For several years now, the Organization for Economic Co-operation and Development (OECD) has been cautiously enthusiastic about blockchain technology. Beginning with a 2014 working paper titled, “The Bitcoin Question” the intergovernmental organization has been considering the economic possibilities opened up by distributed ledgers and cryptocurrencies — and, on the whole, it has found these possibilities exciting, even if such working papers “do not necessarily reflect the official views of the Organization or of the governments of its member countries.”
But for the most part, reports on “Blockchain Technology and Competition Policy” and “Corporate Governance” — among other subjects — have struck a largely ‘wait-and-see’ tone. They’ve outlined the areas in which distributed ledger technology (DLT) could potentially offer innovations, yet they’ve also affirmed that institutions should acquire a more complete understanding of DLT and how it works before integrating it into their operations. As June’s report on corporate governance concluded, “it may be worth exploring” is the kind of phrase often encountered in such analyses.
However, this preliminary phase in the OECD’s standoffish evaluation of DLTs is drawing to a close. On Sept. 4 and 5, it held its first-ever Blockchain Policy Forum in Paris, where a range of public officials and private leaders came together to meet, to network and, most importantly, to explore just how blockchain technology is being and will be used by businesses and governments. Over the course of the two-day conference, scores of delegates presented a wide variety of use cases of DLTs, from self-sovereign identity to competition law. And in the process, they began to map a way forward for those organizations that have entertained the notion of trialing blockchain tech without actually taking that all-important first step.
Bitcoin for central bankers
The OECD’s first foray into reports and policy recommendations regarding blockchain came with its June 2014 working paper, “The Bitcoin Question: Currency Versus Trust-Less Transfer Technology.” Like many traditional institutions that represent the mainstream global economy, the general position expressed by the report’s author was that Bitcoin is “volatile” and has “an important scalability problem,” and that “a raison d’être for Bitcoins is to carry out illegal activities.”
But as has been seen with such Bitcoin-detractors as, say, Mark Carney and Yanis Varoufakis, the report also sung the praises of the blockchain — as it referred to the underlying protocol. According to author Adrian Blundell-Wignall, the special advisor to the OECD secretary-general on financial markets:
“[The blockchain] is the key innovation in this technology — that is, a technology that removes the need for a trusted third party and the intermediary costs associated with such institutions (banks, credit card companies, payment companies, non-bank financial intermediaries).”
Expanding on the theme of disintermediation, the working paper surveyed the different benefits blockchain technology — rather than Bitcoin — could deliver for businesses, institutions and the global economy more generally. Blundell-Wignall wrote, noting that the imposition of regulation may increase costs for crypto exchanges and other blockchain-based service providers:
“This technology has the potential to reduce transactions costs for retail spending with credit cards, e-commerce costs and money transfers. But such companies are intermediaries too, and it should not be forgotten that competition in the cryptocurrency world is fierce, and new decentralized technology innovations may reduce costs dramatically.”
Having noted the scalability issues Bitcoin encountered at the time (but which are now being addressed), the paper’s author extolled Ripple as an example of a DLT-based system that enables banks to transfer remittances at a fraction of the usual cost and of the usual speed. And while it acknowledged that Ripple may not be the “ultimate winner” in the cryptocurrency race, it concluded by advising the OECD’s member states to seriously consider looking at comparable, less decentralized blockchain-based technologies.
“Policymakers do need to focus on how to ensure that the new technologies operate in the most socially-useful way. That is, it should be possible to make use of a new technology to facilitate the medium-of-exchange transporter and ledger functions and increase competition in financial services, while eliminating the ‘anonymity’ problems [of certain cryptocurrencies].”
In sum, the working paper recommended blockchains that don’t attempt to usurp the power of governments and central banks over a nation’s money supply, but that still retain certain aspects of Bitcoin’s transparency and efficiency. And since then, succeeding reports and papers from the OECD have elaborated on this blockchain-friendly approach, with more recent documents…