Blockchain technology is a distributed digital ledger system that stores lists of records (blocks) linked cryptographically, making the information on the blockchain impossible to reverse, alter, or hack. The most common application for this technology is recording digital transactions in Bitcoin, Ethereum, and other cryptocurrencies. But it has many other possible uses.
One area where blockchain technology holds promise is in government. It’s changing how government public services—such as in the healthcare sector, supply chains, government-related financial transactions, and voting—are delivered. Blockchain technology allows secure data sharing and provides an immutable audit trail, building efficiency, transparency, and public trust.
To illustrate, several countries, including Georgia, Ukraine, Brazil, and UAE have pioneered the adoption of blockchain for their land registry processes. For a country like Georgia where land disputes have long been an issue, analysts believe Bitcoin’s ability to provide trustworthy, auditable, traceable data trails can be an efficient solution.
There’s a great deal governments can gain from adopting blockchain technology in their systems, including:
Blockchain technology is helping increase access to financial services for the unbanked or underbanked.
Due to several reasons, such as poverty, illiteracy, and lack of necessary documentation for verification, many lack access to financial services, especially in developing and third-world countries.
Blockchain technology is immutable. That means records entered in a block are time-stamped and encrypted so that unauthorized users cannot alter them, even if they’re the policymakers. Only the trader responsible for the transaction can make changes.
Singapore’s Monetary Authority has been exploring blockchain technology to ensure transparency in recordkeeping and data management for clearing and settling payments and securities. This solution would ensure transactions are recorded in a tamper-proof and transparent manner.
Any alterations would prompt syncing of the changes in real time. Since it’s a distributed ledger, everyone in the distribution blockchain would receive an update of the changes made. This visibility and traceability enhances transparency and accountability.
Data entered in a blockchain-based system is permanent and encrypted end-to-end. This immutability prevents unauthorized users from tampering with records, promoting security.
Also, because no person or entity has complete control, no one but the authorized trader is responsible for all entries and alterations. This promotes accountability.
Blockchain-based systems automate processes and eliminate the need for intermediaries, exchanging papers, and reconciling records. This speeds up processes and cuts costs.
Several countries—including UAE, Estonia, Singapore, Sweden, and Australia—have adopted blockchain technology into their government services at the national level. The following are some practical ways local governments can use blockchain technology:
As governments embrace digitizing banking and payment systems, blockchain is gaining traction as an innovative solution for secure and efficient transactions. The technology allows decentralized, borderless, and transparent payment systems.
By leveraging blockchain, governments can create more inclusive financial systems, facilitating payments and remittances for the unbanked or underbanked. All a user would need is a cell phone and an internet connection, and they can transact from anywhere, including the comfort of their home, at a reduced cost.
El Salvador is one example of a government where blockchain enables financial inclusion and payment systems. The government has adopted Bitcoin as a legal tender and empowered citizens to access Bitcoin through Chivo, an app that’s grown as popular as PayPal within El Salvador.
As populations expand, governments can benefit from using blockchain to provide well-protected, secure digital identities for citizens, gathering various private data, such as birth certificates and marriage certificates, into a single encrypted element.
Each registered user has a unique identity. The technology’s decentralization feature ensures the validity of the identity, and it’s easy for authorized users to access, change, and manage information.
However, no one, including those in authority, can gain unauthorized access and tamper with data. This simplifies access to public services while ensuring privacy and data protection.
Abu Dhabi is using a combination of biometrics and blockchain for digital identity card management and verification. The blockchain-based IDs, accepted as valid identification in everyday use, promote data security from the time of registration.
Governments can use blockchain to improve their supply chain management by improving procurement and logistics.
Supply chains often face execution, traceability, and coordination challenges. With blockchain technology, each party can monitor and trace the status of shipment, and no participant can overwrite or alter details. This helps eliminate the problem of long, unpredictable lead times and lack of visibility.
Blockchain technology also helps make faster and more cost-effective deliveries. Thus, it helps track the production, shipment, and delivery of products transparently.
Australia is using blockchain at the government level in its supply chain management. The blockchain-powered system has dramatically improved traceability.
Governments can use blockchain to facilitate a smart voting system that’s immutable, secure, and transparent.
Election fraud is a common challenge worldwide. However, blockchain’s immutability would make it next to impossible to tamper with vote counts, ensuring transparency in the electoral process.
Blockchain’s decentralization would help conduct the vote-counting process faster and without errors, eliminating the cost of recounting. It would also streamline the personnel needed. A digital government with a transparent electoral process free of fraud and errors would increase its citizens’ trust in the processes.
India has the vision to adopt blockchain in its voting and e-governance. It seeks to enable a “Made in India” blockchain for global use by 2027.
Land registry and real estate transactions can be burdensome and inefficient. The process is lengthy, with several legal, financial, and logistical aspects. It’s also highly prone to human error, breach of contract, questionable practices, delays, and communication gaps. Each inaccuracy makes tracking property ownership less efficient.
Besides making the process of land registry and real estate transactions faster, blockchain-based records are accurate and permanent. They cannot be altered or tampered with, reducing fraud and improving the efficiency of transactions.
The government of Estonia has leveraged blockchain in its government-related property transactions for speedy, transparent, and fraud-free registry transactions. And Sweden is far along in its plans to adopt blockchains in its already highly digitalized land registries to speed up transactions and reduce fraud.
Especially for governments, there can be a lot of bureaucracy and paperwork associated with traditional methods of keeping public records. However, blockchain allows for the secure storage and management of public records like birth certificates, marriage licenses, and educational qualifications in the long term.
Governments can use blockchain technology to create proof of identity, ownership, or validity by creating digital signatures and timestamps. It can track the movement or changes on records and ensure consistency, accuracy, and reliability of records.
Blockchain also makes it easy for authorized parties to audit and verify due to the technology’s immutable nature, and create immutable backups and copies. It cannot be altered or deleted by unauthorized users, reducing the likelihood of forgery.
Smart contracts are automatic digital contracts on a blockchain performed automatically when the concerned parties meet the terms and conditions.
Government officials can revolutionize contracting by using smart contracts. Because the contracts execute automatically, the process is efficient and with fewer errors.
The technology also helps streamline various processes, reducing delays and costs. Additionally, the system’s immutability ensures the contracts are accurate and tamper-proof, increasing transparency and public trust.
Tax administrations often deal with tax evasion or avoidance. In evading taxes, citizens exploit the tax system using legal methods. However, blockchain can help simplify and improve tax collection efficiency by digitizing and automating processes like invoicing.
Blockchain technology could solve a taxation system’s weaknesses and enable tax agencies to easily view and verify tax payments. This would reduce evasion. And once a taxpayer makes a payment, blockchain-based tax collection would ensure transparent and immutable recordkeeping.
In grant and aid distribution, a major challenge is to reduce fraud and ensure that aid reaches its intended recipients. Blockchain can speed up payment processes and provide an immutable transaction ledger where no tampering can occur.
Blockchain’s decentralized nature eliminates the need for intermediaries as no individuals or government agencies control the recordkeeping. Additionally, it allows everyone to track and manage commitments, distribution, and use as data is available to all participants in real time.
The following are examples of use cases in three countries that are taking the lead in implementing and encouraging blockchain implementations:
With the Chivo wallet, a Bitcoin payment app, El Salvador strives to adopt Bitcoin as a legal tender to empower citizens to access Bitcoin through the app. Chivo has become a major payment platform in the country, setting the stage for further blockchain adoption.
About 70% of El Salvador’s population is underbanked. The country’s president reported that as of 2021, 2.1 million people were actively using Chivo, and for good reason. Users can make deposits and withdrawals both in U.S. dollars and Bitcoin. More of the population can now transact.
Additionally, a significant portion of the country’s population lives abroad, particularly in the U.S. and Canada. Now, they can send money to relatives with no bank accounts.
Singapore ranks second as a crypto hub, with a cryptocurrency ownership rate of 19%, higher than the global average of 15%. The government has heavily promoted blockchain technology. It has organized initiatives to educate citizens about blockchain, offering courses, programs, and events like the Singapore FinTech Festival.
The government also supports TOKEN2049, Asia’s top cryptocurrency conference (sponsored by AlphaPoint), which organizes the gathering of all stakeholders in the global crypto industry in Singapore. Additionally, the government does not tax the purchase of cryptocurrencies.
Public distrust in traditional financial institutions and unmatched needs, with many preferring peer-to-peer alternative services, are some reasons many lack access to traditional financial services.
However, Bitcoin has enabled financial inclusion for the unbanked and underbanked population, who can now use the country’s P2P exchange platforms and Bitcoin ATMs. The country has nearly 40 crypto withdrawal machines throughout the nation. And unlike your typical cash machine, withdrawal machines connect users to a Bitcoin wallet or exchange, not a bank.
Bitcoin has significantly contributed to the financial inclusion of many who were previously unbanked or underbanked. When most of the population can access financial services, it enables innovation and helps a country reach its global goals.
There are several potential applications of blockchain at the national level. And there’s so much a government can gain by integrating blockchain into its public sector. However, it’s a highly complex undertaking, requiring a robust technology design and implementation framework.
AlphaPoint’s software solutions have helped many businesses worldwide and the El Salvadoran government take the lead in unlocking their global crypto potential —l and illustrating the potential for further government adoption. AlphaPoint provides superior software to power secure, stable, institutional-grade digital asset solutions.
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