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Author's profile photo James Zdralek

False Dilemma of Innovation or Regulation (9th in the series)

What if the world ran on new classes of digital currency that are inflation resistant, create price stability, discourage bubbles and deflationary spirals? What if they could protect citizen’s savings without reducing liquidity when they save rather than spend?

This blog series examines issues and possibilities in the changing banking and monetary systems. Rapid change could occur in the near future due to the ongoing digital transformation. What are the possible outcomes? Which future will happen? How are you prepared?



How can we regulate a new monetary system where currencies can compete fairly? Futures-backed currency, introduced in the first of this series of blog posts, is a type of currency that can pay interest direct to people holding the currency. This type of currency would thrive in a well-regulated fair marketplace for currency.


The extreme views of some libertarians and anarchists when discussing blockchain technology come across as a call for a free state where current laws do not apply. Lawlessness is not the ideal soil in which to sow the seeds of innovation. New ideas, invention and experimentation advance when there is a reward system in place that encourages improving on the status quo. Structuring the competition and reward system in a society so that it improves the living standards of everyone cannot be reduced to a simple trade-off between regulation and freedom. A conflation occurs and arguments seem to combine free market economics and libertarian politics without differentiating between the marketplace and the ballot box. Competition needs to be fair to prevent monopolies. Regulation ensures a fair marketplace and protects the innovators. A well-regulated marketplace cannot function well in an anarchy or kleptocracy. Fair and equitable government leads to fair and equitable market places.


Once a flicker of novelty is exposed to the world there are three paths. The paths of under, over and appropriate regulation. A complete lack of regulation will crush innovation through charlatans and substandard imitation. Any improvement in a product will be diluted in the flood of snake oil sales pitches and cheap knock-offs. This is the very reason for the development of guilds, patents, copyrights and trademarks. Protections for those who innovate so they can benefit from the risks they take. Allowing them a unique mark so they can be recognized by their consumers for their superior products. Over regulation will crush innovation in different ways. Excessive paperwork and red tape that only corporations can afford to follow will prevent the garage based innovators. Protections and rules that prevent competition and ensure a captive market for established organizations will lead to monopolistic like structures. The ideal path of appropriate levels of regulation should be there to encourage the flickers of innovation into the flames of invention. Protecting innovators from imitation and charlatans as well as shielding them from large predatory industries.


Libertarians tend to use the internet as an illustration of where freedom reigns and regulation does not exist. It is not a wild west. The standards of law are applied to behavior. Censorship laws prevent your ISP from filtering your access to the internet. Libel laws apply in certain countries. Large service providers are required to keep traffic records so that law enforcement can subpoena them and track down illegal activity. There are also regulations through internet authorities that maintain technical standards. Often access to this bastion of freedom is supplied to the public by large corporations that ask to be paid for the service. The irony for many libertarians is that the free and unfettered access to the internet is usually through universities or libraries who are supported by taxes.


Society will thrive through regulations that all of us put in place to protect each other. Regulations that protect those who lack power are appropriate and justified. Regulations that protect the powerful and are intended to concentrate or maintain power are inappropriate and unjustified. This applies to either situation where the powerful and a majority or a minority.


There are areas where additional regulation would help expand blockchain adoption and increase the use of cryptocurrencies. Audit requirements would be one among many. There are other areas where people treat cryptocurrencies as unregulated when it in fact already is. Rules are in place that require individuals to report income from all sources so that their due to society is paid. It is irrelevant to a tax authority that your business is in the cloud. You live on the ground where jurisdiction is applicable.


There are also areas where regulation has gone too far. National currencies can be considered badly regulated since they typically have a monopolist protection. A currency that can compete with the government should be able to compete on the same level playing field.


The paper linked below looks at creating a fair market value for currencies that can address inflation and natural interest rates. Stay tuned for additional examples of how this theory can help.



This blog series will be a forum to discuss different concepts and areas where these theories can be applied. Subscribe to stay informed.

Read more about the future of money: Full article. 



The Team

The SAP Canada Ideation Centre’s mission is to help Canadian leaders of business, academia, government and non-government organizations develop a deeper understanding of the digital forces driving the economy today. Ideation Centre members strive to bring forward made-in-Canada fact-based arguments that challenge decision makers to think about the potential of organizational shifts that were not possible in the past. The Ideation Centre is fueled by thought leaders from the Industry Value Engineering team at SAP Canada. This diverse team of industry and value advisors helps organizations of all sizes and industries take advantage of technological innovations to create incremental economic value by adopting new business models and optimizing business processes, from the back office to the boardroom, farm to storefront, mine to operating room, etc.



The Author

Over his decades-long career in the high tech industry, James Zdralek has concentrated on usability, user research and design thinking while building a reputation as a visionary innovator. Merging his expertise in product design, human behavior, and economics, and through his focus on improving accounting tools, James envisions ideas that can drive tectonic shifts in financial and monetary systems. He holds a bachelor’s degree in Industrial Design, a masters in Psychology, and a diploma in Professional Accounting.

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