Previous Giving Thought papers have looked at how cryptocurrency (e.g. Bitcoin) and blockchain technology could be used for social good. This new paper builds on that work by considering the impact that blockchain technology could have on the way in which charities are created and regulated.
The core argument of this paper is that many of the functions of charity regulation could be achieved (or even improved) without the need for standalone regulatory organisations. This could make regulation more effective while at the same time reducing costs. These are some of the key ideas we have explored in this paper:
- Verifying trustees: The blockchain could enable a new model of highly secure, user-controlled online ID, which would make it possible to automate all the relevant background checks needed to confirm an individual is a suitable trustee.
- Charities as blockchain entities: Charities could be registered on the blockchain using smart contracts which link all the relevant documents with the IDs of trustees.
- No separate register of charities: If charities are registered on the blockchain, there would immediately be a secure, continually updated public ledger recording all of their information. Hence a separate, dedicated register would be redundant.
- Real-time reporting: Annual reporting would no longer be necessary if transactions were conducted or recorded on the blockchain, as accurate, real-time information on spending would be available to everyone.
- Proactive enforcement: Smart contracts could be used to provide an early-warning system for breaches, allowing problems to be dealt with before they escalate.
- Governance-by-algorithm: laws and regulations could be embedded in the very smart contracts governing how charities operate, so that it would not be possible to break them and hence enforcement would become unnecessary
- Consensus-based regulation: the smart contracts in the system of governance-by algorithm could be agreed by consensus among the users of the system, with representatives of the judicial system retaining an appropriate arbitration role as expert “oracles”.
Download Block & Tackle – Using blockchain technology to create and regulate CSOs here>