How is the UK government using blockchain?

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Minister for Digital and the Creative Industries, Margot James, discusses the UK's plans for blockchain technology

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When it comes to new technologies, government has earned a reputation as a slow paced and lumbering beast. But British minister for digital and the creative industries Margot James, speaking at the recent Blockchain Live conference held in London, attempted to disabuse this notion - laying out the UK government's plans for technology of the moment, blockchain. 

"As the prime minister said recently, the UK is 100 percent committed to supporting the development and adoption of new technologies," said James, drawing a parallel between the government's interest in blockchain, and the push to roll out 5G.  

James also held up the example of the UK's financial regulator, the FCA, and its sandbox approach which "lets firms test products and services in a live market setting" but with "appropriate safeguards". It's a pioneering approach that is reportedly now being imitated across the world. 

"And across the first two cohorts of companies supported by this process, the most popular technology employed has been blockchain," said James. 

However, James stressed the importance of looking at the applications of blockchain beyond the financial world. She highlighted a number of blockchain projects for particular praise, including the partnership between IBM, Nestle and Unilever to improve the traceability of contaminated food. 

"Actions like this, which work behind the scenes for consumer protection, have the capability of making huge improvements to peoples' lives," she said, noting that in recent months she had met a number of companies developing blockchain applications to improve supply chains and increase trust in social funding. 

She also highlighted a partnership between the National Archives and the University of Surrey on 'Archangel', a project aiming to preserve digital archives through blockchain technology. 

UK government blockchain initiatives 

How exactly is the UK government making good on its professed commitment to blockchain? "We are starting to make some investments from my department," said James. "We're investing over £10 million pounds through Innovate UK and our research councils to support Blockchain projects in diverse areas like energy, voting systems and charitable giving."

There is interest in the technology across government, with the DWP, DEFRA and the department for international development also undertaking proof of concept projects.

James mentioned that crypto assets are becoming more interesting to government bodies: "In March, the government established a crypto assets taskforce comprising the Treasury, the Bank of England and the FCA to explore the risks and potential benefits of crypto assets and other applications of distributed ledger technology in financial services to assess what if any regulation is required in response."

The problems with blockchain for government

Despite the government's interest and investment in blockchain technology, James was candid about the inherent difficulties for public bodies.

"The decentralised nature of the technology does pose some real challenges for regulators and government, as it does, of course, for business," she said. 

"Legally, how do we interpret smart contracts when computer coding requires specificity and the law often needs interpretation? Who is liable? The data that is shared and held by thousands of separate players on a decentralised distribution system." 

She pointed to government's role in helping to work out answers to these questions, noting that the Law Commission had recently launched a project examining smart contracts and how the current law applies to them, as well as identifying the areas of uncertainty.

Despite the regulatory difficulties, keeping abreast of new technology is an imperative for the UK government.

"We all know that the digital sector plays a vital role in the UK economy," said James. "Indeed, digital and creative industries are the two fastest-growing sectors of our economy. In 2016, the digital sector contributed almost 120 billion pounds to the UK economy, and last year, it generated 1.5 million jobs."

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