Blockchain can be hard to grasp. But the central idea is simple: blockchain makes it easier to move money from one individual (or organization) to another. It solves a basic problem in money transfer: when one person wants to transfer money to another, it does so through a trusted third party – typically a bank. The bank takes time to process the transaction and charges a fee. Blockchain eliminates the need for a third party – therefore reducing the time it takes to transfer the money and cutting the cost of the transaction.
So how can this be applied to public finance?
Blockchain is best suited to situations where we have to deal with interfaces in the exchange of resources and information across organizational boundaries. Like when a government’s central budget authority allocates money to government departments, who then spend it through other government agencies.
At present, public finance managers face a series of challenges as money moves from the central budget authority, through government ministries and departments, to delivery agents. They lack timely, low-cost access to financial and non-financial information that could help improve decision-making and unlock better public finance outcomes.
Watch the video to find out more.