At RISE Conference in Hong Kong, ConsenSys Mesh took the stage to discuss their opinions on the future of the government integration of and relationship with blockchain technology. The discussion was moderated by Aiai Garcia, Business Solutions at ConsenSys. Panelists included Aaron Wright, Professor at Cardozo Law School, Co-Founder of Brooklyn Project, & Co-founder of OpenLaw, Joyce Lai, Legal at ConsenSys and Brooklyn Project, and Dr. Guang Zhao, Strategy at ConsenSys. Summary of the panel below:

What are the possible applications of blockchain technology for government? What are some limitations?

Wright: Blockchain is, at its core, an asset management platform. In today’s society, governments often are the ones who manage and/or regulate a tremendous number of assets in a country. In the future, blockchain technology will make this management/regulation immutable and instantaneous. We will move from a paper-based, delayed-reporting world to a more dynamic, real-time world. We can imagine voting systems. Access to new markets. Deep liquid markets. New ways of managing properties. In the next five, ten, twenty years, we will witness increasingly more cooperation and interoperation between countries and economies.

Lai: One particularly relevant application is tax collection. With smart contracts, you can build in escrow conditions to divert payments to certain places automatically and in real-time, without back-office costs. OpenLaw has published a real-world use case showing how companies can use smart contracts for employee tax purposes. With smart contracts, governments can collect taxes in real-time — this a more dynamic way for governments to collect. Additionally, blockchain technology would provide radical transparency for taxes — we would be able to see precisely where governments are using citizen’s taxes.

Zhao: Digital identity is also crucial to recognize. In the past 10–15 years, many government agencies have transformed from a paper identity system to digital. But hackers still can access centralized government records and compromise someone’s identity. By moving from electronic-based to government-based digital identity, we protect citizens better. Government transparency is also key. Money coming from citizens in the form of taxes flows downward from city to district to village. A study has shown that $10 turns into $1 after flowing down to a village level in the Chinese infrastructure — where does that money go? Governments will be held accountable in a blockchain-powered future.

Left to right: Aaron Wright, Joyce Lai, Dr. Guang Zhao, Aiai Garcia

What some policy trends we are seeing in different countries?

Aaron: Globally, we are seeing governments ask, “what is the correct policy to put in place? Will we drive or inhibit innovation with these measures?” The US took a permissive approach to the Internet when it was growing, which led to an explosion of powerful tech companies based in the country. I think we’re going to see a similar policy approach this time around. We’ll see a balance — allowing room for innovation and growth while also protecting everyday consumers.

Joyce: We see policymakers and governments enthusiastic about this technology. You can work with blockchain anywhere in the world; people are extremely mobile with this new technology. That means governments are being very competitive with each other. They understand if they create the right incentives, people will move there to do it. In the US, for example, Vermont offers $10,000 in tax credit if you move there to work in tech. Remove the border restrictions of working with a particular technology and you see global competition among governments to attract talent and businesses.

Further Reading: Blockchain for Government and

the Public Sector

Guang: In China, the policy trend has been fairly consistent. In September 2017, the government published regulation restricting token exchanges. Back in 2015, China restricted Bitcoin exchanges. That’s the restrictive perspective if you want to look at it that way. But on the other side, China and the Chinese government loves blockchain technology. Nationally, many ministries and departments have published about 20 different guidelines and announcements — mostly supportive and promotional. On the province and city level, ~150 pro-blockchain policies have been published encouraging innovation and the development of a blockchain platform. The trend in China from the underlying technology side is encouraging — from the crypto side, the messaging is a bit mixed.

Many entrepreneurs are attracted to blockchain technology because it is decentralized. Where should blockchain companies set up?

Lai: The US is in a competitive position. From a regulation standpoint, it is true that most regulatory bodies don’t want to over-legislate and stifle innovation. They want to encourage growth. Generally, the US is encouraging lots of different technologies. Additionally, there are great universities and good talent here. But I think, depending on what type of business you’re trying to set up, other areas might be more competitive — banking in Hong Kong, for instance. It is not that different than traditional businesses; some countries and cities have made an effort to be more friendly of certain business structures, and they will continue to do so.

Wright: Joyce [Lai] nailed it. Most tech companies are decentralized similar to blockchain technology. In terms of setting up a legal entity, the US is still a great place to do it. You can set up a company in an hour, and there are standards in place to ensure a robust business model. There is incredible developer talent in the US, but definitely not exclusive to the US. What’s important to recognize is that blockchain will help drive a global ecosystem, where people can work effectively and without hindrance wherever they are. ConsenSys is one of the largest companies to successfully do that.

Zhao: There are two places to think about if interested in technology. With respect to the sheer size of the market, China & the surrounding regional market cannot be matched. If your business is focused on ICOs or cryptocurrencies, however, there is nothing in mainland China — you’ll have to go to Hong Kong, Taiwan, or Singapore. If you’re purely interested in the technology as a platform and the size of an addressable market, it is prudent to get your foot into the China market as soon as possible. The best practice still remains to be forming a company in the US and then spreading into China.

Is government relevant in a future where blockchain governance is distributed?

Lai: I am immensely enthusiastic about the technology. I believe most people want and need the kinds of services provided by traditional government — fire departments, militaries. I don’t think governments should be replaced by blockchain technology. I think the tech can evolve and improve how governments serve their citizens

Wright: There is a good possibility that some services traditionally provided by governments can be replaced by blockchain-powered consensus governance. But national governments and services? I believe those will still be around.

Zhao: Hierarchies naturally exist. From an efficiency standpoint, it is more efficient for national organizations. Governments and governance may become more decentralized in the future, but it will be some sort of decentralized hierarchy, they won’t disappear altogether.