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A Blueprint for the Pan-European Distributed Ledger

Recent legislative developments in Europe showcase policymakers’ diverging approaches to cryptocurrencies and a wider array of non-monetary Blockchain applications. Crypto regulation is tightening, driven by the tide of anti money laundering measures that the European Parliament approved last week.

This, however, does not mean they are not embracing Blockchain’s potential beyond currency. On April 10, Europe came one step closer to establishing a common approach to the implementation and regulation of Blockchain technology. A Declaration on a European Blockchain Partnership brought together 20 EU member states, Norway, and the departing United Kingdom in an expression of a shared vision and policy goals. The agreement, sealed during the European Commission’s Digital Day 2018, offers a number of insights into how the continent’s policymakers conceive of Blockchain’s potential uses and governance.

A major point that is immediately clear from the language of the declaration is that it is primarily about Blockchain as a service rather than as a financial instrument. The introductory clause describes the technology’s potential to bring about “value-based, trusted, user-centric digital services” that would encompass both private and public sectors and operate across borders. The authors emphasize that in order to make the best of the opportunities that the technology offers, it is critical to avoid a “fragmented approach” to its implementation.

Rather than creating a separate framework for coordinating distributed ledger technology (DLT) governance, it is evident in the document that the partner states have agreed to embed it into the existing policy arrangements.  The overarching scheme to host the new policy domain is the Digital Single Market, the European Commission’s initiative aimed at facilitating the expansion and integration of Europe’s digital economy. One main focus is creating infrastructure for providing online governmental services to individual citizens and organizations alike. Among those already in existence under the initiative are systems of ID and social security information management, procurement, dispute resolution, and healthcare services – the kinds of utilities that are ostensibly among the first for the prospect of becoming Blockchain-enhanced. Mariya Gabriel, who is in charge of the Digital Single Market as the EC’s Commissioner for Digital Economy and Society, sounded unequivocal when she contended that “in the future, all public services will use Blockchain technology.”

It is instructive to examine the list of delegates who signed the declaration. The caliber of statesmen involved has been estimable, with nine ministers or officials of equivalent standing, three deputy ministers, and a host of state secretaries and undersecretaries representing a variety of governmental offices. These ministries and departments ranged from specific digital, tech, or IT bodies (six states, including France and the UK) to more general-assignment entities, usually ministries of economy, industry and trade (five states, including Germany). It is noteworthy that Finland was the only country that delegated a finance minister, a fact that seems indicative of the service-oriented framing of the debate.

Three points stand out in the text of the declaration, which makes them likely to represent the foundational principles of the European policy consensus:

Public sector

Arguably the key use of ledger technology that the declaration envisages is improving the citizens’ experience with public sector information while providing for a better data integrity and security. Private sector implementation is featured less prominently and in the least specific terms.  It is also made clear that the governance of Blockchain services will rely extensively on public authorities, who will purportedly be responsible for fostering competition and ensuring equal access for all service providers, including startups and SME’s.

Interoperability and scalability

As a roadmap towards a shared European Blockchain ecosystem, the declaration dwells heavily on the importance of standardized technological solutions, shared governance models, and regulatory convergence. The ultimate goal here is to ensure the smooth operation of Blockchain infrastructure across national borders, as well as to bolster economies of scale. The latter effects are supposed to be associated with operating within a system that is standardized up to the interface level, as opposed to a “plethora of non-interoperable private Blockchains.” The use of such language invites broad interpretations as to the degree of the proposed technological confluence, as it could be construed to describe something as ambitious as a unified European distributed ledger.

Privacy

Consistent with many European nations’ heightened concerns over user privacy, the theme of data security, data integrity, and user control of personal data is prominent throughout the text of the declaration. The agreement calls for implementing “the highest standards of security, confidentiality and personal data protection compliance,” as well as reducing fraud and improving transparency and auditability of records. This notion looks as salient as it is declaratory, as no specifics are considered with regard to how the balance of privacy and transparency is to be achieved.

Now, the first step that each of the signatories will take under the agreement’s provisions is designating a representative to work with the European Commission on Blockchain matters. The roadmap then specifies three milestones in the process of implementation. By September 2018, the partners will outline the initial pool of cross-border public sector services that would benefit the most from the introduction of DLT into their operations. By the end of the year, technical specifications, governance mechanisms, and regulatory framework should take shape. The EC expects that the first cross-border actions on the European Blockchain will be performed by the end of 2019.




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