Blockchain technology is attracting more and more physical retailers and others. Now governments are trying to build blockchain technology as well. Recent moves include identity documents, which are fairly simple and more complicated bureaucratic records as well.

In the meantime, bitcoin is being increasingly regulated because of money laundering. In a plan that extends to the entire EU, bitcoin platforms must scrutinize and then report transactions that raise suspicions.

A British Treasury spokesman said that rules affecting cryptocurrencies are already on the books and that they are available for regular updating. He added that some of the updating would include making platforms resilient when it comes to money laundering and terrorism.  

The plan to regulate bitcoin was originally set out by Treasury Minister Stephen Barclay in the fall. He said negotiations regarding money laundering and terrorism would finish by early 2018 at the latest.  

These negotiations are said to be justified by bitcoin’s growing popularity. Today, bitcoin is employed by millions but is also saved—even hoarded—by numerous holders who think the price will go much higher.

Beyond Nakamoto

Founder Satoshi Nakamoto wasn’t so clear about it, but people eventually realized that blockchain technology could function away from bitcoin itself. Now there are hundreds and even thousands of cryptocurrencies mimicking bitcoin with various minor or major differences.

One innovation is blockchain scaling. Today, computers process all transactions. But a scaled blockchain calculates the number of computers needed for each transaction and portions out the work accordingly. Scaled blockchains may soon be able to compete with middlemen such as VISA and SWIFT.

Blockchain’s “distributed registers” create transactional documents on an ongoing basis. Even as they confront bitcoin, many governments are aware of advantages derived from creating records without human interference—records therefore that cannot be changed or deleted.

The Delaware Blockchain Initiative began in May 2016 under the management of Governor Jack Markel. The upcoming task is to build a “smart UCC” system that will focus on real estate and let borrowers understand that lenders have an interest in their financings.

In Sweden, Lantmäteriet wants to create a digitized version of parts of the current real estate market. It is building an app to create a place for marketers alongside agents and banks. The Republic of Georgia is trying out an equivalent system that lets people use smartphones to manipulate property titles.

Meanwhile, Dubai wants to put government documents on blockchain by 2020 thus making interactions between citizens and government a lot simpler. Dubai’s effort is especially ambitious because it includes almost every aspect of government in which citizens participate.

Because blockchain provides indelible records, users in Dubai will not need to provide paper records on an ongoing basis. Even passports may be handled electronically henceforth. The idea is to give people the ability to approach Dubai in a paperless fashion.

This will make things more efficient but there is a downside to having so much information available. People generally may not wish for Dubai to know so much about their affairs. And there may be suspicions that Dubai will share information regardless of individual preference.

That goes for government generally. In fact, one of the attractions of bitcoin is its anonymity, and this will be reduced once governments impose anti-money laundering and terrorist regulation.

Damping Bitcoin

Many governments and large banks are not especially enamored of bitcoin to begin with. So damping its processes is seen as secondary to bringing it under supervision. Perhaps bitcoin will evolve in ways that are not in sync with government, but that is not a current reality.

Putting blockchain to work in bureaucratic environments is a good idea, but reducing private blockchain and cryptocurrency for money laundering reasons will lower acceptance of bitcoin and other cryptocurrencies.

Perhaps, bitcoin will stop growing so quickly as a result, or even stop growing entirely. Other cryptocurrencies, too, will grow more slowly if they are enmeshed in the creation of identity docs.

It is an issue that will need further discussion rather than a blanket imposition of rules. If those rules are forthcoming without such conversations, cybercurrencies may become more involved in gray or black markets. That may be a significant loss.

David Murry is a journalist working on both blockchain and cybercurrency issuance and is the author of a recently published book, Blockchain Disruption: How a Decentralized and Distributed World Expands Freedom.