EU bureaucrats may not have a reputation for being the most innovative bunch, but they’re ready to embrace blockchain if it will help them fix the bloc’s sprawling administration.
At the heart of this ambitious effort, surprisingly, is a UK company: London-based iov42 was chosen by the European Commission in August 2021 to help design European blockchain capabilities. Iov42, which builds blockchain-based identification tools, beat the likes of EY, Vodafone and Deloitte to secure one of seven EU contracts — collectively worth €6.2m (£5.3m) — available for the project.
A blockchain is a digital database or ledger used to record information and transactions in a transparent and collaborative manner. The technology underlies bitcoin and other cryptocurrencies.
To see a UK company involved in a tentpole EU tech project so soon after [Brexit] is surprising
To see a UK company involved in a tentpole EU tech project so soon after the country’s acrimonious divorce from the bloc is surprising for some, though the company does have an Austrian office.
In theory, the blockchain should add accountability to the vast EU budget by generating a public record of all activity. This aspect of the tech makes it particularly compelling for the bloc, amid accusations that politicians and officials in some member countries mismanage or even embezzle huge amounts of subsidies each year.
The blockchain is a great fit for the EU, argues Pēteris Zilgalvis, head of the Commission’s blockchain unit. “Because it is multi-level, it enables multi-level governance,” he told Sifted last year.
The EU blockchain push is part of a larger multibillion-euro effort by Brussels to stoke technology development across the bloc. About a fifth of the EU’s €750bn pandemic recovery fund will be spent on digital tech, “the make-or-break issue” for the continent, commission president Ursula von der Leyen said in September 2021.
‘A happy surprise’
According to iov42 CEO and chairman Dominic von Trotha Taylor, the EU plan is “an enormous vision and feels quite revolutionary. The potential for things like protecting consumer privacy where data is held is huge. EU countries don’t want their data to end up in a random part of the world.”
The company previously developed a blockchain-based certification system for timber companies, an industry “with an enormous amount of fraud,” von Trotha Taylor said.
While an EU-wide blockchain would be far more complex and expensive to run than a traditional data structure created and maintained by a central party, proponents believe it will have important advantages in security.
Blockchain, the buzziest of tech terms two years ago, is still immature, with problems around speed, volume and security
Public administrations around the world are exploring the use of blockchain, though many of these efforts remain small. The technology is being more readily adopted in industries like logistics to beef up supply chain visibility.
Still, there are significant challenges. Blockchain, the buzziest of tech terms two years ago, is still immature, with problems around speed, volume and security. Political bureaucracy — especially the combined buy-in needed by 29 countries (the EU-27 members, Norway and Liechtenstein) to make the EU chain work — is another hindrance.
Iov42 spent the second half of 2021 fleshing out the EU’s blockchain approach. “What we want to end up with is a platform that is proven to operate. In two years there should be a clear understanding of the art of the possible,” von Trotha Taylor said. Should policymakers back the plan, the EU will then explore a prototype system.
EU policymakers have been front-footed on blockchain. In April 2021, the European Investment Bank sold the world’s first syndicated digital bond. To carry out the deal, the bank issued bond tokens registered on the public Ethereum blockchain network. The Commission is also throwing its weight behind plans to introduce a digital euro.
Zilgalvis sees a future where EU citizens save time and money accessing public services on the blockchain. Third-level diplomas should go on a public chain for example, he said, ending school leavers’ awkward and tedious tracking down of exam results from university administrators.