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29 Jan 2020

There is a lack of legal certainty for the blockchain breakthrough

Abstract image of network connections
  • Data protectionists are still hesitant with clear statements on blockchain technology
  • Bitkom hopes that the roundtable in the Federal Ministry of Economics and Technology (30 January 2020) will set the course for important decisions

In view of numerous open questions regarding data protection, the digital association Bitkom warns against delays in the use of blockchain technology in Germany. At the same time, Bitkom hopes that the roundtable on blockchain and data protection in the Federal Ministry of Economics and Technology will set the course for important decisions. "Blockchain technology has the potential to fundamentally change entire industries. Germany has the chance to take a leading role in Blockchain application and development," says Patrick Hansen, Blockchain Division Manager at Bitkom. "The German government has recognized this opportunity and decided on a Blockchain strategy to help the technology achieve a breakthrough. In order for this to succeed, however, we must clear up the existing legal uncertainties as quickly as possible". According to a Bitkom survey, 6 out of 10 companies (59 percent) say that the Blockchain is of great importance for the future competitiveness of German companies. At the same time, however, two thirds (66 percent) of the companies also state that data protection requirements are a challenge when using Blockchain in Germany.

With block chain technology, data is not stored centrally on a server, but decentrally, distributed in a network of computers. Technically it is ensured that data, once stored on a block chain, cannot be changed. This means that there is no need for a central instance that all market participants must trust, nor can a central storage location be attacked by criminals or paralysed by technical faults.  The more open and accessible the chosen block chain system, the greater the difficulties in implementing the data protection requirements.

When using the block chain, the European data protection regulation leaves open, among other things, whether the hash values and public keys urgently required for the technology must be considered personal data and whether the processing is subject to data protection requirements. It is also unclear whether the so-called miners and nodes necessary for the operation of a block chain are considered jointly responsible or contract processors under data protection law. However, legal certainty will be decisive in determining whether providers develop and use block chain technology and applications. Other data protection regulations can hardly be reconciled with block chain technology - which illustrates the lack of openness to innovation in data protection regulations. For example, the principle of memory limitation is at odds with the block-chain idea of being able to trace all transactions forever. The right of those affected to have their stored data corrected or deleted, as enshrined in the Basic Data Protection Regulation, also collides with the revision security of the block chain, which fundamentally excludes subsequent changes. "We urgently need clarity when using the block chain in Germany. A clarifying statement by the data protection authorities on the many open questions would already be a big step towards legal certainty," said Hansen.

Today, Bitkom published an overview paper on "Blockchain & Privacy" which is available for download (German):