Blockchain has the potential to disrupt government

A new survey shows how blockchain use cases are endless for the public sector.

“A common perception of the government’s adoption of emerging technologies, like blockchain, tends to understate the levels of innovation that happen within these governmental organizations,” states a new survey on the blockchain industry by Deloitte.

The survey, co-authored by Deloitte’s Linda Pawczuk, Principal and Americas Blockchain Leader for Consulting, Rob Massey, Partner and Global Blockchain Leader for Tax, and David Schatsky, Managing Director for Consulting, shows how, over the past several years, we have witnessed an increase in activity, with blockchain beginning to form within the walls of government agencies.

While the majority of survey respondents hail from financial services, technology/media/telecommunications, and consumer products and manufacturing, 4% of them are from the public sector. Respondents are distributed in in seven countries — Canada, China, France, Germany, Mexico, United Kingdom, and the United States.

About half of the government respondents (46%) agree that blockchain technology would disrupt their organization’s industry. It is interesting to notice that 52% of the public sector respondents grades their knowledge of blockchain technologies in the “Excellent” to “Expert” range, much lower than any other industries.

“Public sector executives are much lower in the learning curve,” Deloitte says. “It is quite possible that the Public Sector executives are more realistic in terms of their perceived understanding of blockchain technology.”

Deloitte adds: “We are seeing government’s perspective shift from curiosity to experimentation, to longer-term strategic thinking and increased investments as organizations learn more about how blockchain can tangibly impact their organizations.”

However, 48% of the respondents in the public sector believes that “at the end of the day, blockchain is a database for money.” For them “it doesn’t make sense to use it for applications outside of financial services or facilitating financial transactions.”

When envisioning the future of blockchain in government, the potential use cases are endless. Common use cases for blockchain in the public sector include digital identity, inter- or intra-governmental transactions, data integration, and supply chain traceability. These use cases align with blockchain’s benefits as identified by survey respondents: real-time transaction speed, new and improved business models, and increased data security.

The survey points out that blockchain innovation requires organizations to be nimble and open to change.

Within government, many of the barriers to adoption lie outside of blockchain but focus on regulation, security, and general resistance to change. The challenges of interoperability with blockchain can also loom large when agencies begin their blockchain journey, as noted by the fact that 37% of our survey respondents indicated adaption to legacy systems as a key barrier to blockchain technology in their organization.

Data security, privacy, and lack of regulation also stand out as paramount focal points in government, slowing agency adoption because of the current levels of uncertainty.

“With all the inhibitors that uniquely stand against this technology, we still see organizations challenging themselves to innovate,” Deloitte writes. “Blockchain has the potential to disrupt government in apparent and subtle ways, and agencies that identify and act on this potential will be at the forefront of the paradigm shift.”

In terms of global reach and adoption, the survey finally shows how “adoption of blockchain is still in its early stages across EMEA, although at different speeds in different sectors and geographies.”

Overall, however, there is strong belief in the long-term impact of blockchain to help transform business and government services.

“Government organizations are coming to the forefront in spearheading the adoption of blockchain,” Deloitte says. “The European Commission has supported the signing of a 27-country pact on blockchain, the European Blockchain Partnership, that will see EU-wide collaboration on regulatory and technical matters.”

The EU will also allocate €300 million in blockchain investment over the next three years. It has established the European Blockchain Observatory to undertake research on how blockchain can be applied.

In the Middle East, the United Arab Emirates has developed a visionary strategy for blockchain with the intent of having 50 percent of government transactions on blockchain by 2021. Elsewhere, individual countries are working to advance their own specific initiatives, such as Sweden’s blockchain-based land registry project.

In Canada, blockchain-based business registrations, led by a collection of government agencies, have seen global recognition and put Canada firmly on the global map as a pioneer in the blockchain space.