Governments need to understand blockchain as it is a vital tool in solving development challenges.
Speaking on a senior panel discussion on Demystifying Blockchain, hosted by Decoded on Wednesday 25 January 2017 in New York. Former Prime Minister of Haiti, Laurent Lamothe emphasised that during his tenure he was faced with rebuilding a devastated country after the 2010 earthquake.
It was a mammoth task as everything from basic infrastructure to roads, housing, schools and essential healthcare was needed. However, Haiti at the time, and continues to be one of the poorest countries in the world. There was simply not enough funding to go around.
Therefore, Lamothe believes that Blockchain Technology could have helped many of the challenges his Government faced, along with the crypto-currency it could have greatly facilitated payment to beneficiaries of many social programs, for examples PSUGO, Ti-Maman Chéri and giving them much more financial transparency. The crypto-currency could have been implemented and used as a tool for the financial inclusion of the unbanked Haitians and stimulate much more programs for the population.
Blockchain is a revolutionary technology but it is still in its infancy as a technology. Laurent explained that the benefits of the technology are numerous. The technology can be applied to a wide array of businesses—not just financial services—to markets and any transaction involving different levels or stages of a hierarchy or process, from logistics to retail and even government agencies. And in his case, he believes that Blockchain technology is ideal for government services.
In addition, by creating a new concept of services or forms of public value, each transaction could be used by governments as a means of revenue-raising for socio-economic development. This is in itself is a very exciting prospect for all governments— especially the governments of emerging countries.
In fact, Innovative Financing for Development (IFD) can work hand in hand with Blockchain. Micro-contributions on globalised sectors such as telecommunications and financial services, when aggregated can provide significant revenue. This could be used to finance Blockchain which then can “feed” IFD through the revenues that could be generated on the various transactions.
“Innovation is important in the development arena, says Lamothe, and Blockchain requires a fundamental shift in mind-set because the current regulatory framework aims to regulate the financial system through the access point of a central operator, regulator or management body.”
However, in total contrast, a central tenet of Blockchain philosophy is the idea of self-management between transaction participants with no central figure. Thus, the fundamental philosophical underpinnings of our payment systems regulation may need some urgent re-thinking as the two philosophies are diametrically opposed.
Lamothe believes that once this challenge is overcome and Blockchain can be accommodated within the financial services/banking regulatory framework it will facilitate global, cross-industry and cross-entity transactions particularly within financial services, insurance, telecommunication and other large enterprises. It will allow people to cut out the middleman and reduce the associated transaction costs.
In fact, it will have a huge impact on the way we do business—in particular on the global tax system. It could be used to register and record property transactions, for example, or government-licenced assets, intellectual property, even to make sure that one voter uses one vote only. On a day-to-day level Blockchain technology could also make government tendering processes and purchases more efficient, and reduce the potential for fraud and error.
The use of Blockchain in government is more than speculation. The Isle of Man government recently tested a Blockchain registry that records which local companies are using distributed online ledgers. In Estonia, NASDAQ—which runs the country’s stock exchange—is creating an e-voting system based on the technology and in 2016 the government in Georgia announced a deal to develop a Blockchain-based land registry.
“Considering the pace at which organisations and governments are beginning to explore and test Blockchain, once the remaining challenges are tackled, the new technology could take off very rapidly,” concludes Lamothe.