7. AWAY: International Blockchain best practice
In researching international governments' activity in DLT we made use of published information and attendance at industry conferences. In the months since this report was commissioned many more nations, regions and cities have come forward with initiatives specifically or implicitly targeting DLT.
These initiatives are recent, and in most cases start with research then proceed to action via practical "proof of concept" projects, typically in co-operation with local commercial enterprises who are concerned with developing their own solutions. In some cases, the initiatives seek to support inward investment by running challenges and competitions to attract funded international start-ups.
In 2018 many of these projects are moving into pilot phase. To our knowledge the Republic of Estonia is alone in having a production service established for several years.
Where more detailed investigation has been undertaken, and where we have made contact with the appropriate government personnel, we include detail.
Estonia is a small nation of just over a million people with a reputation as a global leader in e-government. Citizens of Estonia enjoy a streamlined experience across their digital interactions with the state. The "e-Estonia" narrative has driven Europe's most efficient and effective digital public service, putting it in the driving seat of the European Commission's digital single market, and sustaining Estonia's tech start-ups at home, and its international growth aspirations.
"Even though there are only a little over a million of us, thanks to Estonia's capabilities, we can make ten million payments, perform ten million requests and sign ten million contracts in just ten minutes. Even ten times larger states cannot beat us."
—Kersti Kaljulaid, President of Estonia
In 2007 Estonia suffered a nationwide cyberattack. Government websites and digital services were defaced or unavailable. Following the attack, there were worries that sensitive citizen data may have been compromised. By this point Estonia's public services were already in an evolved state of "digitalisation" to meet the cost and efficiency imperatives of the small nation. Services such as tax and voting were already online. Unlike its peers which could rely on disconnected nature of paper process, Estonia needed solutions to assure continuity and integrity of citizen data.
In the aftermath of the attack steps were taken—NATO established the Cooperative Cyber Defence Centre of Excellence in Tallinn. In 2008 Estonian government took steps to secure and guarantee authenticity of transactions in some Government databases, building on indigenous cryptography work (Ahto Buldas, 2004). This was the genesis of the scheme which today uses "linked timestamping" to audit changes in several Estonian Government databases and assure that they have not been tampered with. Such technologies are commercialised by Guardtime AS and others, and are today considered Distributed Ledger Technologies (DLT)s.
Much has been written by Digital Transformation commentators about the reasons for e-Estonia's success, but the following systems play an essential role:
1. A uniform digital identity system implemented across public services, banking, and some private service providers.
2. A cross-government data interchange system (the X-road system lets government agencies look up information in other government databases).
3. Availability to citizens of systems to monitor how and when their personal information is being used by government officials (mostly implemented by Guardtime's DLT audit).
These foundations are mortared together with strong technical leadership, political commitment to remove legal and regulatory impediments to the deployment of technology solutions, and a populace with a higher than average degree of trust in digital government solutions.
Estonia and neighbouring countries have an active blockchain and cryptocurrency community. In 2017 there were two major conferences which attracted speakers from Silicon Valley and rivalled London-based events in size. The active tech start-up scene in Estonia has given rise to a significant share of Europe's more established blockchain start-ups, notably Funderbeam (financial services), Healthureum (Healthcare), and a healthy pool of smaller bootstrapping and seed funded companies already with customers such as WePower (Energy).
Estonia has a record of technology entrepreneurialism which belies its size. It enjoys a healthy angel and institutional investment environment for technology ideas. That the 2011 sale of Skype to Microsoft created many Tallinn-based developer $Millionaires undoubtedly helped.
In 2014 Estonia's digital identity scheme was extended through the E-Residency programme to foreigners. This "government start-up" scheme seems to have created an elite group of Global Estonians including well-known operators in Silicon Valley's Venture Capital scene, further increasing access to capital. It also provided an easy infrastructure for location independent businesses to establish head office operations, tax, employment and business banking within the EU. At the time of writing E-residents were responsible for the creation of 5,000 businesses (mostly in the technology industry) based in Estonia. At the end of 2017 this has generated €15Million in net income according to independent auditors.
Building on the e-Estonia narrative, the Estonian government is reinventing its mission:
"Estonia is now a blockchain nation. Our digital society is underpinned by blockchain technology and our secure digital identities provide a significant advantage to blockchain companies that need to verify online identities"
—former President Toomas Hendrik Ilves
What does this mean in practical terms? Firstly, blockchain companies (both physically based in Estonia, and registered in Estonia by E-residents) are using the E-residency identity verification process to satisfy KYC checks as they raise funding through ICOs. In late 2017 Estonian Government issued proposals for the establishment of an E-residency cryptocurrency, under the working title of "EstCoin" with goals of enabling a fluid marketplace and incentivising growth in the E-residency community.
7.2 Dubai and Malta
Wallet.Services attended the UNLOCK blockchain forum, which brought together international Governments and blockchain entrepreneurs in Dubai, UAE, in January 2018.
The event attracted public servants from UAE, South Korea, Malta, China, and the USA, keen to understand how distributed ledger tech could improve delivery of basic government services and play a role their regional economic development. It also attracted a global cross-section of representatives from blockchain tech companies, public services, health, genomics, utilities, electric vehicles, cybersecurity, and education sectors.
Several representatives of smaller jurisdictions who were investigating the role of DLT in government services were met, underlining the notion that smaller nation-states are at the forefront of DLT innovation, and often have ambitious goals to advance its deployment and its capacity for business transformation. These nations shared a view that collaboration around learning and commissioning of DLT pilots was desirable.
The following people were interviewed for this study:
- Abdalla Kablan, Malta Stock Exchange Blockchain Committee
- Andrea Tinianow, Founder and Director Global Delaware
- Dr Aisha Bin Bishr, Director General at Smart Dubai Office
In 2016 Dubai set a city blockchain strategy to "deliver more seamless, safe, efficient, and impactful public services". It set the goal of eliminating bureaucracy by replacing 100 million documents with natively digital transactions, underpinned by distributed ledgers, by 2021.
Dr Aisha Bin Bishr discussed Dubai's 20 planned blockchain pilots, spanning applications across permits & licenses, transportation, energy, health and education. This strategy is a co-ordinated cross-government multi-agency effort with defined results and deadlines.
"Adopting blockchain technology Dubai stands to unlock [£1 billion] in savings annually in document processing alone"
—Dr Aisha Bin Bishr, Smart Dubai
One example is the Dubai Land Department which is building a real estate register system to record transactions with improved transparency, timestamping and credibility in a city state which is a hotspot of foreign inbound property investment. This department deals with the Land and Property Register, and also deals in the extended services of property financing, letting, brokering, and disputes. Currently in pilot, the project will be delivered in 2019 and involves a broad ecosystem including real estate companies, IKEA and Emirates Bank.
Dubai's hope is to establish itself as a destination for the most innovative start-ups to help diversify away from oil revenues. It sees blockchain start-ups as attracting the best talent and investment.
At the UNLOCK blockchain event, the city energy utility DEWA issued a challenge to the start-up companies present around a blockchain platform for Electric Vehicle registration, charging and billing. Later in 2018 it will repeat the Smart Dubai Office Blockchain Challenge—targeting international start-ups under three years old. Its goal is to drive solutions for government efficiency, thought leadership, and to support creation of a blockchain industry in Dubai.
Malta was represented by Dr Abdalla Kablan who explained that Maltese government attention had focussed on the role of cryptocurrency in its position as Europe's "online gambling hub", and DLT in Malta's role as a financial centre.
US State Delaware is small with 1M residents, but its sympathetic state laws mean that 60% of US Corporations are based in the state. Delaware aims to address use cases in share ownership, record keeping, transaction and settlement.
Malta and Delaware's blockchain initiatives are directly sponsored by their Prime Minister and Governor respectively. In Dubai the nation's Ruler is on record saying all applicable transactions will be on the blockchain by 2020.
It is further noted that the city government of Zug in Switzerland is currently in pilot of a "self-sovereign" identity utilising blockchain technology from Blockstack.
Since 2016, the Dutch Public Service has delivered eleven blockchain pilots focusing on processes and services it wanted to modernise in different government organisations. The Netherlands seems to have implemented the best example of co-ordinated cross-government activity and it is represented in detail in "Appendix: Netherlands Use Case detail".
The results of the pilots were that participating organisations gathered valuable knowledge about blockchain and its potential impact. A specific use case was developed for each organisation, and an informal blockchain network was set up by participants to share best practice and projects emerging from Dutch academic institutions and businesses. Additionally, a government-business network was set-up to collectively develop blockchain applications building on the learnings and outputs from pilots. This network includes large corporations, IT companies, universities, and start-ups.
The Dutch government has defined clear policies with regards to digital identity, value registration and critical personal data management; started a series of small projects in partnership with blockchain businesses of which the failures and successes are transparently shared; and established rules and standards for blockchain code (if it is created with government funding, code should be completely open source (Hartog)).
Since 2016, Sweden's land-ownership, mapping and cadastre authority, the Lantmäteriet, has been piloting and testing its own blockchain based platform for property transactions. At March 2018, they are seeking volunteers to participate in buying and selling property who are interested in reducing the time from signing a contract to registering a sale which can take between three to six months.
The National Land Survey of Sweden has developed a full digital property transfer process with blockchain. It means sellers and buyers, and those who accept the transfer of the property's registry, such as the Land Survey Property Registration department can create the right content in the Land Registry and witnessing in principle can be done by everyone. The Land Registry is a publicly held ledger of real estate transactions, with inbuilt transparency and crypto security, so that no one can tamper with records without detection (Lantmäteriet, Landshypotek Bank, SBAB, Telia company, ChromaWay, Kairos Future, 2017). With the blockchain system, the entire transaction could be completed in hours.
There are still obstacles to overcome in Sweden before blockchain can be adopted on a wider scale for real estate dealings, namely that digital signatures for registering or purchasing properties are currently illegal under Swedish law (Zuckerman, 2018).
Swedish bank SEB is also trialing a blockchain platform for the trading of mutual funds, together with Nasdaq. The current Swedish mutual fund market does not have a centralized tracking mechanism in place (unlike equities markets), and so tracking and maintaining a ledger of transactions is a radically complex process involving a host of players, some aspect of which are still recorded with pen and paper. The platform intends to make it possible for all fund managers, distributors and other mutual fund participants to make trades directly onto the blockchain technology ledger. This would increase efficiency, tracking and auditability and make trading of funds faster, smoother and easier for all parties (Buck, 2017).
7.5 European Commission
Under the auspices of the European Commission there are several significant streams of work in Distributed ledger Technology, spanning policy, research, economic development and implementation.
This culminated in the signing of the Declaration on the establishment of a European Blockchain Partnership (European Commission, 2018) with the express goal of preparing for the launch of EU-wide blockchain applications across the Digital Single Market. The UK Government was included as a signatory.
Shortly afterwards the EU DG Joint Research Centre policy unit released the final report of a project started in early 2017 #BlockChain4EU: Blockchain for Industrial Transformations. This project's aim was to identify and communicate blockchain use cases from an EU industrial and business context. At the time of writing its final report is available only in printed form.
The Commission launched the EU Blockchain Observatory and Forum in February 2018 with support of the European Parliament. This will highlight key developments of the blockchain technology, promote European actors and reinforce European engagement with multiple stakeholders involved in blockchain activities. The European Commission wants to build on existing initiatives, ensure work across borders, consolidate expertise and address the challenges created by the new paradigms enabled by blockchain (such as disintermediation, trust, security and traceability by design). The EU Blockchain Observatory and Forum will actively help Europe to seize new opportunities offered by blockchain, build expertise and show leadership in the field. It will gather information, monitor and analyse trends, address challenges and explore blockchain's socioeconomic potential (European Commission, 2018). The Observatory and Forum will review the five innovations emerging from the €5m blockchains for Social Good competition closing later this year.
7.6 United States
The US government have been evaluating blockchain via several US government agencies to improve transparency, efficiency and trust in information sharing in:
- Financial management
- IT asset and supply chain management
- Smart contracts
- Patents, Trademarks Copyrights, Royalties
- Government-issued credentials like visas, passports, SSN and birth certificates
- Federal personnel workforce data
- Appropriated funds
- Federal assistance and foreign aid delivery
The Israeli Government funds and collaborates with businesses and academic institutions via the Iraeli Blockchain Association. With a policy of open government, Israel has commissioned an interactive political platform that promotes the policies of an open government and eliminates the communication gap between the elector and the elected a utilizes smart contracts for enforcing campaign commitments made by politicians—such as budgets proposals and policies (Ozelli, 2018).
Centre for Digital Public Innovation (CDPI) of the Colombian Government is looking into the potential of blockchain after the blockchain-powered voting platform Plebiscito Digital (Digital Plebiscite) and worked with several civil society organizations to allow expat Colombians abroad and not allowed to vote to cast symbolic votes on a peace treaty through the platform (Case Study: Blockchain Voting for Peace—Colombia).
Africa still has an unbanked majority, and so cryptocurrencies have offered opportunities to those with no access to traditional financial services. DLT are now disrupting Africa's business arena at a time where governments and industries are still rife with corrupt deals, poor record-keeping and untraceable transactions.
Last year, the Rwandan government developed the first phase of an initiative to digitise Rwanda's Land Registry onto blockchain to aid authenticity.
South Africa's newly-appointed president Cyril Ramaphosa made an announcement in February 2018, stating that a 'digital industrial revolution commission' would be set up in partnership with the private sector and encompass new technologies, such as blockchain.
The same month, Kenya's Ministry of ICT appointed a team to produce a blockchain roadmap. Led by Dr. Bitange Ndemo, the eleven-member team will spend three months researching artificial intelligence and the potential use of distributed ledger technology in Kenya.
Also announced in February was a blockchain-based information portal for crime control in Nigeria. The citizen-focused platform, named interPort, will allow Interpol to access information and manage stakeholder engagements and crime reporting.
A pilot scheme, set to launch in Q3 2018, will use blockchain to monitor cobalt mining in the Democratic Republic of Congo. The scheme aims to ensure that cobalt used in lithium-ion batteries (found in everything from cell phones to electric cars) hasn't been mined by children. Companies are under increasing pressure from consumers and investors to show that cobalt has come through supply chains free of rights abuses, similar to other minerals such as tantalum, tin, tungsten and gold (Top 5 African Blockchain Applications, 2018).
In 2017 an Australian stock exchange (ASX Ltd) announced that it would replace its legacy clearing house system (CHESS) with a blockchain based post-trade settlement system. This decision is widely credited with accelerating the Australian blockchain ecosystem, and its implementation timetable requires external trading participants to be ready in late 2020.
The city-state of Singapore has a blockchain ecosystem populated by many well-funded start-ups and supported by a strong academic research environment. At the time of writing, the Financial Services regulator in Singapore (Monetary Authority of Singapore) is in consultation around regulatory changes to ease market entry for blockchain-based decentralised exchanges.
In 2017 Chinese state moved to address perceived fraud and money laundering issues. Despite China being a global hotspot for Bitcoin "mining" operations, the financial regulator moved to force Bitcoin miners to exit from China, and to ban developers and entrepreneurs from launching coin offerings.
However, in a May 2018 speech Chinese President Xi Jinping endorsed blockchain technology and seemed to suggest that a national research and development lab would be established.
Email: Alexander Holt