Blockchain technology allows for a new generation of cross-industry relationships where users can exchange supply and demand openly and efficiently. In recent years, it has met with high expectations due to its potential to revolutionize business models and financial systems.
The hype around crypto and its underlying blockchain technology attracted not only institutional investors but also many governments. In late 2021, the crypto market cap surpassed $3 trillion, which received a huge response from every sector there is! 2022 wasn’t the best year for crypto, but that didn’t stop countries from launching blockchain-based pilot projects.
Though governments grew skeptical about cryptocurrency, they openly embraced blockchain technology for decentralized ledgers and smart contracts in finance.
Moreover, it reduces the need for costly intermediaries and ensures greater trust in contracts between organizations. Well, that’s what blockchain technology is all about, giving monetary freedom to users.
Not only is this technology poised to revolutionize what has been traditionally a centralized industry, but it also gives rise to new opportunities that have yet to be tapped into by governments worldwide. For instance, in the finance industry, banks are traditionally involved in many intermediary functions such as settlement, lending, and asset management.
However, the blockchain presents an alternative method for financial transactions by eliminating the middle person or bank. This technology helps firms get rid of costly intermediaries to allay concerns about fraud or theft and facilitates an open, transparent relationship between buyers and sellers by eliminating the need for third parties.
The transparency offered by the blockchain has allowed for greater security. As governments also become aware of the blockchain’s potential applications, they try to incorporate it into their operations. So it is because blockchain technology can resolve a lot of inefficiencies that have long plagued public services.
Governments’ ongoing Blockchain-based Pilot Projects
A number of US government agencies have begun to test blockchain technology for its potential to increase transparency and enhance security. We have listed several active government blockchain-based pilot projects here to let you know about their growing adoption.
1. United States
The Bureau of Fiscal Services, a division of the US Department of Treasury, is leveraging blockchain technology to track transfers, determine if physical assets can be tracked in real-time, and study other possible use cases.
An application developed by the U.S. The health and human Services department called Accelerate enables researchers to access a variety of materials on the blockchain. Although the technology is still in its early stages, the project is designed to better manage HHS’s portfolio of 100,000 contracts.
In addition, the national public health agency of the United States CDC has begun researching the use of blockchain to improve public health outbreak tracking, tracking medical trends, and tracking health data from surveys.
Another government agency that has embraced technology is the Australian Department of Industry, Science, Energy, and Resources. A new initiative aims to develop a digital Luxembourg governance framework. This will include a blockchain-based system for tracking and distributing government resources.
In addition to providing insight into the sector, PwC Australia has partnered with the federal government to provide assistance in the blockchain space. Their Digital Pulse newsletter provides weekly updates on developments in the area.
The Reserve Bank of India (RBI) is enlisting the support of a number of leading banking institutions in its blockchain project. The project is driven by the central bank’s innovation hub in Bangalore, and will incorporate technology from IBM and Corba Technologies.
The RBI has also launched a Digital Rupee pilot project in four major cities including Mumbai, New Delhi, Bangalore, and Bhubaneswar. Also, India is currently working on a blockchain identity management project which aims to provide a digital identity system for its 1.3 billion citizens.
The United Arab Emirates has set up a regulatory sandbox for FinTech companies. Among other things, it will monitor the use of blockchain technology and provide feedback to the government. The country is leveraging blockchain technology for government efficiency, industry creation, and international leadership.
Moreover, Dubai Future Foundation established the Global Blockchain Council which consists of 46 members, including government entities, leading UAE banks, free zones, and international blockchain technology firms.
While the government is pursuing its own initiatives, it has also provided support to other governments to pilot similar initiatives. Some of the countries that are busy creating blockchain-based projects and CBDCs are the UK, China, Lebanon, Switzerland, Bahamas, Estonia, and Japan.
Now, let’s understand how these countries are leveraging blockchain technologies in their existing financial system and industries.
Why Governments are adopting Blockchain-Based Projects
Governments are piloting several blockchain-based applications to improve citizen services, including identity management, e-healthcare, and e-governance.
These technologies have the potential to reduce regulatory compliance costs, make payment processes more efficient, and enhance the citizen experience.
However, before governments can take advantage of the technology, they will need to invest in its development and support. They also need to consider the risks and potential for unintended consequences. Here are a few use cases on how blockchain can boost transparency and trust in financial transactions while preventing disputes and lowering the cost of services.
1. Supply Chain Management:
Governments are starting to take the blockchain and utilize its capabilities for supply chain management. This application is being developed in Australia, Canada, China, and the United States. To improve efficiency for government suppliers and contractors alike, governments must understand how the blockchain could handle their supply chain process.
The Australian government is one of the first to begin utilizing blockchain-based supply chain management software to streamline its procurement process. One of their objectives is to help small businesses and startups with more transparency in the procurement process so they can grow.
Likewise, the United States government is working on a blockchain project to make federal grants more accessible and efficient. At the same time, Canada is placing greater emphasis on streamlining its procurement process as well.
By developing an integrated database, governments can cut out a lengthy manual process that takes up tremendous resources and time. As this technology increases in popularity and companies begin using it, it may become necessary for the government to partner or cooperate with third parties so the correct data can be shared between organizations efficiently without compromising security. Such data may include contracts, remittances, delivery status reports, etc.
The government is also considering developing DLT and adopting blockchain technology for voting. The Estonian parliament also recently discussed how users could use this technology to enhance their presence globally. By accessing the blockchain, governments can make informed decisions quickly, which can help improve their overall efficiency and strengthen their democracy.
What is important to note above is blockchain technology offers automation which will help governments reduce paperwork traffic and deliver more accurate data. One such use of blockchain for taxation is the implementation of verified real estate records. This new system can help governments with paperless licensing and taxation procedures for property registration.
4. Retail Stores:
By working with a blockchain-based solution, governments worldwide can track products sold and ensure that they were bought legally by private citizens. In addition, it would provide an additional layer of transparency to governments by allowing them to see what products are being sold or exported and where they come from.
Governments are also looking at blockchain technology for trade finance for large and small businesses. One of the advantages is that it provides greater transparency to suppliers and sub-contractors, which can help with auditing and information gathering. Another significant benefit is that it’s easier for governments to track the movement of goods in real-time compared with current methods.
5. Other Use Cases:
Governments from around the world are beginning to realize the vast potential applications of blockchain technology. Having all government services managed by the blockchain would be easier for people and organizations in India to access them, improving overall efficiency and security.
Blockchain technology can make online voting and elections more secure as countries begin to see its potential benefits.