Europe Is a Leader in Blockchain Adoption
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These days, blockchain technology is spreading like a virus. Throughout the year 2018, the demand for industry-specific professionals has been rising in an unbelievably swift manner. The number of active Bitcoin miners is in an endless upward spiral and dozens of the world's largest companies are getting their feet wet while preparing to dive deep into the space -- all regardless of the recent market downturn.
The world of digital decentralization is booming like never before. In order to be well prepared for this cryptographic revolution, 22 European nations formed a partnership to exchange blockchain related experiences in April this year. During the past few decades, U.S.-based companies often eclipsed European firms with ease, in regard to technology adoption. This time, it could be Europe's turn to take the global leadership.
As of 2017, almost every bank in the world was interested in implementing blockchain technology. Recent developments have shown that this curiosity is not only based on theoretical considerations, but has already been adapted into practice. On July 3, the blockchain platform We.Trade, managed by IBM, conducted the first real-time customer transactions between several big European banking institutions.
Apart from We.Trade participants Santander, UniCredit and Deutsche Bank, there are also a handful of other European banks, like UBS and ING, that are currently engaging in various international blockchain consortia, all of which aim to evolve the $10 trillion trade finance industry. In detail, the assembles are exploring the potentials of distributed ledger technology, in order to minimize fraud cases, accounting efforts and document turnaround times. Furthermore, some agendas also include delving into smart contracts, which could enormously enhance cross border trading and potentially revamp the supply chain industry.
However, banks are not the only financial entities that have shown interest in getting their piece of the pie. As stated by diverse industry experts, like University of Oregon professor Stephen McKeon, security tokens are likely to disrupt venture capital in the very near future. These digital units can represent ownership in any type of financial asset, most commonly stocks and bonds. European stock markets appear to be particularly interested in building exchanges for tokenized securities. The main stock exchanges of Malta, Gibraltar and Switzerland previously announced to be working on their very own security token exchanges, whereas overseas stock markets mostly remain temperate so far.
While insurance have been around for multiple centuries, the industry has often failed to incorporate recent technological advancements into their daily business. This time, it appears that representatives of the business are trying to establish themselves as pioneers of blockchain technology. In November 2017, the German corporation Allianz, one of the world's biggest insurance companies, revealed it successfully developed a prototype for the captive insurance market that is powered by blockchain technology. Less than 10 months later, Allianz announced it was testing a native cryptocurrency called "Allianz token," which will be used to move money internally.
Due to its obligatory transparency, reliability and also more advanced techniques like smart contracts, the cutting edge technology perfectly fits the needs of the insurance business. Other major players outside of Europe, such as the People's Insurance Company of China and MetLife, are also running various tests that include automated payments when the terms of a claim are met.
Still, recent research by S&P Global Market Intelligence concluded that European insurers trump their Asian and U.S.-based competitors by far. According to the study, almost 50 percent of all insurance behemoths that are publicly talking about distributed ledger technology are residing on the European continent -- in spite of the higher number of U.S. firms.
In July 2018, the European Parliament's policy department for economic, scientific and quality of life policies released a report concerning competition issues in the area of financial technology. The report mentioned cryptocurrencies could potentially disrupt the entire finance sector and perhaps even replace traditional fiat currencies. While the report sheds light on a potential digital currency as an extension to the euro, it also indicates no interest in a native cryptographic currency.
Nevertheless, the European Central Bank made clear that it is currently not working on a digital euro. In an open letter to a member of the European Parliament on Sept. 12, ECB president Mario Draghi explained that "the technologies which could potentially be used to issue a central bank digital currency [...] have not yet been thoroughly tested and require substantial further development before they could be used in a central bank context."
The world outside of the euro looks different. Sweden, for example, is working on the "e-krona," which is based on the popular cryptocurrency IOTA and planned to be an official medium of exchange. Switzerland can be considered another prime example for blockchain adoption in Europe, as the country provides unique blockchain-friendly legislation and occasionally accepts Bitcoin for official payments.
What the future holds
Studies from mid-2017 showed that Europe and Asia were taking the global lead on blockchain innovation and, so far, it seems like Europe has managed to defend its leading position throughout the past 16 months. A survey by the Netherland-based bank ING recently disclosed that Europeans are generally more interested in cryptocurrencies than U.S. citizens. However, regardless of the recent advancements, there are still several hurdles to clear before distributed ledgers reach a truly big share of all companies.
Christopher Pissarides, Economic Nobel Prize laureate of 2010, believes that asset-backed stablecoins could strongly accelerate the adoption of cryptocurrencies as a form of payment. Pissarides, who is working on a diamond-backed cryptocurrency with his project Hello Diamonds, told me in an interview that "blockchain technology has the potential to disrupt the current financial system, but it is still mainly used for speculation. If we can eliminate the volatility and bring in stability, we now have the financial tool necessary to replace the archaic payment systems in place today."