Blockchain – Ger­many

While the Ger­man gov­ern­ment has shown its keen­ness to pro­mote blockchain as a tech­nol­ogy, the coun­try is not among the lead­ers that use this tech­nol­ogy:

Banking Frontiers - - Contents -

The fed­eral gov­ern­ment in Ger­many has come out with a com­pre­hen­sive blockchain strat­egy that it ex­pects will pro­mote the tech­nol­ogy, mit­i­gate risks and al­low wide use. The gov­ern­ment says it ex­pects the new strat­egy to un­leash the po­ten­tial of the dis­trib­uted ledger tech­nol­ogy and pave the way for mass scale dig­i­ti­za­tion of sev­eral sec­tors, pre­dom­i­nantly the fi­nan­cial ser­vices sec­tor, even while bring­ing down the risk in­volved in the use of data. The strat­egy is very much in line with that of the EU in or­der that a sin­gle dig­i­tal mar­ket can be es­tab­lished for the whole of EU.

To d a y, b l o c k c h a i n h a s found ap­pli­ca­tions in var­i­ous fields and sec­tors like en­ergy, com­mu­ni­ca­tions, mo­bil­ity and health although a few years ago, its use was re­stricted to only for cre­at­ing cr yp­toc ur­ren­cies. The new strateg y di­rectly pro­motes such use as it is aimed at pro­tect­ing con­sumers and state sovereignt­y - two con­cerns voiced by sev­eral au­thor­i­ties re­gard­ing the im­ple­men­ta­tion of new vir­tual cur­ren­cies in Euro­pean mar­kets.

IM­PACT ON FI­NAN­CIAL SER­VICES

The new strat­egy is ex­pected to lead to a leg­is­la­tion that may have far-reach­ing im­pact on the fi­nan­cial ser­vices sys­tem - like for ex­am­ple cre­ation of blockchain-based elec­tronic bonds. The strat­egy also out­lines the gov­ern­ment’s pri­or­i­ties in the blockchain space - like dig­i­tal iden­tity, se­cu­ri­ties and cor­po­rate fi­nance. It also makes it clear that the state will not tol­er­ate any threat to state money by sta­ble­coins like the Face­book-led Libra. The gov­ern­ment is ex­pected to launch a pi­lot project soon for a blockchain-based dig­i­tal iden­tity to study the tech­nol­ogy’s ben­e­fits in use cases like main­tain­ing the records of civil sta­tus, doc­u­ment regis­tra­tion, pass­ports and ID cards.

AV­ER­AGE USER

This en­thu­si­asm apart, Ger­many is one coun­try that is just about av­er­age in the use of blockchain com­pared to other tech­no­log­i­cally de­vel­oped coun­tries. A study by Bitkom, an as­so­ci­a­tion rep­re­sent­ing the coun­try’s dig­i­tal econ­omy, showed that 46% of some 1004 com­pa­nies that are ac­tive in the dig­i­tal space be­lieve Ger­man busi­nesses lag be­hind their in­ter­na­tional com­peti­tors. Nearly 40% think Ger­many is about av­er­age while 10% even say Ger­many is far be­hind the in­ter­na­tional level of blockchain adop­tion. Not a sin­gle sur­vey par­tic­i­pant be­lieves Ger­man com­pa­nies are among the world­wide pioneers in the sec­tor. The com­pa­nies that par­tic­i­pated in the sur­vey were from the au­to­mo­bile in­dus­try, ma­chin­ery and en­gi­neer­ing, lo­gis­tics, trade, en­ergy & util­i­ties, bank­ing and in­surance, or the pub­lic sec­tor. It also showed that while small busi­nesses are not blockchain­savvy, larger cor­po­ra­tions have in­vested in the tech­nol­ogy. Only 2% of com­pa­nies with 50 to 500 em­ploy­ees are us­ing blockchain at any level of their or­ga­ni­za­tion.

Ger­many has an es­ti­mated 120 blockchain star­tups, a ma­jor­ity of th­ese based in Berlin. In com­par­i­son, there are more than 750 star­tups in Liecht­en­stein and Switzer­land’s Crypto Val­ley. In­dus­try an­a­lysts feel part of the rea­son for this is the reg­u­la­tory en­vi­ron­ment. Lack of reg­u­la­tions and le­gal se­cu­rity are con­cern for star­tups. Sev­eral en­trepreneur­s have left the coun­try to set up firms in Liecht­en­stein or Crypto Val­ley.

IN­DUS­TRY 4.0

Ger­many has coined a term, In­dus­try 4.0, which de­scribes the ways by which big data col­lec­tion and anal­y­sis, ma­chine-toma­chine com­mu­ni­ca­tion, and ar­ti­fi­cial in­tel­li­gence are mak­ing busi­nesses ‘smarter’ across all points of their value chains. Within this frame­work, in­dus­tries such as bank­ing, in­surance, and en­ergy are in­creas­ingly ex­plor­ing the po­ten­tial of the blockchain. Many of the busi­nesses not just in Ger­many but in EU as a whole, have rec­og­nized the value of us­ing blockchain for more than just cryp­tocur­rency. For ex­am­ple, Ger­man re­gional bank LBBW and auto maker Daim­ler ex­e­cuted a debt cer­tifi­cate based on blockchain to re­duce ad­min­is­tra­tive costs and du­pli­ca­tion of work. Some 15 Euro­pean in­sur­ers and rein­sur­ers have joined forces un­der the Blockchain In­surance In­dus­try Ini­tia­tive (B3i) for sim­i­lar pur­poses. Many Euro­pean en­ergy util­i­ties like Enel, RWE, and Vat­ten­fall are back­ing the En­er­chain project to bring peer-to-peer trad­ing to the whole­sale en­ergy mar­ket.

Ger­man tech­nol­ogy scene an­a­lysts quote process scal­a­bil­ity, com­plex­ity and test­ing as hur­dles in many blockchain ap­pli­ca­tion cases. Yet, it has po­ten­tial is in cut­ting out in­ter­faces and de­part­ments. In the en­ergy sec­tor, traders are hop­ing that blockchain tech­nol­ogy can re­duce trans­ac­tion com­plex­ity and, thereby, re­duce the costs of en­ergy set­tle­ment, the process of rec­on­cil­ing the en­ergy pur­chased with the en­ergy sold.

Reg­u­la­tion is also a fac­tor in blockchain’s po­ten­tial. While the gov­ern­ment and min­is­ters in the coun­try may ar­gue for more reg­u­la­tion, star­tups will feel reg­u­la­tions will sti­fle the growth po­ten­tial of the tech­nol­ogy. Rather, they would say trans­parency in the blockchain tech­nol­ogy, and its ap­pli­ca­tions should re­duce r e g u l a t i o n s . Whil e blockchain tech­nol­ogy has a sound foot­ing in Ger­many and in Europe in gen­eral, the ad­vances made by coun­tries like the USA or China in this do­main have the po­ten­tial to change the global fi­nan­cial plat­forms as a whole and Ger­many and Europe have to do a lot of catch­ing up.

Blockchain strat­egy in Ger­many

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.