Blockchain presents a challenge to the authority of regulators and law enforcement officials everywhere. Unlike with centralized entities, there is no manager in charge of a blockchain so there is no representative to task with compliance in the event of a violation. The same is true of DAOs more generally: once a DAO unleashes an automated smart contract no one can exert control, not even the creators.
Jurat levels the playing field. With Jurat solutions, regulators can bring enforcement actions directly against a decentralized protocol or smart contract, there is no need for a centralized manager. Court orders will trigger any transaction or contract call needed to bring about compliance with rules or regulations. This method provides effective vindication of legal rights in all decentralized environments (including Web3). Moreover, Jurat accomplishes on-chain enforcement in a completely decentralized manner that keeps all of the blockchain’s native protocols intact. Therefore, on-chain enforcement comes without any downside. This technology is fully discussed in the Jurat Whitepaper.
With blockchains and DAOs increasingly falling under agency jurisdiction, it makes sense for officials to begin mandating that regulated entities include on-chain enforcement as a matter of course.
Most policy initiatives for reining in blockchain lawlessness rely on extremely robust implementation of KYC/AML so that regulators can engage directly with the blockchain users in the physical world, a burdensome but necessary process. These initiatives are correct but incomplete. KYC/AML alone cannot solve blockchain lawlessness because un-hosted wallets transact amongst themselves with impunity.
On-chain enforcement via court orders provides a necessary additional tool that does not rely on the identification of anonymous account holders to effectuate lawful compliance. Rather, regulators can bring enforcement actions against the wallets themselves, remedying illegal transactions and, if necessary, seizing illegal assets.
The “same activity, same risk, same rules” principle is often recited but regulators are lacking the tools to apply it to blockchain. Jurat’s court connectivity solves the problem and lets regulators use rule-making and enforcement actions, just like with centralized companies.
Blockchains that incorporate Jurat, like JTC, include court connectivity and are already friendly for regulators. Otherwise, officials can use the rulemaking process to require regulated entities to include court connectivity in their smart contracts on and layer 1 protocols. DAOs that violate such rules can be effectively walled off from the compliant companies and DAOs.
No one is more motivated to see the law enforced than a person who has been injured. That is why most regulatory regimes rely on at private enforcement to help effectuate policy goals. The threat of private enforcement causes most people to follow the law from the outset.
But this piece is missing when it comes to blockchain; victims have no effective means to enforce their legal rights. That is why hackers demand ransomware payments in bitcoin. Rules that require regulated entities to include on-chain legal enforcement are a natural solution. For example, if an ICO issuer violates securities laws, the defrauded buyers could sue the contract that issued the coin. The same is true for DEXs, DeFi, and stablecoin protocols – each is built of smart contracts that can be brought under court control.
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