A new report by the ECB details the use cases of distributed ledger technology across various industries. One topic of particular interest is the impact this will have on the governmental and e-identity sector as the blockchain may facilitate necessary changes to KYC and AML requirements.
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ECB on Governance on the Blockchain
Most cryptocurrency enthusiasts will know of the various projects taking place which focus on e-identity services related to blockchain technology. BitNATION is a project that comes to mind immediately, but there is also the E-Estonia initiative, which provides governance services to anyone who signs up for the program.
A recent report by the European Central Bank delves a little bit deeper into the subject of distributed ledgers and governance, as they see an exciting future ahead. Existing regulatory policies, such as Know-Your-Customer and Anti-money Laundering, have remained unchanged for several decades and do not scale with the current landscape of financial services.
The report also makes mention of how distributed ledger technology – which the ECB dubs as DLT – can be useful in this regard. Establishing the “new world of technology” within the current regulatory framework is a serious challenge, especially when taken automatic price settlement through an open trading platform into consideration.
The ECB report states the following:
Innovations in the area of e-identity may, however, facilitate the major changes that would be needed. In general, trusted parties need to certify the identity of potential investors, in order to allow them to open an account and trade on a distributed ledger in compliance with current regulation.
It is also worth noting how the ECB feels this digital identity does not need to be granted by a financial institution per se, as it can be a part of the governmental services offered through new initiatives. Both Estonia and Finland are working hard on bringing digitized governance services to their residents, which would give them a competitive advantage.
E-governance is a revolutionary aspect that can solve one of the key issues when dealing with government officials these days. Citizens feel severely disconnected from their government, both regarding voting and getting a response for officials in general. Even dealing with a city council can be a major challenge, as making one’s voice be heard is not that easy these days. Whether or not e-governance will change all of this, remains to be seen, but the digitization of these services is an interesting trend for sure.
When asked about the ECB being open to other parties providing E-governance services, BitNATION Founder, Susanne Tarkowski Tempelhof, told Bitcoin.com:
It’s encouraging to see nation state governments starting to compete in providing services on a global market, to each other, and directly through citizens regardless of their citizenship, but ultimately all these services will need to be decentralized, and not certified/verified by a central authority (like a bank or a nation state government), and they’ll need to be pseudo-anonymous, to preserve people’s security and privacy. The days of ‘one-identity-per-person’ are quickly coming to an end.
Perhaps the biggest advantage to using the blockchain for these types of services is how anyone can become an e-resident of any country. In the case of E-Estonia, for example, anyone in the world can become a part of this initiative, regardless of where they live. This stance by the ECB may pave the way for projects such as BitNATION to become global projects over the coming years.
What are your thoughts on the role of blockchain technology in digital governance? Let us know in the comments below!
Images courtesy of ECB, Shutterstock