The head of the digital innovation and blockchain unit at the European Commission (EC), Pēteris Zilgalvis, explained the concise benefits of distributed ledger technology (DLT) in an interview to The Banker, a subsidiary of the Financial Times. In the interview, published on April 3, Zilgalvis talked about the benefits and challenges of the technology.
According to him, blockchain provides a powerful framework for data sharing, something that can't be done by normal databases:
“We think that it presents an excellent technology for situations where different stakeholders need to collaborate but, due to competition or legal reasons, they do not want to or are unable to share a single database.”
He added that blockchain is not “the solution for everything,” but there are applications such as document certification, self-sovereign identities and regulatory reporting, where DLT is “30% to 80% more efficient.”
Sharing data between members of a group
The distributed nature of blockchain is especially useful in the context of the EU, where it provides a way of coordinating data between member countries without sending it to a central location in Brussels or Luxembourg.
This is the rationale behind the European Blockchain Services Infrastructure, which aims to bring public services into a pan-European context. One of the potential uses of EBSI is connecting European banks in terms of their regulatory reporting, for example by sharing client data gathered in their anti-money laundering efforts.
Zilgalvis noted that this is a bigger challenge than it may seem, as banks are reluctant to do so due to concerns about competition and user privacy regulations.
The European blockchain effort is finding more issues with the political aspect rather than technological, as Zilgalvis revealed:
“The biggest challenge is governance. The best use cases for blockchain are where it is not one enterprise or entity but many. Thus, governance is important.”
On the technology side, efforts are being made to improve scaling, consensus mechanisms and privacy.
Blockchain and crypto
Unlike some other governments, namely China, the European Union’s blockchain efforts are also coupled with a relaxed stance on cryptocurrencies, according to Zilgalvis"
“We haven’t made any moves to prohibit anything, which stands against the stereotype of ‘if it moves, Europe regulates it.’”
He added that crypto is regulated through the same principles as any currency and that any future changes will be “very much done in a ‘pro-innovation’ spirit.”
The European Central Bank is also pushing for issuing a “digital Euro” in response to Libra and similar worldwide initiatives. Zilgalvis, while noting that this is not EC’s area of competence, urged the bank to determine the advantages and risks of the proposal. He added:
“Obviously for the EC, and the EBSI initiative, it would be easiest for us to use the euro in our blockchain infrastructure rather than another digital currency or cryptocurrency.”