Published late last month by the European Union Blockchain Observatory and Forum – an initiative spearheaded by the European Commission – a thematic report titled Blockchain Innovation in Europe reviews the various facets of blockchain development across the EU. Informed by workshop discussions and analysis, the study is separated into four key areas: blockchain innovation within the EU, the EU's blockchain strengths, the EU's blockchain challenges, and emerging priorities related to blockchain development in the EU.
The first section begins with the claim that "European institutions are heeding the call" of blockchain technology. The report's author, Tom Lyons, notes the various institutions, from governments and academic organizations to corporations and startups, cultivating innovation in the space. Considering the academic realm, he states that "Europe's researchers are … delving into a wide variety of blockchain topics," such as healthcare, media, and finance. Further, he mentions active participation in blockchain innovation by businesses, claiming that Europe has an "extremely vibrant blockchain startup scene."
Lyons also remarks that other blockchain-related EU initiatives aside from the observatory, such as the Blockchain for Social Good prize and the FinTech Action Plan, are evidence that blockchain has piqued the interest of European society and its economy at large.
The report's second section outlines the EU's purported competitive advantages in the blockchain space. According to Lyons, these strengths range from the diversity of Europe's communities to the number of quality blockchain events within the union, such as Amsterdam's Blockchain Expo Europe, Dublin's MoneyConf, and Zug's Crypto Valley Conference on Blockchain Technology.
Another strength that Lyons suggests is the fact that, as he put it, "Europe … always has had a strong penchant for collaboration between governments, corporates, startups, academics and the general public," as demonstrated by efforts like Alastria and the Dutch Blockchain Coalition. He maintains that this cooperation is complemented by the EU's "extremely well-developed legal and regulatory framework," which Lyons asserts will be useful in "dealing with blockchain."
The next section pivots to discuss the varied challenges, future and present, facing blockchain innovation in the EU. Despite the union's relatively developed legal and regulatory system, there is a lack of clarity in certain areas of the law. Lyons argues that the "most pressing need" regarding clarification is token classification – how should it be determined whether a token is a security, a financial instrument, or a payment method? He also notes that guidelines are needed for taxation, accounting, and the legal status of EDCCs (aka smart contracts).
One major hurdle the report points to is the General Data Protection Regulation (GDPR), a heightened data privacy law that went into effect across the EU on May 25. A primary concern with the GDPR, according to Lyons, is blockchain's decentralized approach to data as opposed to the regulation's understanding of a database as "a centralised mechanism for collecting, storing and processing data." Although the GDPR may not be anti-blockchain innovation per se, Lyons believes that lawmakers, entrepreneurs, developers, and other stakeholders in the space will face uncertainty due to the tension between the new regulation and blockchain's decentralized evolving nature.
Moreover, Lyons argues that businesses may find it difficult to store crypto-assets (such as those raised through ICOs) in traditional bank accounts. Uncertainty regarding blockchain technology percolates into the financial realm making many banks hesitant to touch crypto-assets.
In the final section, he sets several priorities for the EU to address regarding the future of blockchain development:
- Clarify Europe's legal and regulatory framework, especially as it relates to the GDPR, and ensure that legitimate blockchain ventures can obtain bank accounts.
- Focus on education and research, including ways to combat the shortage of blockchain talent.
- Drive the adoption of blockchain in both the public and private sectors to create a domestic market for innovation in the space.
- Promote collaboration within the blockchain space, particularly through partnerships between governments and companies.
- Study the blockchain ecosystem and provide information to entrepreneurs and developers.
The EU Blockchain Observatory and Forum is a young institution; it was only launched a few months ago. Since then, the organization has worked on a few projects, including an ask-me-anything session via YouTube on June 18. However, the blockchain initiative was recently scrutinized by four members of the European Parliament who wanted clarification regarding the observatory's work.