Blockchain technology has the potential to transform society, but there is a need for legal clarity and certainty and therefore a common EU approach. This is the key message of an own-initiative opinion adopted by the European Economic and Social Committee (EESC) on 30 October, which also calls on the European Commission to launch a comprehensive initiative to make the EU a global authority in this field.
Blockchain technology is a mathematical structure for storing data in a way that limits corruption and fake data. According to Ariane Rodert, rapporteur for the opinion on Blockchain and the single market,
blockchain technology could help reinvent socioeconomic models, thus supporting the societal innovation needed to tackle today's societal challenges. Gonçalo Lobo Xavier, co-rapporteur for the opinion, said that
the technology behind blockchain may be a transformative force across society, bringing with it values such as trust, transparency, democracy, and security.
This technology can be applied in many sectors to increase security and transparency and can even contribute to achieving the Sustainable Development Goals (SDGs). However, as the EESC says in its opinion, several challenges have yet to be addressed and there is an urgent need to provide clarity and certainty and protect privacy.
Therefore, the EESC calls for a common EU approach and asks the Commission to launch a comprehensive initiative with the SDGs at its core. The initiative should be complemented with an action plan for Europe to become the reference point for blockchain worldwide.
The EU institutions have already taken some measures to support blockchain technology. In April 2018, the European Commission, together with 21 Member States and Norway, signed a declaration to create the European Blockchain Partnership (EBP) and cooperate to establish the European Blockchain Services Infrastructure (EBSI). The aim was to foster cross-border digital public services with the highest standards of security and privacy.
In its opinion, the EESC proposes to reinforce these initiatives by creating a new, EU-wide platform that will bring together representatives from the EU institutions (including the EESC and the Committee of the Regions), Member States, industry, consumers and academics. This platform would provide a space for joint learning, capacity-building and sharing good practices.
The opinion also gives examples of how blockchain technology can be used to harness significant opportunities in the context of the single market, including:
- achieving SDGs by increasing trust, openness and transparency. Blockchain technology can help to reduce poverty by using cryptocurrencies for people who have no access to bank accounts. It also allows patient healthcare records to be shared in a secure and efficient way and supply chains to be monitored;
- empowering citizens by sharing data in a transparent way and reducing the need for intermediaries;
- boosting entrepreneurship and innovation thanks to its collaborative and consensual mode of operation;
- improving mobility and cross-border opportunities for businesses, while at the same time protecting consumers' rights by minimising barriers to trade in the EU and globally while ensuring safety and security in payments and transactions;
- supporting the single digital gateway, which introduces the "once only" principle whereby data only needs to be entered in the platform once;
- developing public and private services in the fields of notarisation and authentication, diplomas, European self-sovereign identity, taxation and trusted data sharing;
- creating and verifying digital identities for individuals and organisations, as a digital identity can be created and attributed to every online transaction involving an asset;
- mitigating breaches of personal data and protecting sensitive data, while ensuring safe transmission of data;
- improving transparency through smart contracts;
- limiting tax evasion and tax avoidance by increasing accountability for transactions and liability for operations;
- generating new funding models, such as crowdfunding, by issuing a project-specific currency.
Blockchain technology, therefore, has the potential to solve the problem of trust between individuals without going to a third party, and it also makes possible new types of governance and relationships based on transparency. However, as with any new phenomenon, care is needed to avoid a gap forming between those who control or can afford blockchain technology and those who can only access it through models controlled by large corporations.
To this end, tackling legal uncertainty is a priority. The current legislative framework is unclear and fragmented at Member State level. It is also essential to protect privacy, ensure interoperability between the different blockchain technology platforms and reduce transaction costs that are in many cases prohibitive.
The opinion also stresses how crucial it is to inform the public about blockchain technology and monitor its impact on consumer protection and rights, pointing to the need to analyse the effects of this technology on jobs, working conditions and workers' rights.
Blockchain technology is an IT protocol dating back to the 1990s, whose development is linked to cryptocurrencies. It is both a code and a public register in which all transactions between participants in a network are recorded one after the other, with a high degree of transparency and in a way that cannot be altered. Each participant is a link in the chain, helping to validate and store the data that is being exchanged. This is intended to make data processing secure and help build mutual trust between blockchain participants. Blockchain is, therefore, an attractive tool for redefining security in digital transactions.
For further information, see the EESC's opinion on Blockchain and distributed ledger technology as an ideal infrastructure for the social economy.