Brexit A Boon For Blockchain?
Questions loom large over Brexit. As the U.K. gears up to leave the European Union (EU), for commerce, there remains the unknowns of how trade will be affected, as well as how capital, goods and services can be tracked. Late this month, a study from Nexus found that across 200 businesses surveyed, more than half of large and mid-sized companies queried are looking to adopt blockchain in an effort to mitigate operational risks in the wake of Brexit.
As noted by Nexus, about 33 percent of firms said they will use blockchain to combat fraud, while 11 percent will use blockchain to help cut costs, and 10 percent see blockchain as useful in supply chain management.
The concept of blockchain used in Brexit’s aftermath — specifically to help navigate a new customs landscape — is nothing new. As reported in July via white paper, the U.K. government has advocated in part for “exploring how machine learning and artificial intelligence could allow traders to automate the collection and submission of data required for customs declarations.” That would leave room for blockchain.
The paper noted that “this could also include exploring how allowing data sharing across borders, including potentially the storing of the entire chain of transactions for each goods consignment, while enabling that data to be shared securely between traders and across relevant government departments, could reduce the need for repeated input of the same data, and help to combat import and export fraud.”
In an interview with PYMNTS, conducted via written exchange, Alex El-Nemer, executive director at Nexus, said of his firm’s study that “what was most interesting about our polling was that all companies had similar plans for increasing implementation, for the same reasons, regardless of size, sector and scale. This is perhaps reflective of the wider interest in adopting blockchain, but also a sign that companies recognize their potential to drive savings.”
He said that companies might mull turning to blockchain to prepare for Brexit because, “whether they support the U.K.’s impending departure from the [EU] or not, the majority of company leaders agree that the process is likely to lead to economic turbulence and a level of uncertainty in 2019, at least in the short term.”
The data, showing that 51 percent of firms see blockchain as useful as Brexit takes shape, shows that, possibly, “this trend reflects the need to improve transparency ahead of this situation, with reducing fraud, improving innovation and driving cost savings as key reasons. The issue is most likely the market consequences of such a major political process, rather than something inherent in Brexit itself.”
Supply chain efficiency stands out as a key use case, as blockchain can be used to track the movement of key parts and products of, say, the automotive and manufacturing verticals.
El-Nemer noted, too, that in cross-border commerce, “one area that is set to boom is the music industry, which can start using both blockchain and cryptocurrency to ensure artists are paid on time and correctly, when music is streamed online. In the U.S., we’ve already seen legislation passed to make this happen, with the recent implementation of the Music Modernization Act.”
There also exists the questions of the Irish border. As has been widely noted, the U.K. is part of the EU’s customs union and the single market — at least for now. Post Brexit, that will change, and the Irish border will be a customs border with separate controls and commerce processes.
The Nexus director stated that “we included this question in the research, as the U.K. Chancellor Philip Hammond recently suggested that blockchain could provide a potential remedy to the Irish border issue, which is causing problems for the current Brexit negotiations. His proposal was met with a mixed reaction from tech experts, and that was reflected in our research. … It is arguable that blockchain could assist with providing a clear record of the movement of goods lorries over the border, thus avoiding the need for a ‘hard’ border. This solution would have to be backed up with additional technology and properly tested, so nobody can say for certain it would solve the whole problem.”
When asked about the timing of blockchain adoption spurred by Brexit, he said, “I expect, over the next 12 months, many more organizations will have increased use of the technology, and within the next three years, it will have become an essential aspect of the vast majority of companies.”