boost taxation revenue from the Mediterranean it will undoubtedly destroy households who can still barely get by on cash; meaning only one thing… state handouts in programmable money.

Algorand is a great blockchain — climate conscious, scalable and negligible txn fees — just the protocol that Eva has been looking for but will Algorand or it’s tech be used for CBDCs?