Can blockchain give an economy a competitive advantage?

By

Mark MacDonald

EY Global Public Finance Management Leader

Experienced leader of public sector reform. Works with governments around the world. Advises on designing and implementing programs to help improve performance and create better citizen outcomes.

3 minute read 28 Mar 2019

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Discover how blockchain technology can help make governments more effective and boost the wider economy. 

Most new technologies follow a similar pattern. Initially, they’re the preserve of those in the know. As word spreads, hype builds and people try to make a fast buck.

Then steadily, the technology matures, people understand how to apply it, and the economic and social value begins to flow. And sometimes, as with the internet, the technology transforms the way we all live and work.

Could this be the case with blockchain?

Until now, the name has mostly been associated with cryptocurrencies. But organizations in the public and private sectors are beginning to understand how the technology can be applied to long-standing business issues so that it really drives value. EY teams have developed applications of the technology, for example in public finance and marine insurance.

But blockchain could have a much larger part to play in both public and private sectors – it has the potential to be a genuinely transformative technology.

Could it, for example, lead to the more efficient running of government, and even help carve out a competitive economic advantage for the organizations and jurisdictions that use it?

To help start a debate about this question, EY has been working with the School of Business and Economics at the University of Canterbury in Christchurch, New Zealand.

Researchers at the school have produced a paper that discusses the avenues through which a public implementation of blockchain could deliver efficiency gains in the running of a government.

The paper addresses some of the current inefficiencies in record-keeping and the improvements that could come about if record-keeping, including keeping track of tax liability, would be “put on the blockchain.”

It discusses some of the current issues with transaction costs and property rights that governments face and how these could be addressed with blockchain.

It also tackles issues with asymmetric information in general, and moral hazard in particular, which are ripe in the delivery of public services, and how blockchain could be used to reduce them to achieve efficiency gains and better outcomes for public policy.

But, of course, these potential gains in efficiency and outcomes are not confined to the public sector.

Could jurisdictions that facilitate the use of blockchain technology across their economies carve out a competitive advantage – with big potential economic gains?

Will jurisdictions that transform their legal, regulatory and public-sector delivery systems to capture the advantages of blockchain give themselves a competitive edge that benefits businesses and citizens?

How blockchain will transform government and the wider economy is not yet certain. But what is clear is that governments should be asking themselves these questions and gaining a deeper understanding of how they can help shape economic competitiveness in a blockchain world.

As blockchain technology matures, and the benefits of its practical applications emerge, EY will continue to ask questions and engage with the debate.

Our next steps are to work with the University of Canterbury to dig deeper into the topic and quantify the potential benefits of blockchain to government and the wider economy.

Summary

Blockchain could help governments become more efficient and effective. Could the technology also give the jurisdictions that use it a competitive advantage in the wider economy? It’s time for governments to engage in this debate.

About this article

By

Mark MacDonald

EY Global Public Finance Management Leader

Experienced leader of public sector reform. Works with governments around the world. Advises on designing and implementing programs to help improve performance and create better citizen outcomes.