Last week, iov42 CPO David Coleman joined the EU Blockchain Observatory & Forum (EUBOF) event “Discussing the Latest Developments in the EU Blockchain Ecosystem,” to talk through the key findings of the first thematic report published by the EUBOF’s new leading team.
The event convened members of the European Parliament (MEPs), policymakers, representatives from the European Blockchain Partnership, and other industry pioneers.
David participated in the event’s first panel, “Business Environment and Development of Crypto Assets and Blockchain Community,” which was moderated by Alexi Anania of Cambridge Centre of Alternative Finance and Bartertrade.io. The other panelists included Marc Taverner of INATBA, Montse Guardia of Alastria, Luukas Ilves of Guardtime, and Ad Kroft from the EUBOF Expert Panel. The panel comprised an impressively diverse spread of expertise and opinions that neatly captured the current climate and outlook of the European blockchain ecosystem.
Below we have summarized David’s main points for each of the panel’s themes, including a few additional insights.
From iov42’s perspective, the innovation and progress that is happening across the DLT industry is difficult to frame as a race with winners and losers. What we do notice, however, is that many countries seem to have been focussed on the crypto asset side of blockchain, and this is certainly where most of the regulatory focus is, as well. The reality is that crypto assets are a only subset — albeit an important one — of all things blockchain-related, so the more proactive rather than reactive regulators can be in the other applications of blockchain, the better.
iov42 is a firm that has regulatory compliance at the forefront of what we are trying to do, so we have a vested interest in seeing more proactive regulatory involvement in areas beyond the financial asset side of blockchain. That is why, for example, we are really encouraged to see the willingness of some governments to innovate and collaborate on new hybrid public-private services. This is one of the most exciting areas of potential for blockchain.
On the flip side of this progress, there is a concern around fragmentation in regards to the separate initiatives going on all over the EU. Forums such as the EUBOF have a key role in getting these different initiatives talking with each other, but there still remains a real challenge in developing the necessary regulations and technology that will sit in the gaps between these initiatives. There is a lot of value just waiting to be created by bridging these gaps, but since it likely can’t be realised in the short-term, it’s difficult to attract the necessary funding.
Ultimately, we need to be really clear about where the industry is at. We are over the hype of blockchain and well into the trough of disillusionment. Just look around and you will find people who, in 2019, couldn’t stop talking about blockchain, but now, just over one year later, want nothing more to do with the space. So we must be willing to acknowledge the failings of the market and look for solutions. However, we are at — or near — an inflection point where the conversations are serious about solving real problems with blockchain and other distributed ledger technologies.
Right now, regulators have the opportunity to get on the front foot. Regulation is being established around the crypto investment story, but as a response to a new market. Regulators have the opportunity to get ahead of the game when it comes to using blockchain and blockchain-inspired technologies for other identity and asset use cases.
To facilitate this somewhat, we will need a mindset shift from “blockchain needs to be regulated” to “blockchain is an invaluable tool for regulators.” This will require blockchain technology that accommodates regulators rather than pushing them to change their policy. This shift would not only provide unprecedented access for the regulators, but also accountability from our industry.
Generally speaking, infrastructure investments are big and take time to pay off. The appetite for such investments is certainly lower in Europe, when compared to the U.S. and China. So further incentives to invest are needed. Programmes like the European Commission’s Artificial Intelligence and Blockchain Technologies Initiative are taking the right steps to close the investment gap, but more can and should be done.
The speed of growth we are seeing with China’s Blockchain-based service network (BSN) is a challenge. In less than one year, there are over 2000 enterprise and government applications and over 80 cities connected. How do we accelerate availability, uptake, and usage in the EU? What do policy makers and technology partners need to do in order to be able to compete on the global stage?
As technologists, we need to make sure we are taking responsibility for sufficiently adapting the technology to the ecosystem, and not just trying to force the ecosystem to adapt to our technology. The most successful result will be some sort of middle ground, but, again, it’s important for us technologists to take responsibility for our part.
Governance is another huge challenge when considering EU-level networks. What is required is governance that is relevant at a local level, while also allowing for pan-EU participation, because if we have learned anything from the public blockchain networks, it’s that trying to govern large blockchain networks is really hard!
We have seen that SMEs struggle to engage and invest in blockchain because the technology bar is still quite high and the skills gap too wide. The technology industry can address this by presenting blockchain in a more accessible, lower-cost, and, therefore, attractive way in order to allow these organisations to be able to integrate the functionality blockchain offers into their operational activities. This is where initiatives such as EBSI are important.
In general, the lack of accessibility and quality user experience of cryptography-based systems presents a substantial hurdle for the industry — just talk to anyone who has lost a lot of Bitcoin because they lost their private key. This shortcoming leaves a majority of consumers excluded and puts organisations at risk. Moreover, the implications of identity and value being locked up in cryptographic keys still remains a real challenge — We must not leave people behind.
We need to see more investment and funding going into research around improved accessibility and user experience. We also need to see the emergence of custody-like solutions beyond crypto investment assets before we can see wide participation by both organisations and individuals.
You can find a recording of the entire event here. The panel “Business Environment and Development of Crypto Assets and Blockchain Community” begins at the 1:05:50 mark.