Consumers and Health

Blockchain, true or false? Fraud in the corner

June 30, 2019

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Blockchain, true or false? Some consulting firms use this name to present quite different services and technologies, at the risk of exposing their clients to criminal and administrative challenges. Best to keep your eyes wide open.

Table of Contents

Blockchain. A decentralized, distributed and open system

Blockchain technology works through a concatenated series of ‘blocks,’ consisting of validated transactions that are interrelated through ‘nodes.’ Nodes are the servers through which each participant can access the system to check and approve transactions.

Bitcoin is the most famous example of blockchain. It is based on a cryptographic, distributed and decentralized system that functions as a public ledger where cryptocurrency transactions are recorded. This technology represents an open, decentralized and distributed system. Indeed:

– anyone in possession of a cryptographic key to access the blockchain can verify all information in the chain and distributed in equal copies among all participants in the system,

– all users who participate in transactions contribute to the management of the system, and the lack of barriers to entry ensures the transparency of the digital structure. The system cannot be controlled by a single party, as is the case in private (pseudo-)blockchains ,

– the transparency of the system grants no room for confidentiality of information that is in fact shared by participants,

– trust is inherent in the technology adopted, precisely because participants have direct access to the system and can check the veracity of the information in the block at any time,

– incorruptibility of the system, even in applications other than cryptocurrency (e.g., traceability of supply chains, processes and products, food and non-food), is guaranteed by digital notarization,

– digital notarization assigns a unique digital fingerprint (hash value) to the individual data entered by each participant in the public register,

– immutability comes from digital notarization. Whenever you try to change a piece of data (even due to unintentional error) the hash value changes accordingly. Users can thus verify whether the new hash value resulted from deliberate tampering.

These properties are unique and distinguish the blockchain-which is precisely public-from systems that are sometimes presented under the same name, despite having different features and functionality (see next section).

Blockchain… private?

The so-called ‘private blockchain’ – as opposed to the real blockchain – is a centralized, closed, non-distributed technology. Precisely because it is ‘private,’ it presents a barrier to entry. That is, it is accessible to a small number of users. And thus the number of nodes is limited, which cannot multiply unlimitedly as is the case in the authentic system (see previous paragraph).

The guarantee of the certainty of the uploaded data is assigned to a circle of users who check and validate the information contained in each block. Trust is not inherent in the system, but entrusted to those who check the record and those who certify it. The features and functionality of this system are therefore radically different. Because of this, it is useful to note the following:

– the closed, centralized system may be useful for companies or business groups that wish to share easily accessible data and information for their operators on an internal digital registry,

– the presentation of such a system vis-à-vis external parties (e.g., economic operators, consumers, authorities) cannot refer to the concept of blockchain, since precisely it is a different technology.

Legal Reflections

Propose as ‘guaranteed‘ or ‘ blockchain certificate’ a product whose traceability has instead been registered with a technology that does not correspond to the distinctive requirements of such a system may constitute the crime of fraud in trade, punishable under Article 515 of the Criminal Code by imprisonment of up to 3 years and an administrative fine of not less than €103. As well as entailing the administrative liability of the entity in whose interest the person acted (pursuant to Legislative Decree 231/01).

In fact, fraud in trade consists of the delivery, sale or holding for sale of a movable thing other than that regularly agreed upon in kind, origin, source, quality or quantity. The crime is perfected even in the absence of artifice or deception, and it is not necessary for the fraudulent conduct to take the form of an injury to the consumer’s assets, but it is sufficient that the protected legal asset-the correspondence between what was promised and what was actually offered-was threatened. (1)

‘For the purpose of perfecting the crime of fraud in trade, the failure to inform consumers about the product they intend to purchase is sufficient.’ (2)

In addition, there are specific violations of the ‘Food Information Regulation,’ in food, and violations of the Consumer Code for other product categories. (3) The purchaser, must always be given true, clear and understandable information about the essential characteristics of the products as well as those that are claimed. Especially in the event that they are faced with a choice between seemingly similar products that are not easy to distinguish except on the basis of ‘promises’.

Dario Dongo and Melissa Bozzolini

Notes

1) See Cass. Pen. sect. III, 16.7.15 no. 4027.
2) See Cass. Pen, Sect. IIII, no. 899/ 15, Cass. Pen. Sect. III, no. 5474/2013
(3) See reg. EU 1169/11, Articles 7 and 36. For penalties see the free ebook ‘1169 Penalty. Reg. EU 1169/11, food news, controls and penalties’, at https://www.great italianfoodtrade.it/libri/1169-pene-e-book-gratuito-su-delitti-e-sanzioni-nel-food