Life beyond crypto? The European Strategy for Blockchain.

Introduction.

The European Union has been committed for some time to implementing the so-called Blockchain Strategy, which allows Europe to be at the forefront of the development and adoption of technology, while supporting European ambitions in environmental sustainability and digital transformation.

In this regard, just a few months ago, it was announced that the European Union will invest in Blockchain, data infrastructure, and quantum computing as an active part of the “Next Generation Internet” initiative, aimed at creating a new generation of Internet that is designed for humans and that benefits society and the economy.

Indeed, although the association between Blockchain and cryptocurrencies is almost immediate, in reality, the uses of technology go far beyond the financial sector. The most enthusiastic supporters argue that Blockchain will bring significant changes to the world as it is today and that it will create a more democratic, transparent, and free society.

A defining premise.

Before formulating any consideration regarding its potential uses, it is necessary to give a definition of Blockchain technology, bearing in mind that there is no consensus on a single definition but that, on the contrary, this could be described in various ways.

In essence, without going into the details of how Blockchain works, it can be said that it is a class of technologies that allows the creation and management of a decentralized and distributed registry that is structured as a chain of encrypted blocks that contain transactions. The validity of these transactions is entrusted to a consensus mechanism among peers; therefore, there is no central authority.

In summary, the main characteristics of Blockchain are the transparency and immutability of the registry, the traceability of transactions, and security based on cryptography techniques.

Therefore, thanks to its technical peculiarities, the technology is destined to be used in numerous sectors (for example, in the field of food traceability and personal identity management), as various ongoing studies and projects testify.

A “gold standard” for Blockchain.

Leaving aside the perennial dilemma of regulating Blockchain technology – invoked by many – this paragraph highlights the key elements of the “gold standard” strategy developed by the European Commission with the aim of promoting innovation while respecting European values.

It has already been said that environmental sustainability is one of the guiding principles that guide the European Union‘s activities in any area of its competence, and Blockchain is no exception. It is required, in fact, that the technology be sustainable and energy-efficient.

Another essential element is respect for the fundamental right to the protection of personal data, which not only contradicts Blockchain in its ontology but also risks being undermined by the characteristics of immutability and transparency inherent in the technology. However, this (apparent) dichotomy is not described by all experts in absolute terms, leaving room for maneuver that can support the feasibility of using technology for the processing of personal data.

Furthermore, the Strategy also mentions the issue of respect for digital identity, which is listed as a priority for the 2019-2024 five-year period. Therefore, Blockchain must be compatible with the regulatory framework on electronic signatures (e.g., EIDAS) and support the framework within which European initiatives in this area operate.

Another key component of the Strategy under review is the guarantee of the technology’s compatibility with the European cybersecurity strategy, which is “essential to building a resilient, green, and digital Europe”; finally, to ensure that the technology exploits its full intrinsic potential, the need to focus on interoperability between blockchains is emphasized, which can be achieved using standards adopted at the international level (e.g., CE, CENELEC, ISO, IETF).

European initiatives in the field of Blockchain Strategy.

Numerous European initiatives have been launched in recent years to promote wider adoption of Blockchain technology, which has become of unparalleled strategic importance. These initiatives are based on the principles and objectives described in the previous paragraph.

In April 2018, all EU Member States and members of the European Economic Area (Norway and Liechtenstein) established the European Blockchain Partnership (EBP). The EBP is a partnership aimed at implementing blockchain-based service projects, such as the European Blockchain Service Infrastructure (EBSI). The EBSI is a joint initiative between the EBP and the European Commission that aims to provide cross-border public services at the European level through the use of Blockchain. The EBSI is the first blockchain infrastructure at the European level and since 2020 it has been implementing a network of distributed blockchain nodes throughout Europe, supporting applications focused on selected use cases such as identity, diploma, traceability, and reliable data sharing. In essence, it is a peer-to-peer network of interconnected nodes managed at the national level by the EBP Policy group’s appointed authorities of Member States. The network’s principles are public good, governance, harmonization, open source, and compliance with EU regulations (GDPR, eIDAS, etc.).

Following the European infrastructure, the Italian Blockchain Service Infrastructure (IBSI) was launched, promoted by AGID and various Italian companies and universities, aiming to create the first Italian blockchain-based network to deliver public services, such as certificates attesting to academic qualifications.

Returning to the European initiatives, a central role has been played by the establishment of the European Blockchain Observatory and Forum (EuBOF), which is tasked with mapping Blockchain projects and promoting education and the sharing of information and knowledge on the technology and its potential uses, including through workshops and thematic reports, as well as formulating recommendations on the potential role of the European Union in the field.

The establishment of the International Association for Trusted Blockchain Applications (INATBA) in 2019 has proven and still proves to be fundamental. It is a multistakeholder organization based in Brussels, but with members located all over the globe, that promotes constructive dialogue between Blockchain developers and providers, on the one hand, and representatives of governmental institutions and standardization bodies, on the other. All work with the goal of achieving a common vision and promoting transparent governance that ensures legal certainty and trust in services managed on blockchain.

To ensure that innovation moves within a clear and defined regulatory framework in areas related to Blockchain-based applications, the European Commission is developing a legal framework for so-called digital assets and smart contracts that can protect consumers and, at the same time, ensure legal certainty. In this context, the proposal for a regulation on the crypto-asset market (MiCA) is proposed, which aims to respond to the need to prepare a regulatory framework for new digital phenomena that is uniform and that thus allows companies to understand how to act and users to be able to assert the same protections as those recognized in more traditional sectors.

The European Union‘s Horizon Europe research and innovation framework program for the period 2021-2027 (known as Horizon Europe) also includes funding for numerous Blockchain-related projects, as was already the case with the Horizon 2020 program. Finally, initiatives aimed at promoting specific digital skills in the Blockchain field, such as the Digital Europe Program and the CHAISE program, funded by the Erasmus+ program, which aims to develop a strategic approach to respond to the current and future competence needs of Europe in the Blockchain field, are also worth mentioning.

A starting point, not an endpoint.

From this brief overview, it can be seen that the attention of European actors is not solely focused on the potential of blockchain in the financial sector, but also on the various (and numerous) sectors where the technology could bring benefits.

The scope of European initiatives is very broad and is oriented not only towards possible areas of application, but also towards the issue of digital education and training in this sector. European institutions are aware that substantial funding for businesses is necessary to facilitate Europe’s entry into the ongoing digital competition. However, they also understand that such efforts could be (almost) in vain if not supported by a widespread dissemination system of correct information and knowledge about the technology and its possible uses, which can also guarantee a fast and effective development of the required skills in these areas.

The state of the art highlights how blockchain technology, although still in development, already has high potential. Therefore, based on this representation, it is clear that a change of pace is necessary to increase the competitiveness and productivity of the economic system. The conjunction of the various actors involved at the national and European levels, along with serious, continuous, and shared commitment, is needed.

The European Blockchain Strategy is part of this framework and is an (undoubtedly important) starting point but not an endpoint.

¹ https://digital-strategy.ec.europa.eu/en/policies/blockchain-strategy. 
² https://ec.europa.eu/info/strategy/priorities-2019-2024/european-green-deal_it. 
³https://ec.europa.eu/info/strategy/priorities-2019-2024/europe-fit-digital-age/europes-digital-decade-digital-targets-2030_it#prossime-tappe. 
⁴ https://digital-strategy.ec.europa.eu/en/policies/next-generation-internet-initiative. 
⁵ Per interessanti considerazioni su come la tecnologia stia modificando il concetto di democrazia, e viceversa, si rimanda a Magnuson W., Blockchain Democracy – Technology, Law and the Rule of Crowd, Cambridge University Press, 2020. 
⁶https://www.eublockchainforum.eu/sites/default/files/reports/20180727_report_innovation_in_europe_light.pdf 
⁷ Sul punto si rimanda a: Singh A., Kaushal P.K., Chatterjee K., Organic Food Supply Chain Security using Blockchain, 27 Settembre 2021, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3973204. 
⁸Secondo un recente studio, entro il 2030 le tecnologie Blockchain genereranno oltre tremila miliardi di dollari all’anno e che per allora il 10-20% delle infrastrutture economiche globali funzioneranno con sistemi basati sulla tecnologia Blockchain., https://www.gartner.com/en/newsroom/press-releases/2019-07-03-gartner-predicts-90–of-current-enterprise-blockchain. 
⁹ Con riferimento a ciò, il Parlamento europeo ha affermato che “l’Unione non dovrebbe disciplinare le DLT di per sé ma dovrebbe cercare di eliminare gli attuali ostacoli all’attuazione di Blockchain”, Risoluzione del Parlamento europeo del 3 ottobre 2018, intitolata “Tecnologie di registro distribuito e Blockchain: creare fiducia attraverso la disintermediazione”, considerando 68.  
¹⁰ https://ec.europa.eu/info/strategy/priorities-2019-2024_it. 
¹¹ https://www.consilium.europa.eu/it/policies/cybersecurity/. 
¹² https://digital-strategy.ec.europa.eu/en/policies/blockchain-standards. 
¹³ https://www.gov.si/en/news/2021-09-28-european-blockchain-week-2021/. 
¹⁴ https://ec.europa.eu/cefdigital/wiki/display/CEFDIGITAL/EBSI. 
¹⁵ https://www.agid.gov.it/it/agenzia/stampa-e-comunicazione/notizie/2021/03/02/blockchain-agid-promotrice-dellinfrastruttura-italiana-ibsi. 
¹⁶ https://www.eublockchainforum.eu/reports. 
¹⁷ https://inatba.org/. 
¹⁸ https://ec.europa.eu/info/publications/200924-digital-finance-proposals_en. 
¹⁹ https://digital-strategy.ec.europa.eu/en/library/smart-contracts-and-digital-single-market-through-lens-law-plus-technology-approach. 
²⁰ Proposta di Regolamento del Parlamento europeo e del Consiglio relativo ai mercati delle cripto-attività e che modifica la direttiva (UE) 2019/1937, COM/2020/593 final. 
²¹ https://digital-strategy.ec.europa.eu/en/activities/digital-programme. 
²² https://digital-strategy.ec.europa.eu/en/news/first-calls-proposals-under-digital-europe-programme-are-launched-digital-tech-and-european-digital. 
²³ https://chaise-blockchainskills.eu/.