Drivers will be able to use an App, called Pass, scan their license and add the details to a Blockchain-powered platform, which will also allow authorities such as the police to have access to drivers’ details. It will also be possible for South Koreans to use their digitised driving licence to prove their age to buy goods in shops and have access to nightclubs, etc.

The Australians in New South Wales have been looking at putting driving license details onto a Blockchain platform since September 2018 and, following a successful three-month trial project to roll out to 140,000 more drivers, approval has been given by the government. The adding of driving licenses to a Blockchain is further evidence of the Australian Government’s ‘Digital Initiative’ and illustrates the continued acceptance of blockchain technology in Australia.

Santosh Devara, CEO of Secure Logic (which has developed this Blockchain platform for Australian driving licenses), recently said, “The era of standing in line to file government paperwork is coming to an end, as is our reliance on physical identification cards to establish your identity or proof of age with law enforcement or at licensed venues. These are mistake prone, time-consuming, expensive, and impractical ways to offer services.” Elsewhere in Australia authorities are also looking to add other certificates and documentation onto a Blockchain platform, including school qualifications, birth and death certificates.

Meanwhile, since 2012, USA authorities have been looking at mDL (mobile driving licenses) and how to digitise driving licenses so the details are accessible on mobile devices. In April 2019, the American Association of Motor Vehicle Administrators released a whitepaper outlining some of the key requirements that it believes are required. While the paper does not explicitly talk about using blockchain technology one suspects it will be encouraged, considering the increasingly widespread adoption of the technology in other sectors of our economy.

For a while, considerable debate has been generated regarding citizens having an identity card, with many for and against. However, if it is possible to have all your government documentation – passport, national insurance number, driving licence details, NHS number, etc - all held securely but accessible, this potentially will enable governments to reduce benefit fraud and also be very convenient for citizens.

It used Smart Contracts with an Ethereum-based version of the Icelandic króna and created by a company called Monerium.

“As the first company authorised to issue e-money on blockchains, we are delighted to demonstrate the benefits of blockchains for mainstream B2B transactions using a legal form of digital money,” said Monerium’s CEO, Sveinn Valfells.

Monerium has an eMoney licence, enabling it to move money around Europe without the need to use banks. By using ‘programmable’ eMoney in conjunction with Smart Contracts, Monerium is looking to reduce the cost of moving money while making payments faster.

Gert Sylvest, co-founder of Tradeshift said, “Smart contracts can create smart invoices which are not just as useful for lowering administrative hurdles in business-to-business (B2B) cross-border transactions, but for building new financing models that make it easier for enterprises to improve access to credit and improve cash flow. That is why we have built the world’s first smart invoice and now settled it with licensed digital cash”. 

In effect, a smart invoice can create a token which represents the cash that is due to an invoice. Since whoever holds the token is entitled to receive the money from the invoice, it opens tokens to the world of factoring and credit lending which, by using Smart Contracts, payments could all be automated. A key advantage is because the tokens are held on a Blockchain i.e. there is one immutable database and history of transactions, thus avoiding fraudulent activity by the same invoice being used twice as collateral since the token can only be used once.

So IKEA, by accepting payment using a token on the Ethereum Blockchain, demonstrates how it is possible to bypass the banking system and make the process transferring money more efficient. It is not difficult to see why banks are having to rethink their business models and become more digitally engaged themselves.

GrainChain, which is based in Texas in the USA, uses blockchain technology and describes its platform as being able to “facilitate prompt payment to suppliers and farmers, and the immediate availability of tradeable commodities to buyers. It attacks fraud and corruption through certification and accountability” GrainChain has signed up 12,000 Honduran coffee farmers onto its platform, enabling the farmers to get access to capital from banks, also connecting them to global shipping agents. GrainChain is also helping many farmers have access to banking services by automatically paying loans into their digital wallets (as previously they had been excluded from traditional banks, having had no credit history). According to Luis Macias, CEO of GrainChain, “Farmers can use these loans to purchase farming supplies from vendors and a portion of the credits in the digital wallets can also be redeemed for fiat currencies”. 

GrainChain’s Blockchain-powered platform offers greater transparency and so helps to build trust so that farmers can access cash, banks can have greater certainty of what is being produced and also how and when their loans will be repaid. GrainChain’s platform helps in the fair trade and organic certification process as well, while offering coffee drinks greater provenance tracking - this increasingly being demanded by customers.

Macias also said, “GrainChain’s biggest struggle came from the exporters and buyers, who did not immediately understand the benefits a smart contracts system might have to their supply chain. But after seeing the tech’s potential cost savings – cutting out middlemen, securing and paying off loans, reducing administrative overhead – they, too, signed on. Exporters additionally saw the opportunity to use the tech for additional profit. When they’re able to show buyers in Italy and Miami exactly where the coffee came from – the path that it took, the ingredients that were used, the fertilizers, everything – they saw it as a great marketing opportunity.”

This growth is being driven by customers demanding greater transparency as to where the food they buy is coming from, how sustainable it is and the environmental impacts of what they are consuming. Blockchain technology is ideal in tracking and tracing the provenance of goods whilst creating a secure database which, in effect, enables people to see who, where, how and what they are consuming. It can also be used both to ensure farmers are paid faster and to secure higher prices for the food they produce.

In the USA, big tech firms such as IBM and Microsoft and international retailers and food processors such as Walmart, McCormick & Co. and Dole Food Company are driving the use of blockchain technology in agriculture. In the food supply chains there are a number of key companies from a variety of jurisdictions such as IBM, Microsoft, Ripe.io in the USA, SAP-SE in Germany, Ambrosus in Switzerland, Arc-net based in Ireland, OriginTrail in Slovenia, VeChain from China, and Provenance and ChainVine from the UK, whilst from Australia, AgriDigital and BlockGrain are both active.

More recently we have seen Glencore joining a Blockchain-powered platform, called COFCO, which supports four of the world’s largest agribusiness companies. Archer Daniels Midland, Bunge, Cargill and Louis Dreyfus launched the consortium last year to modernise their processes with Blockchain and artificial intelligence (AI). Glencore is about to launch a project to look at the trade of soybeans from Brazil to China, has been exploring how it can improve the efficiency of its supply chains for grain and oilseeds using blockchain technology and AI.

In France, a technology company called Atos has just won an award for its Blockchain-based Crop Insurance Solution at the NATC (NASSCOM Annual Technology Conference). NATC is an India trade association. Farmers can use the Atos platform to speed up the processing and payment of crop insurance claims using Smart Contracts, which historically have relied on manual paper-based processes, thus cutting the time to settle claims from months to days. Atos has created a fully automated-claim settlement platform. This enables insurance companies to collate weather data through satellites and measure weather conditions (rainfall, drought, etc), which are then used to compensate farmers for crop losses.

Increasingly there are more examples that blockchain technology is being used in the agriculture market to help consumers, farmers, retailers, insurance companies and food processing firms across the world. In the last 18 months, we have seen Blockchain-powered proof of concepts and pilot projects being ‘ramped up’ and implemented into commercial-scale adoption. As we see AI, Big Data, Machine Learning and Internet of Things (IoT) technology develop further there is likely to be even greater use of blockchain platforms which will, in effect, act as a ‘skeleton’ linking these other technologies together in an increasingly digitised manner.

This is a real problem for many institutions, and it was argued that TSB’s IT challenges led to it costing TSB over £330 million as customers were locked out of their bank accounts for weeks.

One organisation tackling this challenge is Constellation Network Inc, based in California, which is a company using Blockchain technology, and which just signed a contract with the United States Air Force (USAF). The focus is to help the USAF with its complex supply chains. Constellation will be using Microsoft’s Azure services and also be assisting the USAF with its Additive Manufacturing (AM) parts program, using 3D printing in remote locations, potentially including battlefields. There is a necessity with AM to be able to register, track and hold data securely (but make it accessible) without being intercepted, so third parties cannot modify or alter this data.

Benjamin Jorgensen, Constellation’s CEO, said “The move by the United States Government to work with early-stage businesses and early innovation shows a massive shift by the public sector to be leaders in revolutionizing existing infrastructures by adopting new technologies that protect consumers’ privacy, while tackling futuristic visions of the connected world and joining the private sector in the $50B industry of big data”.

This is another good example of how Blockchain technology is being used ‘top-down’, i.e. by governments to solve complex problems. Since other organisations see how data can be held secure enough for national defence purposes, the Blockchain technology ought to offer them comfort regarding adopting this technology.

Last year the World Bank in conjunction with Commonwealth Bank of Australia (CA), Royal Bank of Canada and TD Securities raised $80 million.

Sophie Gilder, Head of Blockchain and Artificial Intelligence at CBA, was reported as saying: “CBA now has tangible evidence that blockchain technology can deliver a new level of efficiency, transparency, and risk management capability versus the existing market infrastructure. Next, we intend to deliver additional functionality to deliver greater efficiencies in settlement, custody and regulatory compliance.”

 The World Bank issues $50 billion to $60 billion p.a. so if we assume that it costs 0.5% to issue a bond and if the expenses to issue a bond can be reduced by just 20%  this would equate to the World Bank potentially saving $5 to $6 million a year.

The total value of bonds just in the USA is $40 trillion and if you assumed that just 10% i.e. $4 trillion a year matures and gets re-issued and the one can save  20% of the 0.5% cost this equates to an annual potential saving just in the USA of $400 million a year.

According to Thompson Reuters in 2018, there was over $6.6 trillion of debt issued globally in 2018 and 25 banks accounted for 55% of the issuance.

Little wonder why there is more and more interest in using Blockchain technology to cut out layers of costs and intermediaries not to mention the greater transparency and risk controls that can be implemented.

This announcement is just the latest in which a series of countries make such statements.

There are numerous examples of different global exchanges, which have projects to explore how to use Blockchain technology to trade assets. Such projects include Over The Counter (OTC), shares in private companies, derivatives and traditionally illiquid assets like property, cars or art etc. While initially it was thought that Blockchain technology would not be able to cope with the volumes that many of the larger stock exchanges have to deal with, these concerns seem to have abated as the technology matures.

Here is a selection of what some of the different global exchanges have been doing:

●             In the USA, Nasdaq, back in December 2015, successfully traded shares using its private share-trading platform, Linq. This was launched with Citigroup to offer, in effect, unlisted companies in a digital format.

●              Last year, Nasdaq Stockholm and the Swedish Bank (SEB) started testing the use of Blockchain to register all transactions in real-time.

●              Blockchain-based solutions have undergone rigorous testing on the Nasdaq Tallinn exchange.

●             The London Stock Exchange (LSEG), in cooperation with IBM, has begun testing a Blockchain-based platform to fully digitalized trades in the shares of small and medium-sized companies. These tests are being carried out by the Italian operator of LSEG, Borsa Italiana.

●             The Swiss Stock Exchange is finalising its digital asset trading platform - the SIX Digital Exchange - using Blockchain technology. It is aiming to lead to the “tokenization” of shares, ETFs, and other types of assets which have traditionally been illiquid i.e. property, paintings and cars.

●             In November 2018, The Depository Trust & Clearing Corporation (DTCC) from the USA started testing its credit derivatives (Trade Information Warehouse system) using Blockchain technology.

While the promise of transparent and real-time settlement sounds highly appealing, one needs to remember that many of the transactions, especially those in the derivatives market, currently require funding to allow trades to be ‘netted off’.

The challenges in introducing real-time settlements into the derivatives markets are succinctly  summarised in an FT article, citing a report from Greenwich Associates, which said “ Over a 28-day sample in the volatile months of November and December 2019, the average gross settlement balance was $360 billion and the net was $32 billion, 90% of the funding needs were eliminated via netting. What’s more, thanks to multilateral margining and risk management protocols of DTCC, these $32 billion net settlements were secured with a mere $8.3 billion in commitments to the reserve fund from markets participants”.

Introducing Blockchain Technology into the capital markets is not easy. It will require considerable capital because of the development of such Blockchain-powered platforms require whole systems to be built from scratch, needing software, hardware and people with the appropriate skills. Additionally, the stock exchanges must ensure the highest possible level of trading security and stability to maintain market confidence.