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How the EU is using blockchain to build a citizen-centric European Internet

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  • While many are not aware of it, the European Union has quietly laid the foundations for a citizen-centric, privacy-preserving European Internet and Digital Single Market.
  • Policy makers at the European Commission see blockchain as a key enabler of this vision and are working to adapt the regulatory and policy landscape accordingly.
  • Along with an in-depth look at blockchain in Europe today, the recently published Conclusions and Reflections 2018-2020 from the EU Blockchain Observatory and Forum provides a comprehensive overview of this new landscape.

Since its early days blockchain has been heralded as the technology of decentralisation. Many have hoped to use it to counter some of the more worrisome evils – like lack of privacy, fake news, or the concentration of data-wealth in the hands of a few – associated with today’s increasingly centralised and platform-dominated Internet. Yet we still seem to be waiting for a comprehensive view of how this might actually be done.

In Europe, that may be changing. While under the radar to some extent, European policy makers have been busy developing a vision of how blockchain could be applied to the European Digital Single Market. Those who favor a more citizen-centric, privacy-preserving approach to the Internet should find a fair amount to like in it.

Anyone interested in an overview of what’s happening might want to consult the EU Blockchain Observatory and Forum’s recently published Conclusions and Reflections 2018-2020 report. The paper not only contains a compendium of the first two years of the Observatory’s work exploring the state of blockchain in Europe. It also features interviews with key EU blockchain policy makers – including MEP Eva Kaili, Director-General of DG CONNECT Roberto Viola, and Pēteris Zilgalvis, head of the EC’s blockchain unit – on the future of the European blockchain regulatory and policy landscape. (Disclosure: I was on the ConsenSys team that ran the Observatory during its first two years, and am the principal author of the report. I have since left ConsenSys.)

Here are my personal top-five takeaways regarding the EU’s stance on blockchain:

One: The EU cares more about decentralisation than you may think 

Reading through the interviews in particular, you will find strong support from the EC for decentralisation as an idea. To be clear, this is not Satoshi Nakamoto’s all-or-nothing conception of decentralisation. It’s more about creating the conditions for a healthy continuum between centralised and decentralised approaches, depending on what makes sense in a given context. 

It does, however, seem quite clear that the EU favors multi-level structures with a fair amount of decentralisation for the Digital Single Market; places a strong emphasis on privacy protection; and would prefer a digital market that is not solely dominated by large platforms, but rather offers a level playing field with room for innovative protocols, approaches and business models.

Two: Yes, Europe has been moving slowly on the regulatory and policy front – but it is moving 

It is true that compared, for example, with smaller jurisdictions like my home country of Switzerland, the EU has not been the fastest mover on blockchain policy. But momentum has been building. For instance, the EC just finished a consultation on digital assets and has said it clearly favors – if politically feasible – a harmonised European legal and regulatory framework for digital assets and smart contracts. This is now a distinct possibility. 

Over the summer, we can expect a new comprehensive European blockchain policy, likely with significantly increased funding for blockchain projects under the new EU budget. The EU is looking at its current digital signature regime (known as eIDAS) to see how it can be made more fit for a decentralised world. Something similar is happening with the European Data Strategy. It may take a while for blockchain and decentralised approaches to establish themselves in the Digital Single Market, but considering the size of that market, when it does happen, it will have a huge impact.

Three: EBSI, Europe’s homegrown government-services blockchain platform, is a significant development – though it will take time for its impact to be felt 

Behind the ponderous sounding title of the European Blockchain Services Infrastructure (or EBSI) initiative is a pretty neat idea: European governments, along with the EC and the European Court of Auditors (having come together as part of the European Blockchain Partnership), are building their own Europe-wide blockchain for cross-border government services. 

Like any large project it will take time to come to fruition. By design the initiative is also starting small, with four fairly limited use cases. But small seeds can grow into large plants. Three new use cases are being added this year, and the idea is to expand it over time into a comprehensive platform.

I personally find two things very tantalising about EBSI. One is that provision for a generic “European self-sovereign identity” capability is among those first four use cases (more in the next point). The other is that the longer-term roadmap is to make EBSI interoperable with other government and – crucially – commercial blockchain platforms. 

In future if, say, a banking platform that has KYC/AML compliance requirements wants to invite the regulator onto the blockchain, EBSI should make it relatively easy to do. The same would be true for other use cases, for instance tax. This could lead to massive efficiency gains and savings for all involved. 

EBSI also represents a fairly serious attempt by policy makers to learn about the technology and how to regulate it through the simple expedient of using it themselves. That’s commendable too.

Four: The EC’s vision for digital identity foresees a compromise between centralised and decentralised approaches – but it looks like a pretty progressive compromise 

It’s no secret that decentralised identity will be a key element of any large-scale decentralised platform. I have been impressed by the degree to which EC policy makers both understand this and are looking to bring decentralised identity into the regulatory and policy mix. However, the EC’s vision for decentralised identity is not to replace all centrally issued IDs with decentralised or self-sovereign counterparts. 

The idea is to make it easier for individuals to manage a fair amount of their identity credentials themselves and so have more control over how that information is used. The EC thinks this citizen-centric approach would be better for individuals, but also better for the state. European policy makers do not want to see digital identity become a tool for state surveillance, but rather an enabler of citizen protection and empowerment.

Five: If you are a blockchain startup in Europe, take time now to learn about EU funding options

Last but not least, recognising that historically there has been a funding gap for startups in Europe, the EU has been ramping up funding for blockchain and related technologies (like AI). This has been happening through the Horizon 2020 initiative and the newer Artificial Intelligence and AI Blockchain Investment Fund

In the latter, the EU is making €100 million available in 2020 to support companies working in these sectors. We can expect even more to come in the next budget. For startups, it makes sense to keep tabs on what is available or coming online and make use of these resources, if at all possible.

It may seem ironic to some that a largely centralised organisation like the EC should be the champion of the blockchain decentralisation dream. Decentralisation maximalists might shudder at the idea of a government role at all. But there is precedent. The first great decentralising technology, at least initially, was the same Internet that is causing us all these problems today. And as is well known, the decentralised Internet started as a government project and its early development was largely funded from the public coffers.

There is no reason why lightning could not strike again in Europe.

Tom Lyons is an independent communications consultant based in Zurich, Switzerland. He currently acts as an advisor to the EC on blockchain policy communications. All opinions expressed here are however, his own and do not represent the opinions or policies of the Commission. 

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