Blockchain more transformative than internet - researcher
New Zealand should look to become a blockchain and financial technology hub, argues a team of legal and financial experts in a report based on research funded by the New Zealand Law Foundation's Information Law and Policy Project.
Alex Sims, Principal researcher and Associate Professor of Commercial Law at the University of Auckland says cryptocurrencies are here to stay and that this country is missing a trick if it doesn't get to grips with the technology.
"New Zealand has fallen behind countries we like to compare ourselves with, including Australia, the United Kingdom and Japan. So now we need to live up to our reputation as nimble, agile and innovative and rapidly follow the lead of those other countries. That's the only way we can maximise the opportunities that blockchain offers," she says.
"There is a lot of denial about how disruptive blockchain will be, but this is not a flash in the pan. It will be more transformative than the internet."
Countries embracing cryptocurrencies are Sweden and the Marshall Islands, which Sims says are looking to introduce their own central bank-issued cryptocurrencies. In addition, large corporates such as IBM are using cryptocurrencies to shift value around the world.
It isn't all about Bitcoin either, which is just one of hundreds of cryptocurrencies - albeit the one that grabs all the headlines.
"Beyond changing the way we pay for things, the use of cryptocurrencies in combination with smart contracts (which also utilise blockchain technology) has the potential to profoundly transform everyday commerce," Sims says.
The research examines the advantages of 'smart contracts', which are self-executing computer programmes embedded in a blockchain. According to the report, smart contracts allow for some cryptocurrencies to be programmed so that they can only be accepted by certain people or organisations, and the limitations can remain for a set period or forever - something which conventional money simply cannot do, says Sims.
"Smart contracts are being used, or are planned to be used, in everything from the secure storage of patient health data, clinical trials, and electronic voting to health and safety. Smart contracts can also be used to track products from source to consumer, offering unparalleled transparency around provenance, food safety, fair trade and sustainability."
While the New Zealand Government is currently taking a "hands off" approach to cryptocurrencies, the report's authors propose that it should look to actively encourage blockchain businesses to set up here. Their recommendations include that the Reserve Bank of New Zealand (RBNZ) trials the creation and issuance of a New Zealand cryptocurrency, the Inland Revenue Department accepts cryptocurrencies for the payment of taxes and cryptocurrency exchanges be encouraged, with clear and detailed guidance provided as to their anti-money laundering/counter-terrorism financing obligations by both the Department of Internal and the Financial Markets Authority.
The full report is authored by Sims, Dr Kanchana Kariyawasam of Australia's Griffith University Business School and the late David Mayes, Professor of Banking and Finance from the University of Auckland Business School, to whom it is dedicated. You can read more details here.
For a 90 second refresher on blockchain, go here.
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