point interference is required, as was the case with the DAO attack. But it is also
possible to argue that such systemic steering is not normative in the meaning of
the legal system, that it is solely predetermined compliance, behaviour modification through code. Thus, code cannot be law, as law ceases to be anything but
control when one cannot go against it, when adherence to the rules is forced.
19
If ultimately code cannot be law, can law be extended to the code – can
blockchains be regulated despite their inherently regulation-averse decentralisation
that escapes state-bound law and makes it impossible to define the receiver of any
regulation attempt? In addition to limiting the negative impact of such new
technologies by governance and legal protection, governments face the frequent
need to encourage technological innovation and new markets. These conflicting
objectives often lead to inconsistent regional regulation of global phenomena, such
as the attempts to regulate initial coin offerings (ICOs), that have become a widely
popular crowd funding method making use of the monetary side of blockchains. For
example, China and South Korea have outlawed ICOs, as offshore financial centres
such as Cayman Islands root for the new financial tool, and states with strong
regulatory frameworks for financial technology such as the UK, the EU and the US
have adopted a careful stance, emphasising the extra-territorial scope of their
national legislations.
20 In addition to these practical limitations, there is a theoretical
side to regulating such complex phenomena as distributed ledgers. Law has limited
means of addressing the novel environment of blockchains where economic, social
and technological implications become intertwined and regulation is always political.
As Professor Michael King puts it, ‘all that law can do is regulate what can be
regulated through law, and, while this is no mean achievement, it leaves vast areas of
activity . . . quite invisible to law’.
21
Code cannot be law and code should not be law, which admittedly limits the
potential of the ‘code is law’ narrative, the structural coupling between law and the use
of ICT. The problematic example of blockchain-based smart contracts and the
inadequacy of code as redress suggest that the technological narrative does not provide
a sufficient source of justification, at least in this form. Instead, as the decentralised
quality of distributed ledgers make regulation by state-bound law mostly ineffective
and there is no internal conflict management available, the use of code as a regulatory
concept seems only to deepen the justificatory crisis of private enforcement. Lessons
learned from blockchains demonstrate the ideologies behind technology, warn against
computationalism, the idea that law could be reduced to computation. As with other
technologies, such as algorithmic decision-making that makes use of machine learning
and artificial intelligence, the blockchain vulnerabilities demonstrate that code is never
infallible, and and it is dangerous to believe that it is infallible.
8.3 What about the future of private enforcement?
As the example of blockchains illustrates, regulating individual technologies may
be extremely complex or even impossible. But even more so, technology-specific
regulation of blockchains, artificial intelligence or machine learning does not take
into consideration the broader social implications of technological development.
186 New ways forward?
possible to argue that such systemic steering is not normative in the meaning of
the legal system, that it is solely predetermined compliance, behaviour modification through code. Thus, code cannot be law, as law ceases to be anything but
control when one cannot go against it, when adherence to the rules is forced.
19
If ultimately code cannot be law, can law be extended to the code – can
blockchains be regulated despite their inherently regulation-averse decentralisation
that escapes state-bound law and makes it impossible to define the receiver of any
regulation attempt? In addition to limiting the negative impact of such new
technologies by governance and legal protection, governments face the frequent
need to encourage technological innovation and new markets. These conflicting
objectives often lead to inconsistent regional regulation of global phenomena, such
as the attempts to regulate initial coin offerings (ICOs), that have become a widely
popular crowd funding method making use of the monetary side of blockchains. For
example, China and South Korea have outlawed ICOs, as offshore financial centres
such as Cayman Islands root for the new financial tool, and states with strong
regulatory frameworks for financial technology such as the UK, the EU and the US
have adopted a careful stance, emphasising the extra-territorial scope of their
national legislations.
20 In addition to these practical limitations, there is a theoretical
side to regulating such complex phenomena as distributed ledgers. Law has limited
means of addressing the novel environment of blockchains where economic, social
and technological implications become intertwined and regulation is always political.
As Professor Michael King puts it, ‘all that law can do is regulate what can be
regulated through law, and, while this is no mean achievement, it leaves vast areas of
activity . . . quite invisible to law’.
21
Code cannot be law and code should not be law, which admittedly limits the
potential of the ‘code is law’ narrative, the structural coupling between law and the use
of ICT. The problematic example of blockchain-based smart contracts and the
inadequacy of code as redress suggest that the technological narrative does not provide
a sufficient source of justification, at least in this form. Instead, as the decentralised
quality of distributed ledgers make regulation by state-bound law mostly ineffective
and there is no internal conflict management available, the use of code as a regulatory
concept seems only to deepen the justificatory crisis of private enforcement. Lessons
learned from blockchains demonstrate the ideologies behind technology, warn against
computationalism, the idea that law could be reduced to computation. As with other
technologies, such as algorithmic decision-making that makes use of machine learning
and artificial intelligence, the blockchain vulnerabilities demonstrate that code is never
infallible, and and it is dangerous to believe that it is infallible.
8.3 What about the future of private enforcement?
As the example of blockchains illustrates, regulating individual technologies may
be extremely complex or even impossible. But even more so, technology-specific
regulation of blockchains, artificial intelligence or machine learning does not take
into consideration the broader social implications of technological development.
186 New ways forward?