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Dubai is to supercharge its government processes by introducing blockchain, the distributed ledger technology behind global crypto-currency bitcoin.
With the launch of its Dubai Future Foundation initiative, the emirate has committed to putting all its documents on blockchain’s shared open database system by 2020. Dubai also recently founded the Global Blockchain Council, a public-private initiative that brings together government teams, local businesses and international startups to foster the technology’s development in the real world.
Blockchain’s co-founder and president, Nic Carey, said the technology was often misunderstood, and added: “The best way to think of it is basically a big spreadsheet in the cloud that anyone can use, but no one can erase or modify.
“The ledger for the network is completely open, so anyone can verify the transactions. Beyond payments, blockchain could be used as a global property rights system that has enormous potential in frontier, emerging and growth economies, such as the Middle East. All types of collateral could be encoded into blockchain, including stocks, bonds, land titles and more.”
According to experts, blockchain has powerful implications for regional government institutions and could cut a swathe through Middle Eastern bureaucracy and speed up civic transactions and processes. M R Raghu, senior vice-president research at Markaz (Kuwait Financial Centre), said regional governments still relied on paperwork for key processes, which slowed down tasks and increased bureaucracy.
“Land registration, despite the major role it plays in most Middle East economies, still relies on paper for registration and title transfers,” he said. “Digitising real estate transactions could help bring in more transparency and improve liquidity in the market.”
Raghu said the region’s core industries could benefit from faster and cheaper transactions, including energy, healthcare, shipping and remittance. “The GCC economy is fuelled by oil,” he said. “Billions of barrels of crude are exported each day from the region to international buyers who pay in dollars. Currently, these payment processes use the traditional wire/cheque transfer or Swift payment method.
“Cross-border payments can take between two and three days to complete. Blockchain payments are almost instantaneous and take close to 15 minutes to complete. Because the transactions are not centralised, they could also take place even if the party and counter-party were in different time zones.”
Mike Jones, MENA government and public sector leader at EY, said governments in the region should explore blockchain technology to improve both internal and external processes.
“As a distributed ledger, blockchain provides a secure and time-stamped foundation to deliver efficiency of government activities and services across a wide range of areas, including operating costs, contract execution, risk management, citizen experience and transparency of government activities,” he said.
Jones said blockchain usage could be extended to help governments collect taxes, deliver benefits, issue documents, record properties and assure the supply chain of goods and integrity of governmental records.
As well as using the technology to aid public processes, regional governments had a critical role to play in the local adoption of blockchain for the benefit of the wider economy, he said. Regional governments should encourage early take-up, create a clear blockchain vision and invest in technology, he added.
“Governments should act as a facilitator by creating the regulatory frameworks, setting security and privacy standards and building trust,” said Jones.
Blockchain explained – in the words of co-founder Nic Carey
Blockchain is a peer-to-peer network that allows multiple parties to transfer value in a secure and transparent way. The technology allows us to create a system in which: no one can corrupt, sabotage or control the system; trust between participants is not necessary because it is embedded in the system itself; access to all relevant information is available to participants; and activity in the system is held to account through transparency.
The record of transactions on a blockchain is immutable, which means once a transaction is added, it cannot be altered or deleted. Moreover, the blockchain is maintained and validated by everyone who uses it, thus eliminating the need to trust a single central administrator. These features guarantee the integrity of the system. With a few thousand lines of code, users can download apps on their phones that allow them to effortlessly make transactions with anyone else, as easily as sending an email.
In this respect, the Middle East has the advantage of being a developing region. According to Grant Niven, director of financial services advisory at EY MENA, the region has a mixed record in finance sector innovation, but the implementation of a coherent plan to harness the power of blockchain and other technologies could allow the GCC and MENA to “leapfrog legacy payments infrastructure” and reap the rewards offered by the digital and demographic dividend.
“The natural place to start is installing the flexible but robust regulatory infrastructure needed to take advantage of blockchain,” said Niven. “Africa changed global perceptions of the potential of mobile financial services. With the right approach, the UAE and the wider Middle East could do the same with the next generation of money and the blockchain.”
Carey suggested that improving government and corporate bureaucratic processes could bolster the overall regional economy. “Intermediaries existed for a reason, but now they don’t need to,” he said. “Computer software and code can serve that function without latency or bias.
“I expect the digital impact of blockchain technology to be profound in the areas of transparency and governance, bringing large economic gains to the nations that adopt this technology.”