Now is the Time to be Forward Looking

Blockchain can realize common national and community outcomes, if only we adopt it.

by A Fattah Yatim

Article courtesy of the author who serves as the Chairman of Malaysia’s National Standards Technical Committee on Blockchain and Distributed Ledger Technologies (codenamed TC/G/15). It is first published in Fattah Yatim’s Mindshare.


All nations have several common needs and objectives for the betterment of their citizens, communities and commerce. The European Parliament passed a resolution called “Distributed ledger technologies and blockchains: building trust with disintermediation” that affirms the major benefits of Blockchain and DLT are in government processes and services, industry and cross border use cases. Countries trading with each other must ensure they will be ready to engage using the Blockchain platform or risk losing competitiveness and sustainability, with businesses going to other countries that are ready.” … Excerpt

Name any country in the world and there are bound to be a common set of objectives, needs and outcomes to be achieved by such countries for the betterment of their citizens, businesses and communities. These will include governance, efficient government services, transparency, minimise corruption, consumer and business protection, narrowing the community divide, security and many others.

Blockchain and Distributed Ledger Technologies (DLT) are positioned to provide the base to address all these issues, led by a strong leadership and supported by the necessary policy, regulatory alignments, ecosystem set up and incentives. Whichever country that adopts a holistic approach to synergise the Blockchain and DLT development in these areas will most likely be highly efficient and competitive in years to come, and survive competition with other countries that are already moving in that direction.

Following my last blog post six months ago titled Malaysia’s Ministerial and C-Levels to Decide on Blockchain which was intended to prompt and provide follow up actions by our leaders, the significant developments in other parts of the world in recent months prompted me to prioritise focus on those developments.

I choose here to discuss about the European Parliament’s Resolution on Blockchain titled “Distributed ledger technologies and blockchains: building trust with disintermediation”, which was released on 3rd October 2018. The 11 page Resolution is comprehensive covering what Blockchain and Distributed Ledger Technologies (DLT) can achieve or facilitate for nations/citizens/communities/businesses, and also the policies and directives for the EU to follow through.

Why focus on the EU? The Resolution which was passed by the European Parliament (which has 751 seats from 28 member countries) affirms that the true and major benefits of Blockchain and DLT are in government services and processes, industry and cross border use cases; and implementation and planning for Blockchain and DLT must be steered from the highest level.

Also, the EU is Malaysia’s third largest trading partner after China and Singapore. Between January and October 2018, trade with the EU expanded 7.8% year on year to RM 153.31 billion. Exports grew 5.5% to RM 83.14 billion, driven by higher exports of manufactured metal, chemicals and chemical products, rubber products as well as iron and steel products, while imports from the EU rose 10.7% to RM 70.17 billion, according to Martrade as reported in The Edge Malaysia (Dec 24 to Dec 30, 2018 edition).

The European Parliament also later passed a resolution on trade titled “Blockchain: a forward-looking trade policy” on 13 December 2018. This 10 page document which focuses on trade facilitation and related matters will be discussed in a future blog post.

Hence if EU moves with Blockchain and DLT with its cross border trade initiatives while Malaysia lags behind, Malaysia may eventually be disadvantaged in world trade efficiency if other countries are more ready to fill the trade efficiency gap faster with Blockchain and DLT.

To do justice to the Resolution, readers are encouraged to read the full text to understand the full context, comprehensiveness and thrust of the Resolution. This blog will only discuss some parts of the contents in the resolution that should be of universal interest.

Common National and Community Outcomes or Needs

The following paragraphs state, in my view, the desired outcomes that any nation/citizen/community will want to achieve or enhance. These outcome points (grouped into outcomes sets A to H) will be followed by the respective European Parliament Resolution statement that addresses the desired outcome groups.

Desired outcomes A :

  • Improve key sectors of economy
  • Improve quality of public services
  • Provide high-level transactional experience to consumers and citizens
  • Reduce costs to consumers and citizens.

The Resolution states : “… DLT can significantly improve key sectors of the economy as well as the quality of public services, providing high-level transactional experience to consumers and citizens and reducing the costs incurred by them;”.

Desired outcomes B :

  • Transparency
  • Reduce corruption
  • Detect tax evasion
  • Allow tracking of unlawful payments
  • Facilitate anti-money laundering policies
  • Detect misappropriation of assets.

The Resolution states : “… DLT can provide a framework of transparency, reduce corruption, detect tax evasion, allow the tracking of unlawful payments, facilitate anti-money laundering policies, and detect misappropriation of assets;”.

Desired outcomes C :

  • Citizens to control their own data
  • Citizens to decide what to share and what to restrict viewing.

The Resolution states : “… Distributed Ledger Technology (DLT) and blockchain can constitute a tool that promotes the empowerment of citizens by giving them the opportunity to control their own data and decide what data to share in the ledger, as well as the capacity to choose who else can see them;”.

Desired outcomes D :

  • Improve transaction cost efficiency
  • Transaction transparency
  • Reshape value chains
  • Improve organisational efficiency.

The Resolution states : “… DLT is a general-purpose technology which can improve transaction cost efficiency by removing intermediaries and intermediation costs, as well as increasing transaction transparency, also reshaping value chains and improving organisational efficiency through trustworthy decentralisation;”.

Desired outcomes E :

  • Improve trust and transparency
  • Secure transactions.

The Resolution states : “… DLT can introduce, through the necessary encryption and control mechanisms, an IT-based paradigm that can democratise data and improve trust and transparency, providing a secure and efficient route for the execution of transactions;”.

Desired outcomes F :

  • Integrity of data
  • Tamper-evident audit trail
  • New models of public administration
  • Improved safety.

The Resolution states : “… DLT makes it possible to ensure the integrity of data, and the ability to provide a tamper-evident audit trail permits new models of public administration and helps bring about improved safety;”.

Desired outcomes G :

  • Security of data
  • Integrity of data.

The Resolution states : “… blockchain is only one of several types of DLTs; whereas some DLT solutions store all individual transactions in blocks which are attached to each other in chronological order in order to create a chain which ensures the security and integrity of the data;”.

Desired outcome H :

  • Resilient to cyberattacks.

The Resolution states : “… cyberattacks are considered to have less impact on such chains, as they need to successfully target a large number of copies rather than a centralised version;”.

Required Environment to Facilitate Blockchain and DLT Implementation

Blockchain and DLT implementation requires the appropriate support environment and ecosystem for the successful integration and acceptance by the community and businesses. These are broken down into the ‘Required Framework and Resulting Environment’ and ‘Required Regulatory Environment’ factors below, followed by the relevant EU Resolution statements.

Required Framework and Resulting Environment :

  • Innovation friendly
  • Provides legal certainty
  • Promote consumer, investor and environmental protection
  • Increase social value of the technology
  • Reduce digital divide
  • Improve citizen digital skills.

The Resolution states : “… DLT is a still evolving technology which necessitates an innovation-friendly, enabling and encouraging framework that provides legal certainty and respects the principle of technology neutrality, while at the same time promoting consumer, investor and environmental protection, increasing the social value of the technology, reducing the digital divide and improving the digital skills of citizens;”.

Required Regulatory Environment :

  • Regulatory approach to be innovation friendly,
  • Enables creation of innovation-friendly ecosystems and innovation hubs.

The Resolution states : “… the regulatory approach toward DLT should be innovation-friendly and based on the principle of technology neutrality, enabling also the creation of innovation- friendly ecosystems and innovation hubs;”.  

Policy and Directives

The Resolution further provides policy statements and actions to be followed up including training and skills development, rapid regulatory and legislative action, remove existing barriers to implement Blockchain, convergence and harmonisation of regulatory approaches, enhanced legal framework, education and research and raising awareness to all parties. Please read the Resolution for details. It perhaps require a whole separate blog post to cover these details.

EU Blockchain Initiatives

The European Parliament Resolution mentions several initiatives already underway including:

  1. Blockchain4EU: Blockchain for Industrial Transformations. The 111 page document highlights (among other issues) with some details, the Blockchain Possibilities in Nine Industrial Sectors as follows:
    • Space and Aeronautics
    • Food Processing and Distribution
    • Transports and Logistics
    • Health and Biopharmaceuticals
    • Creative Industries
    • Energy
    • Information Technologies
    • Advanced Manufacturing
    • Natural Resources.
  2. EU Blockchain and Observatory Forum. This Forum “aims to accelerate blockchain innovation and the development of the blockchain ecosystem within the EU, and so help cement Europe’s position as a global leader in this transformative new technology”.
  3. Blockchain for Social Good. The infographic mentions that “The EU will award €1 million to each of the best five decentralised solutions based on blockchain technologies to tackle social innovation challenges.”
  4. Study on the Opportunity and Feasibility of an EU Blockchain Infrastructure. The study initiated a year ago mentions that The EU Commission is looking carefully at blockchain developments with the objective of setting the right conditions for an open, innovative, trustworthy, transparent, and EU law compliant data and transactional environment.”

Conclusions and Follow Up

It would not be an exaggeration to say that all the desired outcomes (grouped into A to H) and the required framework and regulatory environment for the successful implementation of Blockchain and DLT listed above are common for all nations/citizens/communities. Hence whatever Resolution statements that relate to those desired outcomes are applicable to all nations/citizens/communities. Malaysia need only to adopt and adapt those statements for its specific situation, arrive at the appropriate policies and chart out the appropriate strategies and implementation plans. The policy statements and considerations from the Resolution are also applicable and can be adapted.

Likewise a lot of lessons can be learnt from the experiences of the various initiatives in the EU ie Blockchain4EU, Blockhain Observatory and Forum, Blockchain for Social Good and the EU Blockchain Infrastructure Study.

The European Parliament Resolution affirms the view that the true and major benefits of Blockchain and DLT are in government services and processes, industry and cross border use cases, and implementation and planning for Blockchain and DLT must be steered from the highest level to provide the right environment and ecosystem for Blockchain and DLT projects to be built and implemented. Malaysia should not wait any longer and its leaders must move on to initiate and steer the development of policies and plans to chart Malaysia’s course in the world arena with Blockchain and DLT, in order for Malaysia to be competitive and relevant.

Blockchain as a foundational technology is one of its kind that appears in very untraditional ways. It should therefore be addressed and treated in very untraditional ways and not in the ways that Malaysian planners are used to. The European Parliament Resolution clearly illustrates the transformational opportunities enabled by Blockchain and DLT implementation, which then requires a broad and different mindset to address the matter holistically.

References

  1. The Edge Malaysia, Dec 24-Dec 30, 2018
  2. European Parliament resolution of 3 October 2018 on distributed ledger technologies and blockchains: building trust with disintermediation. http://www.europarl.europa.eu/sides/getDoc.do?pubRef=-//EP//NONSGML+TA+P8-TA-2018-0373+0+DOC+PDF+V0//EN
  3. Blockchain4EU: Blockchain for Industrial Transformations. http://publications.jrc.ec.europa.eu/repository/bitstream/JRC111095/kjna29215enn.pdf
  4. EU Blockchain and Observatory Forum https://www.eublockchainforum.eu/
  5. Blockchain for Social Good https://ec.europa.eu/research/eic/pdf/infographics/eic_horizon-prize-blockchains.pdf
  6. Study on the Opportunity and Feasibility of an EU Blockchain Infrastructure https://ec.europa.eu/digital-single-market/en/news/study-opportunity-and-feasibility-eu-blockchain-infrastructure
  7. Blockchain Beyond the Hype, A Practical Framework for Business Leaders http://www3.weforum.org/docs/48423_Whether_Blockchain_WP.pdf

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