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Study Suggests Private Blockchain Compatibility with GDPR

A newly-published research by Queen Mary University, London suggests that private blockchains could be compatible with European Union (EU) privacy laws, especially the General Data Protection Regulation (GDPR) passed this year.

While cryptocurrencies were heavily scrutinized in the study for privacy implications, various other applications of Distributed Ledger Technology (DLT) such as private blockchains were also put under a microscope.

In the extensive research, different aspects of blockchain networks, their nodes and other entities were studied with regards to the extensive GDPR legislation. According to the findings, DLT technologies could fall under its rules if they store private information of EU citizens publicly on the chain and allow third parties to operate it.

According to the research: “There is a risk that this legal uncertainty will have a chilling effect on innovation, at least in the EU and potentially more broadly. For example, if all nodes and miners of a platform were to be deemed joint controllers, they would have joint and several liability [sic], with potential penalties under the GDPR.”

However, to fall under the legal definition, blockchain operators could be treated like processors instead. The concept is borrowed from cloud storage companies who act on behalf of users rather than controlling their data themselves. But, most of the research is based on Blockchain-as-a-service model where the company provides a DLT-based infrastructure for the users.

The study quotes similar examples from centralized land registry forms and private inter-banking solutions that have a small number of nodes as part of the network. However, complying with the GDPR is overall cited as tricky for companies especially the ones involved with cryptocurrency mining and wallets.

At the end of the research, the study group urges the European Data Protection Board to issue clearer guidance on data protection in the future to make things easier to comply. The GDPR legislation is one of the most stringent privacy regulations passed in recent times and applies to all participating members of the European Union, as well as entities interacting with EU citizens.

 

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