Governments may not be too keen on bitcoin, but blockchain is another story. In fact, government authorities have begun to help fuel the proliferation of blockchain across the world. In this week’s Blockchain Tracker, PYMNTS runs through some of the latest moves from policymakers and the public sector as they explore blockchain’s potential.
A regional government in Russia is now working with state-backed VEB, reports in CoinDesk said this week, as authorities explore how to use blockchain “to improve the quality of management decisions.”
According to reports, Kaliningrad governor Anton Alikhanov and VEB chairman Sergey Gorkov met with officials at the Russian Investment Forum to announce their collaboration using, according to Alikhanov, VEB’s “competence in the area of blockchain technology. Local officials are hoping to use blockchain to improve public services and boost transparency. It’s not the first time Russian government officials have expressed willingness to use blockchain: reports noted that parts of the Russian government launched trials to use blockchain technology in a variety of applications.
Singapore stepped onto the global stage as a world leader in blockchain innovation in recent months. The latest news from the country comes from its government: Chief FinTech Officer of the Monetary Authority of Singapore, Sopnendu Mohanty, said the central bank is about two years out from being able to assess the impact of its current blockchain project, Ubin.
Ubin was first announced in 2016 with the central bank launching a partnership with blockchain company R3. At the time, the MAS and R3 said blockchain has the potential to “make financial transactions and processes more transparent, resilient and at lower cost.”
The project moved into phase two last October, reports in Coin Telegraph explained, and as authorities explore potential applications of distributed ledger technology, reports also noted that the government will have a chance to better understand how a possible regulatory framework should look.
Perhaps it isn’t surprising that analysts are now musing about how to avoid a repeat of the Punjab National Bank fraud scandal, and some are looking towards blockchain to do so.
“What happened at PNB was the result of numerous systemic failures to detect simple human malfeasance,” said MonetaGo founder and CEO Jesse Chenard in an interview with the Economic Times of India. “These failures would have been easily spotted and prevented on blockchain. It’s surprisingly common for the information settlement mechanism like SWIFT to be on a separate ledger from the payment settlement mechanism, which is the system more likely to be scrutinized by the bank’s internal controls, as well as the various audits, including inspection by regulators.”
“In the recent public sector bank fraud, issuance of fake LoUs would not have been possible on blockchain, as the smart contract would have identified inconsistencies based on automatic reconciliation with the core banking system and following the established limits, it would have restricted the payment initiation over SWIFT network,” added Director, FinTech, SP Jain School of Global Management Vikram Pandya.
Financial regulators may want to begin looking at not only regulating blockchain, but how blockchain can help in their own regulatory efforts — in this case, to ensure proper safeguards and controls in the banking sector.
As regulators begin to consider blockchain regulations, many have signaled a desire not to hamper innovation while doing so. In Spain, regulators are reportedly exploring how to support blockchain developers.
Bloomberg reports this week said Prime Minister Mariano Rajoy’s People’s Party is developing legislation that could hand tax breaks to blockchain companies in an effort to attract innovators to the country.
“The level of the digitalization for companies will be key,” said Teodoro Garcia Egea, one of the lawmakers preparing the legislation, in an interview with the publication. “We hope to get the legislation ready this year.”
New analysis from Moody’s found that banks in Saudi Arabia could save a combined $400 million a year by using blockchain to facilitate cross-border payments. The nation’s central bank, the Saudi Arabia Monetary Authority, recently announced a collaboration with Ripple to pilot such a program, reports in The National said.
Blockchain may be shaping up to be a topic left to individual states to handle. This week, CoinDesk reported that lawmakers from California have introduced a bill that would declare data stored on blockchain to be considered an electronic record.
Reports said Assembly Bill 2658, introduced by Assemblymember Ian Calderon, would expand the existing definition of electronic records and signatures under the Uniform Electronic Transactions Act.
Under current law, “a record or signature may not be denied legal effect or enforceability solely because it is in electronic form;” lawmakers want to ensure data stored on blockchain is considered enforceable.
On the federal level, the U.S. Securities and Exchange Commission has halted the trading of three companies based in Oregon after examining their balance sheets. Earlier this year, the companies — Cherubim Interests, PDX Partners and Victura Construction Group — issued a press release announcing the acquisition of assets from a cryptocurrency and blockchain private equity firm.
“There are questions regarding the nature of the companies’ business operations and the value of their assets, including in press releases issued beginning in early January 2018,” the SEC stated.
“This is a reminder that investors should give heightened scrutiny to penny stock companies that have switched their focus to the latest business trend, such as cryptocurrency, blockchain technology, or initial coin offerings,” added Michele Wein Layne, Director of the SEC’s Los Angeles Regional Office.