If you were still doubting the interaction between blockchain and antitrust is promising, Joe Biden just made it obvious. On March 9, 2022, President Biden released an executive order on “ensuring responsible development of digital assets.” There is a lot to be said about this order, which raises many good points. Biden strikes an interesting balance between underlining blockchain potential while addressing the main issues the technology creates. In this context, the President calls for creating a blockchain-friendly legal environment. In this short article, I focus on what the order says about competition policy and antitrust law.
1. Competition policy in Biden’s executive order
At a broad level, one of the order’s main objectives is to “reinforce United States leadership in the global financial system and in technological and economic competitiveness.” Biden recognizes that the U.S. dollar prevalence has put the USA in a strong position. His objective is to retain leadership once crypto and digital assets are spread. He presents us with two complementary strategies. First, Biden wants to foster a central bank digital currency (“CBDC”). Second, he wants the United States to attract investments and innovators. Although the order does not explain why blockchain adoption is growing, Biden recognizes blockchain propagation is a given, so the country better adapts. In this context, the head of the Federal Trade Commission (“FTC”) is asked to contribute to “a framework for enhancing United States economic competitiveness in, and leveraging of, digital asset technologies” and “to consider what, if any, effects the growth of digital assets could have on competition policy.”
In my view, the growth of digital assets decentralizes markets and thus complements competition policy. As I defend in Blockchain + Antitrust, we must explore the synergies between blockchain and antitrust. Public permissionless blockchains offer a transactional infrastructure without a pilot in the cockpit, which means no pilot can take the plane in an anti-competitive direction (i.e., leverage market power). Therefore, all transactions implemented within these blockchains will escape most antitrust infringements (see more detailed explanations). Antitrust agencies will have fewer practices to detect, which we can only welcome knowing that they detect between 10 to 20% of antitrust infringements. By contrast, private blockchains feature a clear pilot in the cockpit, which eliminates the benefits I just described. Simply put, let us push for public permissionless blockchains’ adoption.
Besides, the order highlights the need for “interoperability with digital platforms.” To be sure, compatibility and competition with centralized ecosystems will define blockchain’s future (see this video). But let us not impose top-down interoperability. Recent history — and economists such as Jean Tirole — show that doing so often locks markets and industries in sub-optimal states.
All and all, President Biden is tasking the FTC — amongst other agencies — to come up with a report “on the implications of developments and adoption of digital assets.” The report shall offer normative proposals, “including potential regulatory and legislative actions, as appropriate, to protect United States consumers, investors, and businesses.” I couldn’t agree more that defining appropriate regulation is key to blockchain growth. In fact, I firmly believe that the Biden administration is taking the right approach by addressing blockchain potential together with the challenges it brings: policymakers need to understand blockchain potential if they want to regulate it properly. In general, tech regulation tends to focus on the sole issues, but blockchain (more than other technologies) requires a different approach. Blockchain central features (e.g., immutability, decentralization, distribution…) explain why it improves the common good, but these features also create legal challenges. Policymakers are facing the challenge to maintain these core characteristics while enforcing legal rules and standards (see here). The same goes for enforcers, which brings me to the enforcement of antitrust laws.
2. Antitrust law in Biden’s executive order
Biden’s order highlights the risk that “unfair and abusive acts or practices” (e.g., antitrust violations) will come out of the “increased use of digital assets and digital asset exchanges and trading platforms.” Logically, the more transactions there are, the more problematic transactions are found. Here, the FTC will find low-hanging fruits. First, I think the FTC should start with the practices directed by centralized players toward blockchain ecosystems. Remedies against centralized firms cannot endanger blockchain potential, quite the contrary. Second, antitrust agencies should tackle practices whose effects are visible in the so-called real space (e.g., companies using blockchain and smart contracts to collude outside the chain – in the “real space”) because consumer harm is simpler to prove than inside the chain, also because detection is easier. On the contrary, coming from a Darwinian perspective, I believe that the FTC and other antitrust agencies should be careful not to endanger blockchain survival by imposing remedies recentralizing blockchain ecosystems when tackling inside-the-chain practices (i.e., practices concerning the way blockchain runs, see examples).
Finally, Biden’s executive order stresses the need for law enforcement agencies to have a “sufficient oversight” “in detecting, investigating, and prosecuting criminal activity related to digital assets.” Giving agencies the expertise, budget, and capacity to investigate criminal cases is a good idea, but let us not forget that antitrust agencies (such as the FTC and DOJ Antitrust Division) must also have the capacity to investigate competition cases. In fact, competition claims are the fifth most common in the space (see here). Knowing that the number of leniency applications has been declining for several years, and that over 90% of antitrust cases before the U.S. antitrust agencies result from reactive methods (such as leniency), the U.S. federal government must better equip its agencies. If you are interested in the idea of using computational tools to augment the work of antitrust enforcers (when detecting, analyzing, and remedying practices), have a look at the Stanford Computational Antitrust project.
Overall, this order makes me a happy writer. It confirms the need to take competition policy and antitrust laws seriously when it comes to blockchain growth, potential and challenges. I now look forward to working with U.S. regulators in the coming weeks, and for the rest, you can always access my book for free (here) or watch this video series (here).
Dr. Thibault Schrepel
To quote this article: Thibault Schrepel, Competition Policy And Antitrust Law in Biden’s Blockchain Executive Order, Concurrentialiste, 16 March 2022
(yes, this is a product placement 🤗)