Blockchain Technology Could Unblock Southeast Asia
Imagine you could swipe your phone over a piece of fish in the supermarket and instantly see secure records of its entire path through the supply chain, from the technique used by the fisherman who caught it in Indonesia to when it was shipped and how it was processed at a factory in your home country — all at the tap of a smartphone.
Trial projects such as that one are testing the potential of Blockchain technology to bring transparency to all sorts of notoriously inefficient or shadowy industries in Southeast Asia.
Blockchain, the technology that powers bitcoin, is an essentially unchangeable form of bookkeeping. It creates cryptographically chained signatures between blocks of information that are authenticated by users over a peer-to-peer distributed ledger — a public record that can be applied to any type of bookkeeping, not just cryptocurrencies.
“It removes the requirement for a centralized authority, and in a lot of the products that it’s being launched in, this centralized authority tends to be the government,” said Alisa DiCaprio, head of research at R3 — an enterprise banking software firm that uses distributed ledger technology.
In a region where the most important records — identity and ownership for instance — are often subjected to little or no external oversight, blockchain offers enormous potential benefits.
Erin Murphy, Founder and Principal of Inle Advisory Group, a Myanmar and emerging business advisory firm, said major Asian business hubs are looking to blockchain to clean up and simplify transactions.
“Ideally, we would want to see adoption of blockchain at an official level all across the region,” she said in an email. “But perhaps not surprisingly, the governments that are leading blockchain adoption are those that are already low-corruption.”
One of those governments, she said, is Singapore, which is working with major banks on a blockchain-based system to streamline and qualitatively improve their customer (KYC) processes.
In other countries, it is being used for completely different purposes. In the Philippines, a remittance market worth billions of dollars per month has been invaded by firms offering cheaper services built on blockchain, which people can access without a bank account..
“Any steps that get taken at first may not be viewed through an anti-corruption lens and may inadvertently tackle that issue; it will likely be viewed through a development lens to kickstart poverty alleviation and bringing sectors up to international standards that attract foreign investment,” Murphy said.
More than money
There are many trials with clear utility in Southeast Asia underway, including systems for land titling under development in Sweden and Japan.
In June, the United Nations unveiled a blockchain-based system built in partnership with Microsoft and Accenture that gives stateless refugees a permanent identity based on biometric data.
It’s also being explored for secure voting systems.
The blockchain-based app developed to track the supply chain of fish from Indonesia — Provenance — is now the basis of many other trials, including a project to create a similar system for the garment industry.
Online you can view the results of a pilot released in May this year that follows a piece of clothing — an Alpaca Mirror Jumper from London-based designer Martine Jarlgaard, from a farm in Dulverton, Britain, through every step of production into London with location, content and timestamps.
It is a long way, though, from realizing that something can be done to actually making it happen, DiCaprio of R3 said.
“The technical capability to do this exists in most developing countries,” she said. “You have engineers who can code on the blockchain. But the understanding of how to actually implement this from a business point of view is very poor.”
DiCaprio estimates it will take about five years before we actually see large-scale functioning applications and believes the most impactful will occur at the macro economic level.
“So for example one area that it’s moving very quickly is trade finance,” she said. “And trade finance, you’re generally talking about fairly large companies, generally in Asia mostly exporting or importing from or to the US or EU,.”
Faster, cheaper and more transparent transactions combined with reductions in the risks of lending and borrowing would flow to down to the village level, she added.
Subversion vs centralization
Blockchain proponents are divided by some sharply divergent values. Some see blockchain — whose slogan is “be your own bank,” as technology that can fundamentally upend a global financial system they believe is intractably corrupt.
“There is a serious opportunity for us here to remove money out of government,” said a Southeast Asia based bitcoin trader who would only give his alias FlippingABitCoin, fearing he could expose himself to physical theft.
Billions of people currently excluded from the formal banking system will be able to access global cryptocurrencies with no middle man using nothing more than a phone, he said.
“It will level out the playing field of power,” he said.
Another group of enthusiasts are encouraging the absorption of this technology by states, as demonstrated by Canada, Singapore, China and Germany, all of which are either exploring or conducting trials of their own central bank digital currencies using blockchain.
“In the long run, we believe if there is any threat at all to governments, it is that other governments will lead the way in adopting blockchain technologies in producing low-corruption, high-transparency, highly-secure digitized economic infrastructures that will attract business, investment and stakeholder confidence,” wrote Michael Hsieh, a non-resident affiliate at the Center for International Security and Cooperation at Stanford University, in an email.
“The societies who lead in the great fintech [financial technology] innovation race of the 21st century will siphon all the capital and productivity from those that lag,” he wrote.