Luxembourg, 9 September 2018
OECD blockchain policy forum
Lëtzblock, represented by Audrey Rouach Baverel and Biba Homsy, participated in the OECD Blockchain Policy Forum that took place in Paris on 4-5 September 2018.
Below Audrey has shared a few main thoughts from the forum that she considered important in the context of reflecting on how to best foster Blockchain and DLT innovation and adoption in Luxembourg.
OECD Forum - Day1
The forum gathered participants from over 70 different countries, all interested to share and discuss about blockchain technology and its impact on the world economy.
The purpose of this forum was to gather participants from public and private sectors, experts, and academia to focus on the following elements:
- Blockchain’s potential global economic impacts
- The use of blockchains to enhance inclusiveness
- The use of blockchains to promote green growth and sustainability
- The use of blockchains to strengthen governance and enforcement practices
The morning focused on the big picture and trends, with panellists who were both interesting and knowledgeable.
They shared experiences on projects implemented in their own countries or organisations. For instance, a representative of the World Bank shared her experience on the implementation in August 2018 of the first blockchain bond.
All agreed that blockchain should be used as a tool (among other technologies, like AI) and that it has great potential benefits - provided it is properly implemented with safeguards and appropriate standards. International cooperation is therefore needed.
It was clear that the more utopic ideas associated with blockchain (such as the complete disparition of trusted third parties) were only partially supported by participants. They conveyed a clear need for monitoring, regulation - and often still in relation with some trust third parties.
Despite a good representation of European countries, in terms of panellists, the absence of “old” Western European countries – including that of Luxembourg - was blatant. Central Europe in particular was well represented.
The Premier of Serbia was present, marketing her country and its aim to be a leader in what she called the new industrial revolution via digitalisation of the economy. The Prime Ministers of Mauritius and Bermuda together with a representative of Slovenia showed their countries’ advancements regarding blockchain.
In the afternoon, focus was on taxation and accounting - currently some of the more complicated topics surrounding cryptoassets and blockchains.
Two sessions in a row were dedicated to this hot topic.
The first one was titled: “Taxing crypto and the broader implications of blockchain for the international tax system”
This session was chaired by Caroline Malcolm, Senior Advisor on the Tax and Digitalisation section of OECD. The panellists were officials from Slovenia and Latvia, together with an economist from US.
We were stuck by just how advanced Slovenia and Latvia are in terms of regulation and tax rules related to cryptoassets. Slovenia is working with the OECD to share their knowledge and experience given that it is one of the first countries to be so advanced in terms of tax and accounting regulation for the cryptoassets ecosystem. Australia and USA are also leading. But there is still much more to be done. Beyond income tax aspects, VAT/sales tax should not be neglected as it can occur huge tax risks.
A disturbing aspect is that Luxembourg appeared nowhere on this new crypto map - during this first day I never heard Luxembourg mentioned.
Luxembourg is one of the leading global venues for FinTech and RegTech - stemming from its pre-eminent global investment fund, banking and space industries. And Luxembourg in fact has numerous interesting blockchain projects in those areas. We clearly must become more visible and more involved in the global blockchain ecosystems.
Increasing visibility will enhance both opportunities and the profile of Luxembourg in these areas, as unfortunately we appear to be losing the PR battle as we are not displaying our strengths in these areas.
Coming back to the sessions, the key message was that accounting and tax rules need to be clarified in order to cover the growing number of questions arising in the cryptoassets world. This is no longer an option, but a must be done promptly to ensure clarity and certainty in the tax treatment of taxpayers.
The following session was “Crypto-currency: a new front in the fight against financial crimes and the potential for blockchain to deliver better results in tax administration”
Despite certain new challenges of cryptoassets in terms of financial crimes, including difficulties regarding traceability of anonymous tokens such as Monero, the session shed a bright light on the benefits that blockchain technology can have for improving and facilitating the efficiency of public services, including tax collection.
Some countries have embraced blockchain as an integral part of their digitalisation process and are testing blockchain technologies. Whilst Luxembourg has pioneered some innovative blockchain projects, such as the use of Ethereum at the Luxembourg Stock Exchange or the development of Infrachain to facilitate blockchain adoption in regulated industries, unfortunately no Luxembourg projects or voices were visible on this global stage.
Spain for instance is currently working on a VAT process and collection with the use of blockchain in order to automate the tax collection and improve transparency and reduce fraud. This project seemed really interesting, but could have a bigger impact if implemented at a European level. For this purpose, harmonisation and common agreement on standards must be discussed and put in place. Discussion at the European level shall be intensified to make it happen, and here we can welcome the involvement of Luxembourg actors in the ISO/TC 307 blockchain and DLT working groups who are already working on standardisation proposals.
The last session I attended during this first day was entitled: “Building a global policy environment for digital financial assets”
The panellists came from the private sector, non-profits and public bodies – including for example ESMA, the Financial Stability Board, the OECD Committee on financial markets, Ripple, SALT Lending and the US Chamber of Digital Commerce.
The message was as expected - regulations need to be adapted in order to face the new challenges posed by blockchain based digital financial assets. For this purpose, international cooperation is needed.
OECD Forum – Day2
The second day was mostly focused on use cases from various areas: healthcare data management, migration issues, sustainable development, supply chains, SME financing, and financial services. All showed solutions that blockchains can bring in order to optimize and increase the efficiency of the existing processes or, in the case of supply chains to completely disrupt the existing processes for tracking goods.
It was surprising not to see any projects related to real estate, where blockchain has so much to bring.
Many questions of course remained open, such as corporate governance and compliance paradigms that must be completely rethought and reshuffled in order to adapt to decentralized ecosystems.
It is clear that although blockchain was created over 9 years ago, it is still at a young sand immature stage, with so much more needing to be done and improved (e.g. scalability, hacking risks, ...). All participants were, however, very positive and agreed that this technology a lot of good to bring and should therefore be nurtured and supported.
The closing session raised the following key questions:
- Which government policies should be put in place to help harness the potential benefits of blockchain, while mitigating risks and potential for misuse?
- How to provide a regulatory level playing field and guarantee proportionality?
- What is the right mix of industry standards, policies and regulation?
- How to ensure a harmonised approach and ensure interoperability?
- Is there a need for common international/global standards and principles?
- What is the overall role for governments and international organisations?
We must help Luxembourg to be at the centre of all these activities.
Let’s work together. Let’s share suggestions.
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