Benoît Abeloos, Policy Officer at the European Commission gives a compelling glimpse into how virtual currency could affect the economy
The publication of the white paper, “Bitcoin: a peer to peer cash system” (1) in October 2008 by the mysterious Satoshi Nakamoto (a fake identity), will be seen in the history of technologies as a disruptive milestone. By combining technologies which were known for years, the author created the first virtual currency and a technology – blockchain – which enabled the exchange of e-money without the usually unavoidable intermediaries: banks.
Developers and entrepreneurs then saw numerous new opportunities in the financial sector, especially as new regulations opened new possibilities and business models: RegTech, peer to peer payments, peer to peer lending, exchange of securities, crowdfunding, initial coin offerings, debt trading, etc.
People soon realised that the broader family of technologies called ‘distributed ledger technologies’ (of which blockchains are a subset) could be used not only to build virtual currencies or offer new financial services, but by exploiting their characteristics, explore new possibilities in many different areas and industries, such as the Internet of Things, energy, health, identity management, taxation, e-government, management of intellectual property and copyright, smart homes and cities. These technologies provide immutability, security and privacy of the data through encryption while offering their ubiquitous distribution to all nodes.
The European Research and Innovation community didn’t wait long to propose, in the frame of the EU Horizon 2020 (2) programme, blockchain based research projects. D-Cent (3) (Decentralised Citizens Engagement Technologies) project, which was the first of its kind, was established as early as October 2013. The aim was to actively foster open source and distributed platforms to encourage direct democracy and economic empowerment.
In the same vein, Decode (4) provides tools that put individuals in control of whether they keep their personal data private or share it for the public good. MyHealth- MyData (5) explores the very important political objective to empower patients to manage their health data. Bloomen (6) provides an innovative way for content creation, sharing, monetisation and copyrighting, and symbIoTe (7) a single mobile application to interact with different IoT platforms. The next Horizon 2020 framework programme will, from 2018 to 2020, provide more opportunities, through calls for proposals, to innovate with blockchain, for example, in e-government, FinTech, Next Generation Internet, IoT, Smart Homes or Media.
The Commission is also exploring the use of distributed ledger technologies in relation to its policies. The first investigations concern the possible creation of a financial transparency gateway, with a pilot being tested, to improve the efficiency of financial data reporting, or tax and customs data collection. Application of blockchain to the CO2 emission trading system, or the circular economy, could also be considered.
In this new reality and a digital market where the stance ‘the winner takes it all’ has too often become a standard, it is important for the European Commission to put in place policies avoiding the emergence of de facto standards, which may limit competition and keep customers, (public and private) locked with single vendors. Moreover, it will be very difficult for service providers to develop applications and services which can seamlessly operate on different platforms if they are proprietary.
These are the reasons why the European Commission, as part of the Digital Single Market strategy, is active in fostering the development and the adoption of international standards. It has established a liaison with the ISO Technical Committee 307 on Blockchain and Distributed Ledger Technologies, which has been set up recently. The Commission organised a policy and standardisation workshop (8) on 13 September 2017 with European stakeholders representing the industry, governments, standards development organisations, citizens, and NGOs. European Standardisation Organisations (9) have been approached to take a leadership role to identify EU specificities with regards to Blockchain and produce a white paper.
Is blockchain going to deliver on its promises? Is “blockchain going to help to end hunger” as I saw on a slide recently? Is it going to be the new internet? Is a bubble being formed, with the frenzy of ICOs reaching summits of capital raising? Aren’t we on the top of a hype cycle where inflated expectations are culminating? Are we going to soon reach the trough of disillusion?
All these statements probably have their part of veracity. The truth is that we need to validate the pertinence of blockchain for every kind of use we can envisage, compared to existing technologies. New business models need to be validated by real businesses and pilot projects. Lawyers and policymakers need to carefully assess several legal questions. Is the apparent contradiction between blockchain immutability and the right to be forgotten a real issue? Is the solution technical or in the interpretation of the law? Can smart contracts be legally enforced, stopped, or reversed without changing the laws and/or the technology? What is the appropriate governance for blockchain?
The Commission will launch a European Blockchain Observatory and Forum10 (early 2018) to help answer these questions and explore the unknowns of this fascinating domain. It will also prepare policy initiatives to help EU start-ups and established companies to seize the opportunities. And grow.
(9) CEN, CENELEC and ETSI
Policy Officer, ICT Innovation
European Commission, Digital Single Market