All-Party Parliamentary Group on Blockchain Technologies : Insights from a Recent APPG Roundtable

 in blog  tagged APPG / blockchain / DeFi / digital identity / DLT / SSI / Web3 by

Introduction

On May 22nd 2024, I was please to be able to attend an industry roundtable looking at tokenizing the UK’s digital economy. This meeting (agenda and main areas for discussion above) was held on an “interesting” and very wet day in the Palace of Westminster (the beginning of the meeting was delayed and then interrupted by the announcement of the UK 2024 General Election by Rishi Sunak).

Key speakers: Natalie Elphicke (MP, Chair); Lord Taylor of Warwick (Committee Member); Naseem Naqvi (Head of British Blockchain Association) Roman Beck (Head of European Blockchain Center, Copenhagen); Jamie Burke (Outlier Ventures); Nikhil Vadgama (UCL); Doro Unger-Lee (Algorand Foundation). [Photos courtesy of the British Blockchain Association]

With a panel consisting of 2 parliamentarians, 4 blockchain/Web3 experts and nearly 100 attendees in a packed Committee Room 11, the meeting kicked off with brief introductions from Natalie Elphicke, Lord Taylor and Naseem Naqvi re-emphasising the importance to the UK economy of blockchain technology and Web3 activities.  Introductions were followed by four slide-free, 10-15 minute talks by the blockchain expert panel on the following topics:-

  1. The EU perspective on blockchain; Roman Beck
  2. Skills, talent and workforce training; Doro Unger-Lee
  3. How can the UK create a thriving Web3 ecosystem and further transition to the digital economy? Jamie Burke
  4. Some real blockchain use cases; Nikhil Vadgama

Summary Highlights and Key Messages

  1. The Current EU Perspective and Position (Roman Beck)

  • Aspire to a single digital European market and a European blockchain infrastructure
  • Need for effective regulation covering, for example, smart contracts, wallets, etc.
    • EU has invested ca. 150m euros in this area
  • Importance of standards: https://digital-strategy.ec.europa.eu/de/policies/blockchain-standards
  • Importance of good governance to protect “European Values” (ethical guidelines)
  • How to capture value on a national level?
  • Key focus on citizens’ digital identity and one’s digital persona; give back that power to individuals (or governments or third parties?).
    • Need for good regulation in this area.
  • Covered the European Blockchain Partnership recently rebranded/relaunched to the European Digital Infrastructure Consortium or EDIC (the UK is not currently a member, but could join), created to deepen cooperation on blockchain and Web3 technologies.
    • This is similar to initiatives in China set up to control, for example, imports and exports.  The EDIC has, amongst other reasons, been established to potentially counter these Chinese controls.
  • Mentioned some important use-cases relevant to current EU challenges.
    • Educational certificate transferability to facilitate moving jobs.
    • Refugee protection – via digital identities.
    • IP management, especially copyright and patents; protecting “your intellectual property”.
  • Some key, overriding principles include: reinforcement of trust and resilience; cross-border enablement; supporting compliance; etc.

 

  1. Skills, Talent and Workforce Training (Doro Unger-Lee)

  • Governments must incentivize academia, including partnerships.
  • Must support facilities in course development around Web3, including blockchain.
  • How to open up the developing world.
  • How to ensure diversity (gender, race and other so-called “protected characteristics”), but not get overly focused on this.

 

  1. Creating a Web3 ecosystem in the UK (Jamie Burke)

  • Need to remember that blockchain tech is just one part of the Web3 ecosystem – Web3 also includes crypto and AI.
  • How can the UK get its “cut” from the billions of $$s being invested in Web3?
  • Need to align big tech with the core principles, e.g. user sovereignty vs. shareholder predominance.
  • Web3 is inherently decentralised; there is and should not be a “Silicon Valley” for Web3; there are already many expert Web3 hubs.  The UK should not have to compete with other hubs in, for example, UAE, Singapore; need to work together and harmonize – collaboration.
  • How best to leverage UK Common Law to cover smart contracts?
  • How to see the digital economy moving from Web2 to Web3?
  • There is a need for regulation of Web3 business, but must be pro-innovation
  • The number one problem for Web3 startups is getting basic banking services and products.  The main banks must be persuaded/encouraged to be more open and flexible on this.
  • Rather than look at “blacklisting” bad actors and companies; switch to “whitelisting” the good actors.

A summary of the key takeaways discussed in Burke’s presentation:-

  • There is a unique opportunity to correct how The Web functions at its very core both as an economy and market and to check Big Tech, not through deceleration or enforcement, but alignment on a set of principles, which in turn brings greater regulatory fit. Again with a Web that includes innovations in AI. 
  • These are not separate issues and shouldn’t be treated as such.  It is our belief because the principles of Web3 are inherently aligned with users, and their sovereignty vs pure shareholder supremacy, they are naturally aligned with what policy makers want; a less extractive and more equitable Web but also one that enables greater commercial, and domestic, competition to serve these interests. 
  • DeFi is its own contained sandbox due to technical hurdles used by less than 1% of even crypto .
  • The UK can lead by harmonizing regulations and leveraging British Common Law to extend to smart contracts, seeding innovations that transition from Web2 to Web3
  • Having clear regulatory principles for cryptocurrencies, smart contracts, and dApps is essential. The UK’s approach should be pro-innovation, avoiding burdensome and over complicated compliance that stifles startups.
  • The UK should create better market incentives to drive better capital allocation, such as ETFs & Indices that allow for professionalization categorization of assets, based on fundamental analysis rather than KOIs on Twitter with pump & dumps.
  • To continue evolving into a thriving digital economy, we must push the blockchain and Web3 agenda forward and involve the UK government and either party in this adoption.

  1. Some real blockchain use cases (Nikhil Vadgama)

  1. Success cases for blockchain
  2. Case Studies on these success stories
  3. How to build on the good work

 

  1. Successes in tokenization
    • Vadgama prefaced his presentation by saying this was very much a non-exhaustive list of examples!
    • Supply Chain examples: Everledger (diamonds, wines and their supply chain); HSBC; Artax (“The Artax project was born from a collective development community all wanting the same thing: The implementation of blockchain data to be stored in read-only memory rather than from disk.”); Land registry (tokenizing real estate and drastically reducing purchase times from months to minutes); BCB Group (“BCB Group was founded in 2017 to service the blockchain and cryptocurrency industry with the promise of providing durable financial infrastructure in a volatile environment.”}; song catalogue tokenizing; Bloktopia; carbon capture tokenization
    • Service provider examples: Eliptic (analytics); Outlier Ventures (see above)
    • Many of the above-named organisations remain in PoC mode and are still relatively small scale.
    • There are NO ubiquitous UK use cases.
    • What is the top tokenization use cases? Stablecoins. They are growing quickly (e.g. USDT), but the UK’s Pound Coin has not really taken off.
  2. Case studies on the success stories
    • It is not easy to find the successes in the first place, then it is harder still to get permission or access to deep-dive them to find out more!  Can sometimes if you are prepared to pay.
    • Questions you would want to ask:-
      • What was the original problem you wanted to solve? Who were the key stakeholders? Was DLT the right solution and why? What are the pros and cons? What were/are the cost savings? What was the revenue generated? What IP was created (if any)? Is there open or closed governance?
      • What were the other non-financial metrics for success? E.g. What was done on-chain and what off-chain? What were/are the transactions per second (TPS) if on-chain? How many wallets? What is the energy utilization? What are the token dynamics?
      • Potential societal metrics might also include: number of jobs created; people trained; tax generated; level of decentralization.
  3. Where do you go from here?  How to build on the above?
    • Some suggestions
      • Promote initiatives on interoperability.
      • Focus on solutions not the tech – solving a real-life problem.
      • Map the DLT economy – quantify the impact on jobs, revenue raised, tax raised, etc.
      • Continue regulatory strides, especially n the area of stablecoins.
      • Coordination and communication between government departments when it comes to public services.
      • Stay ahead of the curve where possible, so in areas where the UK is leading, try to stay ahead, e.g. fund management (UK is currently 2nd behind US)
      • Education and smart curriculum development to remain competitive (especially when compared to countries like China).
      • It is critical that we put in place a UK National Blockchain Platform.
      • We must ensure start-ups get the basic support services they need; must “force” the High Street banks to offer these services at an affordable price.

Questions for the Panel

  • The overwhelming majority of the questions posed to the panel in the final 60 minutes or so were on financial and DeFI matters, e.g. the difficulties for start-ups; financial tokenization; financial services, etc.  This was perhaps not surprising, but was a little disappointing if one was interested in other major industry blockchain issues, use cases and challenges
    • No questions on life sciences, healthcare, etc. were asked.
    • A question about digital identity was posed but not answered.
    • There was one comment/question on real estate; one on the need to watch the mental health of blockchain developers (work-life balance).
  • One excellent question asked was: “what does decentralization actually mean, when the majority of blockchain nodes tend to be run on AWS or on other large dedicated platforms?”  Doesn’t this give Amazon (and the other big tech orgs whose cloud services run many blockchain nodes) the kind of control that distributed computing was trying to get around??
  • One attendee from Australia gave an update on the national blockchain progress in Australia.

Event Summary and Insights

  • This roundtable was more of a mini-conference than an action-oriented, “who will do what” event. 
  • Presentations on: where the EU is currently on blockchain tech; some of the issues around skills and talent development; how to develop a thriving Web3 environment in the UK; and DLT use cases and how to build on them, provided the basis for the “conference” and subsequent questions.
  • Although the presentations were admirably short and often very interesting, it was not clear how all of this would actively contribute to the further development of blockchain and Web3 in the UK.
    • In addition, the alignment with Web3 means that the challenges are larger and blockchain is only part of the roadmap.  Wouldn’t an APPG with a broader scope, looking more widely at Web3 technologies (including blockchain) be more valuable?
  • From this attendee’s perspective, one significant omission in the presentations, discussions and questions was the role of blockchain and other Web3 technologies in the Life Sciences and Healthcare industries.  Bar one unanswered question on digital identities, which, it is widely acknowledged, could have a big impact on an individual’s ability to secure their personal information including health data, there was nothing on this industry sector at the meeting.  This was disappointing considering how important this sector is to the UK economy.
  • One important question arose about whether the technology is truly “decentralized” when so many nodes are hosted by a few big tech companies.  No good, clear answer was given to this conundrum.
  • And finally … a possibly somewhat cynical view on this event might be that it was just “a bit of a talking shop”!  More focus on what actions will follow in the near- and long-term future, and who will “own” those actions, would have added more substance to what was nevertheless an informative meeting.
  • The official minutes for the meeting can be found here.

Richard Shute, Curlew Research, May 2024

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