Organizations have been affected by the General Data Protection Regulation (GDPR) regulation. This also includes blockchain and cryptocurrency companies which simply have to ensure that their infrastructure is fully GDPR compliant. To see how this has affected privacy within the world of cryptocurrencies as a whole, we will dive deep into everything that is currently happening around GDPR as well as the world of cryptocurrencies.
Blockchain, Cryptocurrencies, and Everything In-between
One of the most fundamental aspects of cryptocurrencies, and, well, one of the main reasons as to why it is so popular and widely used is due to its privacy. You see, its encryption makes any data unreadable to others who do not have the decryption key, this key will return the encrypted data to its original context, and only then it can be read.
Transactions that are once written to the blockchain are unchangeable, and they cannot be deleted. This would corrupt the blockchain as a result.
Now, the Data Subject Access Requests or DSAR are one of the data subjects’ rights that are conferred under the GDPR. What you need to keep in mind is that with a blockchain, an individual can review the complete trail of cryptocurrency transactions. This gives complete transparency throughout all of the blockchain as well as the cryptocurrency transactions which are written to the public blockchain. However, when we take a moment to discuss private blockchains, things are different, as the access becomes limited to those who have the private key only.
Within a blockchain, once a transaction is written, it is impossible for it to be deleted or canceled. The blockchain can only be appended to, however, the existing data will remain unchanged. What this means is that any time you transfer Bitcoin or Ether, the action cannot be changed once the transaction has been committed to the blockchain.
GDPR Never Anticipated Blockchain Technology
When we take a look at the regulations and rules of the GDPR, they are documented as giving people the right to have their personal information erased. Organizations need to perform a GDPR audit on a regular basis in order to identify the key risks as well as determine how to mitigate them. Another element is how your data can be transferred out of the EU. This can be easy to manage with websites, however, when we take cryptocurrencies and blockchains into the equation, this can become complex as there is no control over where the nodes are hosted. These can be anywhere, on a global scale.
The point here is that, when the GDPR regulations were finalized, blockchain wasn’t really as evolved as it is today, and as such, the people didn’t really take it into consideration. These regulations assumed that it would always be possible for data privacy to be maintained by deleting unwanted data. With the data written on a blockchain, however, it cannot be erased.
Ensuring that Blockchains and Cryptocurrencies are GDPR Compliant
GDPR can affect what can actually be stored on the blockchain. In other words, if a blockchain were to be compliant with GDPR, personal data wouldn’t be written on it. The data cannot be amended or erased once it is written, so it would not be compliant.
Organizations have to put in place GDPR compliant policies as well as procedures so that they can ensure they are compliant.
One of the main possibilities when it comes to a solution to this issue would be for blockchain transactions to not store personal data on the blockchain, but store it externally to the blockchain where it will be linked by a reference generated within the blockchain.
Let’s assume that you have a software system that can store transactional data on a blockchain. If you want to ensure that you are GDPR compliant, the personal information related to cryptocurrency transactions has to be stored outside of the blockchain but implemented with a high level of security.
This system would essentially send a request for the personal data, where the request would be verified and checked in order to ensure that it has the permission to view the data. If it is valid, then a link Is returned which will send the software a key to access the data that is stored offline. Through the usage of this link, the software can essentially update the personal information or erase the data if requested, which will ensure compliance with GDPR. The system can verify any cryptocurrency transaction data and know if it has been tampered with or corrupted by comparing its hash value to the one provided by the blockchain. If the two end up matching, this ensures data privacy.
These workarounds would ensure that the method is completely GDPR compliant, and the possibility of removing data in line with GDPR regulations will be present. However, blockchains end up losing transparency of data, which is a fundamental part of them. Once the data is stored offline, it will no longer be easy to identify who has access to the data. Furthermore, the ownership of data that is stored on the blockchain will no longer be clear. This is due to the fact that once the data is stored outside of it, the ownership will no longer be clearly identified. It is still a requirement to have a Peer-to-peer integration as well on top of this.
GDPR intends to return ownership of personal data to individuals, and one of the main elements of it is to have the right to have your personal data erased. The blockchain does rely on the encryption keys, so by not having access to them, this data is inaccessible. However, this does not allow you to clear or erase it, and the personal data will always be stored on the blockchain as a result.
However, if you want to implement blockchain into your business through workarounds, Blockchain Consultus can provide you with a pan-European legal, compliance, and strategy device for its implementation.