EU report recognizes potential of permissionless blockchain in traditional finance

the EU recently released a report exploring the potential of permissionless blockchains in traditional finance (TradFi). The report suggests that permissionless blockchains should at least be considered as an option for traditional finance and financial market infrastructure, but should be used with caution.

The report suggests that these types of blockchains can be more neutral than private blockchains, thus encouraging competition. Permissionless blockchains with unrestricted access stand in stark contrast to the increasingly isolated permissioned blockchains. While permissionless blockchains have their drawbacks, there are many well-known solutions to address their challenges, especially by adding permissions at the smart contract level.

The report states that permissionless blockchains can provide an interoperability layer for L2 blockchains (including regulated blockchains). When smart contracts are on a single chain, they can be combined to create more complex functionality.

At the same time, the report also mentions the drawbacks of public blockchains, such as scalability, privacy, finality, and governance. It delves into each topic, as well as the controversial MEV issue.