Malta: Blockchain & The General Data Protect. Regulation

Last Updated: 1 November 2017
Article by Alistair Facciol

Without a doubt, data is the new gold1. Blockchain, the most recent technological development taking over the world as we know it, is realizing the potential of data now more than ever. Yet, at the same time, many question whether the principles established in the General Data Protection Regulation 2016/679 ('GDPR') are compatible with the foundations of this new technology.

Blockchain first rose to fame in the ashes of the financial crisis of 2008, and was then adopted as the underlying technology of hugely successful platforms such as Bitcoin and Ethereum. Best described as a distributed ledger, blockchain allows the recording of information in blocks at a point in time, with new transactions being added to a block and connected to a previous block of information via nodes. This allows the information to be stored across a network, therefore moving away from the traditional approach of centralized data. This methodology also ensures that information is protected through a multi-level approach via encryption.

Blockchain's ingenuity might however prove to be challenging in the face of the GDPR. Firstly, its decentralized set-up automatically excludes the notion of a central entity – this is detrimental to the concept of accountability in that identifying a data controller would seem virtually impossible. The GDPR's applicability has been extended from that adopted within its predecessor, Directive 95/46/EU. Once it comes into force in May 2018, the principles established within the GDPR will be applicable to "the processing of personal data in the context of activities of an establishment of a controller or a processor in the Union, regardless of whether the processing takes place in the Union or not", as well as to "the processing of personal data of data subjects who are in the Union by a controller or processor not established in the Union, where the processing activities are  related to the offering of goods and services, irrespective of whether a payment of data subject is required, to such data subjects in the Union; or the monitoring of their behaviour as far as their behaviour takes place within the Union"2. This establishment principle becomes even more complex when one considers the existence of private blockchain and public blockchain. In the former, participants have been vetted, and therefore the data controller in this situation would arguably be the entity in charge of operating the private blockchain. Conversely, in a public blockchain, as the name implies, anyone would be able to access and add to the ledger, and therefore every node would be considered to be a data controller. Reconciling this notion with that of 'joint controllers' and the determination of respective responsibilities in a transparent manner as expounded in the GDPR is inconceivable to say the least.

Secondly, the material scope of the GDPR is that of processing of personal data, so for its principles to be applicable to a blockchain, the latter must process such personal data. Personal data is deemed to be any information relating to an identified or identifiable natural person3, account being had of the cost of and amount of time required for identification to take place. Here it is noteworthy to mention that the GDPR does not apply to anonymous data, but pseudonymised data which could be attributed to a natural person with the use of additional information still constitutes personal data4. With this in mind, the likelihood is that the data constituting the basis of the transactions carried out through blockchain is information relating to specific individuals, and despite the encryption tools employed allowing access to authorised individuals only, typically such data would merely be pseudonymised and would therefore still fall within the understanding of personal data under the GDPR.

The GDPR also attracted a lot of attention due to its inclusion of the much debated 'right to be forgotten', which was first recognised in C-131/12 Google Spain SL & Google Inc. v. AEPD & Mario Costeja Gonzŕlez. Officially referred to as the right to erasure, this allows the data subject to obtain from the controller the erasure of personal data where he has withdrawn consent, the data has been unlawfully processed and where the data is no longer necessary for the purposes for which it is collected or processed, amongst other grounds5. As highlighted above, identifying the data controller on whom these responsibilities would lie is no easy task. Furthermore, especially in public blockchains, actually carrying out this erasure of data as requested by the data subject is virtually impossible due to the innate blockchain architecture. Erasing data stored on a blockchain would mean that the process must occur at every node, wherein the blockchain would have to be unmade one block at a time up until the point where the data was first entered, and then rebuilt again, across the whole network. One of the arguments put forward in this regard has been that the data is necessary for the processing purpose since the blockchain architecture demands a perpetual written chain.

This architectural issue also ties to the notion of Privacy by Design as included within Article 25 of the GDPR. Developed by Dr Ann Cavoukian in the late nineties, this approach "does not wait for privacy risks to materialise, nor does it offer remedies for resolving privacy infractions once they have occurred – it aims to prevent them from occurring"6. In the advent of technological development and increased data processing, the EU legislators sought to include this notion within the GDPR, and in fact this imposes an obligation on the data controller to implement technical and organisational measures in line with data protection principles, both at the time of the determination of the means for processing as well as during the processing itself. At present, although data is often anonymised and encrypted, blockchain architecture seems to be incompatible with the notions of data minimisation, for example. Nevertheless, it must be noted that the obligation set out in the GDPR is not inflexible, in that in fact it takes into account the "state of the art, the cost of implementation and the nature, scope, context and purposes of the processing as well as the likelihood of risks to the rights of data subjects.

Created as part of the Data Protection Reform Package, the GDPR is meant to revitalize innovation and facilitate business development, but it is still unclear if the concepts underlying blockchain can be reconciled with the data protection principles and privacy concerns that have led to the promulgation of the GDPR – we will yet have to see.

Footnotes

1 Neelie Kroes, Press Conference on Open Data Strategy, Brussels, 12th December 2011, as accessed on http://europa.eu/rapid/press-release_SPEECH-11-872_en.htm?locale=en

2 Article 3, GDPR.

3 "An identifiable natural person is one who can be identified, directly or indirectly, in particular by reference to an identifier such as a name, an identification number, location data, an online identifier or to one or more factors specific to the physical, physiological, genetic, mental, economic, cultural or social identify of that natural person", Article 4(1), GDPR.

  • Here it is also noteworthy to mention the case C-582/14 Patrick Breyer v. Bundesrepublik Deutschland, which established that dynamic IP addresses, under certain circumstances, constitute personal data where a third party has the additional data necessary to identify the individual.

4 Recital 26, GDPR.

5 Article 17, GDPR.

6 Ann Cavoukian, Privacy by Design: The 7 Foundational Principles – Implementation and Mapping of Fair Information Practices, as accessed on https://www.ipc.on.ca/wp-content/uploads/Resources/pbd-implement-7found-principles.pdf

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Alistair Facciol
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.