Additional Reading: On Regulations

Regulation is some form or other affects both macro and micro level of economies: including how companies operate, what is produced, and what we buy. Regulations come to play either pro-actively in anticipation of something or reactively after occurrence of an unwanted event. In most cases, they impose restrictions or mandates on how companies operate or interact with each other, and are drafted (enacted) by legislative bodies or by separate regulatory bodies (independent or government). Courts play an important role in implementing of the mandates and restrictions, by imposing sanctions.

There is a fundamental problem with transparency, traceability and accountability in many legacy processes. A part of the problem is technical in nature, caused by information systems across multiple organizations not being integrated, consequently participatory stakeholders in a process not having the same version of the truth and are unable to vouch that the information is legitimate and inviolable.

Courts can't impose sanctions on an organization unless it can prove legal culpability.

A blockchain can potentially help regulatory bodies by providing an undeniable (non-repudiated) non-violated (immutable) version of a shared ledger with every detail of every transaction necessary to verify culpability.

In fact a self executing code (smart contract) may incorporate all regulatory requirements and invalidate transactions that violates an agreed requirement.

Regulations should not be considered all "bad" for doing business. In fact, Regulatory Capture Theory suggests that the regulations of enhances the interest of (or benefits) the regulated. [A not so honorable mention is from the cigarette industry: the regulatory restrictions on cigarette advertisement actually benefited the cigarette companies. Since no one got to advertise, everyone saved money (sunk cost) on advertisements. You may want to learn about it in Game Theory.]

Note: Smart contracts still don't have the same status as a Legal document, but it can be used to automate checks and invalidate non-compliant transactions.