This article is written by Hazremi Hamid, Senior Officer for Digital Economy, ASEAN Secretariat.

  • The problem: The emergence of blockchain technology offers new opportunities for digital government to improve transparency and prevent fraud, yet at the same time, poses challenges to establishing public sector readiness and trust toward the decentralised and automated governance designs in blockchain-based systems.
  • Why it matters: To what extent does the government need to give up its prerogatives through blockchain technology? It is associated with the level of trust vested in the public sector.
  • The solution: Authorities should develop a strategy to implement blockchain.

The emergence of blockchain technology offers new opportunities for digital government to improve transparency and prevent fraud. Yet, at the same time, it poses challenges to establish public sector readiness and trust toward the decentralised and automated governance designs in blockchain-based systems. However, to what extent the government needs to give up its prerogatives through blockchain technology is associated with the level of trust vested in the public sector. Blockchain is not always well-suited to target specific problems that an agency may be experiencing. The agency should not adopt a one-size-fits-all approach when it comes to Blockchain implementation. An analysis of potential use cases in the public sector remains crucial.

Policymakers should carefully evaluate how blockchain technology can be applied in the public sector.

What is blockchain?

Blockchain is commonly associated with transactions. In terms of its definition, blockchain can be described as a “digital, decentralised and distributed ledger in which transactions are recorded and added in chronological order, with the objective of creating permanent and tamper-proof records.” In simpler terms, blockchain functions as a ledger with inherent trust. The capability of blockchain technology to record transactions on distributed ledgers presents new opportunities for digital government to enhance transparency, mitigate fraud, and establish trust within the public sector. Three key characteristics of blockchain include decentralisation and distribution, irreversibility and immutability and near real-time processing.

The Blockchain system has the potential to assist governments in addressing issues such as corruption, bureaucracy and accountability.

Numerous reports have highlighted challenges in blockchain adoption, including the lack of regulation, security and privacy concerns, inadequate and non-interoperable infrastructure, inefficient and energy-intensive transactions, the necessity for value-driven shifts in administrative processes and the absence of effective governance models. As of now, the actual implementation of this technology in the public sector remains limited.

According to Deloitte, Blockchain offers value in the public sector in three primary areas. First, value transfer with low cost and near real-time processing, eliminating the need for intermediaries and extending beyond traditional currencies. Examples include facilitating internal payments and the exchange of low-liquidity assets. Second, smart contracts, which are based on ledger content and software protocols, execute automatically when predefined conditions are met. Examples include applications in e-procurement, digital checks and automatic financial instruments. Third, recordkeeping capabilities that create immutable records using agreed consensus protocols without relying on trusted third parties. Examples include issuing digital certificates for physical assets, validating transactions involving digital assets and managing financial accounts.

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The Blockchain system has the potential to assist governments in addressing issues such as corruption, bureaucracy and accountability, given that government activities are often vulnerable to fraud, corruption and a lack of trust both between and within agencies. It is crucial for policymakers to carefully assess how Blockchain technology can be harnessed in the public sector. Consequently, relevant authorities should formulate a strategy for implementing suitable Blockchain applications within the public sector, with a strong emphasis on identifying areas where this technology can be effectively applied.

Drawing from the European Commission's (EU) report on Blockchain for Digital Government (2019), several recommended use cases include digital identity, land title registry, governance framework, infrastructure and academic credentials verification.

How it works

Blockchain-based digital identity employs Distributed Ledger Technology (DLT) to authenticate citizens for digital government services, shared data and shared services. It forms the foundation for both centralised and decentralised government services, where identity verification is a one-time requirement. After the initial verification, users can provide verifiable proof of their identity without the need for ongoing involvement from authorities. This blockchain-based solution paves the way for a unified user management system within the public sector by adopting a common interoperable identity for various government services. Despite some obstacles, such as the deployment of a single solution, the success of this approach can serve as a catalyst for other blockchain-based deployments, such as e-voting.

Traditional land title registries still rely on paper-based credentials, making them susceptible to tampering, costly transactions, inefficiency and time-consuming processes. A blockchain-based land title registry issues digital certificates, adding an extra layer of transaction security through the use of a private blockchain to enhance service efficiency. As land title registries have unique registration and verification mechanisms, a harmonised system that aligns with legal frameworks becomes essential. The costs and time invested in harmonisation efforts are likely to outweigh the benefits. Blockchain's ability to maintain unique and immutable records enables a reliable land title registry, potentially reducing the involvement of third parties in transactions and enhancing trust through a decentralised and harmonised system.

A standardised blockchain governance framework sets compliance standards for node validation in private blockchains. While it doesn't directly serve end-users, this governance framework encourages public adoption of Blockchain as a Service (BaaS), facilitating more advanced functionalities and transactions. The role of the National Govtech Agency is crucial in developing a common blockchain governance framework for the entire public sector. This initiative offers benefits such as eliminating legal barriers, establishing clear guidelines and demarcating use cases involving citizen data.

Blockchain-based academic credential verification, as the name suggests, offers a service for verifying academic credentials. Various use cases have been developed within universities using private blockchains. However, at the national level, existing solutions often rely on non-blockchain methods. There is an opportunity for standardisation between universities and the ministry. Although the solution maturity is high, the diversity of credentials adopted by each university necessitates semantic interoperability.

While blockchain may provide solutions to unresolved issues, it is not a one-size-fits-all remedy. The examination of use cases explicitly demonstrates that blockchain is not always the optimal solution for specific problems faced by agencies. The Govtech agency should avoid adopting a one-size-fits-all approach to blockchain implementation. A thorough analysis of potential use cases within the public sector remains essential.

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