Reflections: Reviewing the first two years of the EU Blockchain Observatory

What happened at the EU Blockchain Observatory Conclusion Workshop on 6 May, 2020. 

All good things, they say, must come to an end. The EU Blockchain Observatory and Forum is certainly no exception to this rule. After more than two years of work, on 6 May, 2020, we held the final workshop of the Observatory. Due to the COVID-19 crisis, the workshop was held online, where some 300 people logged in. The purpose of the workshop was to look back at the Observatory’s work, to take stock of blockchain in Europe today, as well as to look forward to the future.

Below we present some highlights of the discussion. For a more detailed account, as well as links to the slides and videos, please refer to our full Workshop Report.

Introduction and overview of European context and activities

The workshop began with a presentation by Pêteris Zilgalvis, Head of Unit, Digital Innovation and Blockchain, Digital Single Market, DG CONNECT and Co-Chair of the EC’s FinTech Task Force. The EU Blockchain Observatory and Forum, he said, is an essential part of the EU's blockchain strategy. Other elements of that vision include the European Blockchain Services Infrastructure (EBSI) project as well as INATBA, a public/private partnership designed to bring the Member States of Europe together with the private sector to further the blockchain ecosystem in Europe. Europe is also investing in research, innovation and startups through a number of Initiatives including Startup EU. On the regulatory front, the EU is promoting and enabling blockchain as part of the Digital Single Market legal framework and looking at the Digital Services Act to see if there is anything that can be done to support the mutual recognition of smart contracts. In terms of policy, the EC cooperates with bodies like ISO, CEN/CENELEC and ETSI on interoperable standards, will be introducing initiatives focused on skills development for blockchain, and has created an AI/Blockchain Investment Fund. The EC will also soon be publishing its Blockchain Strategy. 

Speech by Eva Kaili (MEP, European Parliament)

Up next was a speech by Eva Kaili, a Member of the European Parliament and a strong advocate for blockchain in Europe. The Observatory, Kaili said, has been instrumental to the effort to widen the understanding of the uses and the value of blockchain. Today blockchain is ubiquitous in the markets and public sector and is an integral part of any innovation ecosystem. We also now have a much clearer understanding of what constitutes a blockchain-based solution. Today, Kaili continued, we are moving from blockchain’s period of childhood into an era of adulthood, one in which we have a clear understanding about the importance of blockchain governance and a clear view of blockchain Key Performance Indicators. Kaili ended with a number of recommendations, including warning against the fragmentation of the European blockchain ecosystem, creating a mechanism to link the new EU Blockchain Observatory with INATBA and EBSI, and setting up a distinct Directorate on Blockchain in DG CNECT. In closing, Kaili thanked all those who had contributed to the work of the Observatory and promised to continue her strong support for these efforts in the European Parliament.

Presentation: Blockchain technology now and tomorrow, technology advancements and adoption

In the third session Tom Lyons, Report Manager of the EU Blockchain Observatory and Forum, provided a review and updates on the Observatory's thematic work, which was carried out primarily though its 18 workshops, nince Academic Research Papers and 13 Thematic Reports. A number of priorities raised by the community and communicated to policy makers through the Observatory have since been acted upon. These include clarifying the legal and regulatory framework, which the EC is doing through various regulatory reviews; educating stakeholders, which is happening both through EBSI and EC skills initiatives; supporting blockchain research and startups, which the EU addresses through Horizon 2020 and its AI/Blockchain Investment Fund; and supporting public/private flagship projects, which has now been realised among other things through the creation of INATBA. The second part of the presentation focused on the current state of the blockchain ecosystem in Europe and globally via market research prepared by the Observatory in cooperation with the blockchain-based market research firm Blockdata. Among the findings: Since its height in 2017 during the ICO boom, creation of blockchain-focused projects has dropped considerably around the globe, while more and more companies are joining blockchain consortia. This seems to indicate both the expected post-hype consolidation as well as an interest in companies to start to put the technology to practical use. Funding through token sales and venture capital has also peaked, while the smart contract ecosystem is growing steadily.

Deep dives into key Observatory themes

The next part of the workshop consisted of deep dives into three of the Observatory’s key themes: Supply Chain, Digital Assets, and Digital Identity.  

Supply chain. In the supply chain discussion, it was pointed out that a lot of the legal, regulatory, technological and governance issues in blockchain for supply chain were being discussed before the pandemic. The crisis has however highlighted how fragile global supply chains are. Of all the blockchain for supply chain issues, the governance ones are probably the most important. These are not related to the rhythm of the advance in technology, bur rather to difficult questions around getting a very diverse stable of stakeholders to sit around a table and agree on how to do business in a collective setting.That said, even in this short period, we have seen a lot of progress, for example in trade finance. There are not only a lot of consortia being formed, but many have actually gone to market and are delivering services. 

Digital Assets. A representative of the SEC gave a detailed overview of the SEC’s approach to regulating digital assets. When it comes to classifying digital assets a lot depends on what the rights and expectations of the parties to a transaction are. The threshold issue with the SEC is always analysing whether a digital asset is a security or used in a securities-related activity. That said, the SEC regulates digital assets the way it regulates any other asset, by being technology neutral and looking at conduct and activity. After that, the discussion turned to central bank digital currencies (CBDCs). According to the BIS some 70% of central banks are considering CBDC, and while initial focus has been on wholesale CBDC, most central banks are now considering retail CBDC – or digital cash – as well. Today the most advanced initiatives are in retail CBDC. Many are already in an advanced experimentation phase and could go live by 2020. There are many non-technical questions and challenges central banks have to consider before implementing a CBDC. A CBDC can have a negative impact on the legacy financial system, yet there can also be risks to central banks in not implementing a CBDC and leaving the field of digital cash to private entities.

Digital identity. The digital identity panel focused on the state of decentralised identity in Japan and in Europe with EBSI. In Japan, participants were told, digital identity is quite advanced. The government is an identity provider already for individuals and legal entities. It is developing some decentralised identity technologies as well. In Europe, EBSI is building a blockchain infrastructure based on nodes hosted by Member States. One core component that has been identified is the need for an identity framework for the infrastructure but also to add decentralised identity to many processes. The digital identity ecosystem is heavily dependent on network effects, yet there is no real incentive for actors in the ecosystem to be first movers. So there is a chicken and egg problem as decentralised and self-sovereign identity (SSI) is only effective if large numbers of people can use it in multiple sectors. This requires someone to move first and make the initial investment, and is where government could play an important role.

Blockchain in a Changing World

The next session featured presentations by INATBA and ConsenSys Health on the topic of blockchain in a changing world, with a focus on how blockchain can help in the fight against COVID. 

INATBA. COVID has caused some changes in the world. For one, digital has become the new normal. In times like these it is ever more important that we develop appropriate policies at speed, but those policies need to be strong and take into account the public and private sector views. This is the idea behind the INATBA Covid task force, which has been initially focusing on use cases in pandemic supply chain and donations. So far 25 solutions have been presented to the organisation. Six were around helping to bring the business community together for collective action against COVID. Seven were around how to protect people's livelihood and facilitate business continuity during the crisis. And 12 were aimed at mobilizing cooperation and business support for the COVID-19 response.

ConsenSys Health. In the post-COVID world more people are paying attention to blockchain and DLT. There is a lot of focus on practical use cases like how blockchain can improve the medical supply chain, be a matching engine for resources, for data sharing, and similar challenges. But blockchain and DLT can also help us augment our resilience. Many people are concerned by the fact that large governments, given the choice between mass testing and mass surveillance, are opting for mass surveillance. In this context blockchain can be seen as a dignity-preserving technology. Blockchain can support multilateral collaboration through computational trust, through transparency and by helping to decrease costs and add efficiencies to processes. ConsenSys Health is focusing on this through developing a rapid pandemic response platform with large federal partners. The intent is to create a platform that uses not just blockchain but also privacy-preserving technologies and federated learning techniques.

Conclusion: A two year journey: the Observatory and Forum by the numbers and practical feedback

In the final session of the workshop, Ludovic Courcelas, Project Manager of the Observatory, presented a quantitative look at the Observatory’s achievements over its first two years. The numbers included: 13 thematic reports, a European Blockchain Map featuring over 700 initiatives, the Observatory Website with 91,000 visitors and 310,000 page views, an active Twitter account with 9,500 followers and 800+ tweets, an online Forum with 2,200 members, a monthly Newsletter with over 2,600 subscribers, and a YouTube channel for workshop and events videos on with 8,500+ views. The Observatory’s work, Courcelas concluded, is important for Europe for a number of reasons. These include aiding Europe in crafting and shaping regulation to help accelerate the development of the technology and the industry; helping identify actionable use cases to receive support as needed; contributing to building a better global understanding of the technology among all stakeholders, advancing research and education; helping ensure that European citizens and businesses benefit from the promise of the technology. Courcelas then thanked all the attendees and with that, the final workshop of this version of the Observatory came to a close.

Workshop details

Detailed reports on all our workshops, including links to the presentations and the video of the day, can be found on our Reports page. 

• The Workshop took place online on 6 May, 2020
• 300 people, the maximum allowed, joined the event online.
• Speakers and panelists included:
  • Pêteris Zilgalvis (DG CONNECT)
  • Eva Kaili (MEP, European Parliament)
  • Tom Lyons (Report Manager, EU Blockchain Observatory and Forum)
  • Marina Niforos (EU Observatory Expert Member)
  • Pablo Valles (ConsenSys)
  • Valerie Szczepanik (SEC)
  • Matthieu Saint Olive (ConsenSys)
  • Masanori Kusunoki (CIO Government of Japan)
  • Daniel Du Seuil (EBSI)
  • Marc Taverner (INATBA)
  • Alex Cahana (ConsenSys Health)
  • Ludovic Courcelas (Project Manager, EU Blockchain Observatory and Forum)