Why the EU is Investing $540,000 in Blockchain Development and Pilot Test
The European Union (EU) has decided to invest $540,000 in the formation of the EU Blockchain Observatory to formulate efficient regulations and policies for companies and startups leading blockchain development.
In an official statement released on April 18, the EU stated that the budget would be used to fund the EU Blockchain Observatory for two years. During that period, EU officials, researchers, and regulators will be tasked to study blockchain technology, its technical specifications, impact to the global financial ecosystem and most importantly, its applicability to the finance industry.
“It will have the ambition to become an EU expertise hub to discuss forward-looking topics on blockchain and develop use cases of interest at EU level. The purpose will be to inform and assist the European Commission in understanding what role – if any – European public authorities should play to encourage the development and uptake of these technologies and to formulate related policy recommendations,” the EU announced.
Particularly, the EU Blockchain Observatory plans to focus on the features of blockchain technology that could be utilized to run smart contracts, base infrastructure for large-scale commercial operations, governance and validation mechanisms. Most importantly, throughout the two years, researchers and regulators at the EU Blockchain Observatory will provide regular updates regarding the development of regulatory frameworks around blockchain.
“To that end, the Observatory is expected to provide an up to date overview of relevant initiatives relying on Blockchain or Distributed Ledger Technologies around the world and follow-up closely the developments of this technology and the related challenges and opportunities for European industry, citizens, and governments,” the statement read.
Overall, governments and authorities in Europe are making efforts in attempting to regulate both the cryptocurrency and blockchain markets. Some European countries such as Malta are specifically focusing on bitcoin innovation and development. The island nation introduced the first European Blockcerts pilot in January 2017. In fact, Joseph Muscat, the prime minister of Malta, announced the approval of a national strategy to promote Bitcoin.
Local publications including Malta Today reported that the local government and its prime minister are positioning itself at the forefront of bitcoin and blockchain development. At a conference organized by the financial affairs parliamentary committee, Muscat said:
“This is not just about Bitcoin, and I also look forward to seeing blockchain technology implemented in the Lands Registry and the national health registries. Malta can be a global trailblazer in this regard. I understand that regulators are wary of this technology, but the fact is that it is coming.”
According to Tim Diacono, who exclusively covered the event for Malta Today, Muskat explained that he encouraged the EU to harness bitcoin and blockchain development. Complying with Muscat’s request, EU approved the development of the EU Blockchain Observatory.
However, several legal experts including Luke Scanlon from Pinsent Masons emphasized his opposition to the creation of the EU Blockchain Observatory. He emphasized that the formation of such organization could burden and delay the development of blockchain. Scanlon instead urged EU regulators to follow regulatory frameworks established by other countries such as the UK:
“My concern is the tender approach and building up expertise. If the Commission is to play a useful role, it need not build up ‘observatory expertise’ but ought to follow the approach taken by the UK financial services regulators and focus on sandboxing technologies in order to understand how they will apply in different contexts. If the European Commission were to take this approach, it would develop skills at a greater pace than if it takes a tender for an expert supplier services approach.”