Australian National Blockchain Roadmap — A Road to Big Brother?

The heading of this Government report should scare anyone who seriously understands blockchain technology and believes in democracy, freedom, privacy and liberty. The idea of a National blockchain is horrifying to me…

Anyone who has researched blockchain technology understands that it can be used as a democratising technology or as the ultimate ‘big brother’ enabler.

Some of my earlier writings on this topic are:

1. Submission to the Australian Human Rights Commission;
2. Submission to the Australian Treasury on the Cash Ban; and
3. Medium post on ‘Australian National Blockchain’.

This government paper is a basically a blockchain 101 explainer that is completely silent on the very important difference between public and private blockchain and the use of cryptocurrencies. To me the report is one big ‘blockchain not bitcoin’ explainer that could have been written in 2015.

The report is void of any significant discussion about Decentralised Technology and the benefits for democracy and freedom. See here for an explanation.

I do not wish to be too critical but the statement on page 7 relative to the need for regulations shows an incredible lack of understanding of permissionless blockchains on the one hand, but then it sets it up for the Government to set out regulations and standard to solves these problems. The paragraph reads :

‘As with any emerging, disruptive technology, blockchain and its uses will need regulatory frameworks that are fit for purpose. Challenges include maintaining trust; ensuring security of blockchain systems and the integrity of data; identifying participants in blockchain systems; balancing privacy with transparency; tech-neutrality; and the legal status of smart contracts.’

A public blockchain like Ethereum provides trust, integrity of data, privacy etc…that is the whole point of Decentralised Technology it replaces the middleman…the trust model is fundamentally changed it is moved from trust in people to trust in software. A permissionless blockchain like Ethereum is a Trust and a Truth machine.

It scares me that the report on page 27 cites China as an example of a country adopting blockchain without then making a distinction between public and private blockchains. China, one of the most totalitarian states on the planet will no doubt use a closed private blockchain to completely control their citizens. In Australia, we want blockchain technology to be used to achieve the opposite. We want individual freedom and we want privacy. Globally we want financial inclusion, we want everyone to have an identity. All these things are achievable with public permissionless blockchain technology. Why does the Australian National Blockchain Roadmap not make this important distinction? It is so important to understand this as once a national framework is adopted it will be impossible to change.

Despite all the hyped case studies in the report, that fact is Crypto native businesses are finding nothing but blockages in doing business in Australia. One such case study is Animoca Brands, who have been delisted from the ASX because the ASX did not understand (inter-alia) the nature of Non-Fungible-Tokens. Another issue is the de-banking of crypto exchanges and crypto related business. Also note that on 14 August 2020 Law firm JPB Liberty filed a class-action lawsuit in the Federal Court of New South Wales earlier today, targeting Facebook and Google for anti-competitive behaviour for banning cryptocurrency advertising in 2018. “Youtube has failed to ban actual impersonation scams while banning the genuine company,” said Hamilton, noting legal action taken by Binance against YouTube.

The most egregious of all however is the Australian Government’s own action to effectively make it illegal to use cryptocurrency (or at least it could at the stroke of a pen…see here).

If the Australian government is serious about encouraging the development of an industry in Australia it could take 4 immediate steps toward that end :

1. The Australian Prudential Regulation Authority and the Australian Securities and Investment Commission should issue a joint interpretive letter setting out that banks and custodians are able to provide cryptocurrency custody services and also provide banking services to cryptocurrency businesses in Australia. See copy of US Govt letter here.
2. The potential ban on cryptocurrencies, which is contained in but not YET applied in the Currency (Restrictions on the Use of Cash) Act 2019, should be removed. This potential hangs like an axe over the head of any business that want to use cryptocurrency and therefore any blockchain based application. See my blog post here on this topic.
3. State and Federal Consumer protection agencies need to get up to speed so they can identify disgusting true crypto scams like OneCoin but recognise that Bitcoin is not a scam and there are many (in fact the most) other crypto businesses that are not scams. The ‘Facebook’ case mentioned above is an example where no distinction is being made between genuine and scam crypto businesses. The Government, via consumer protection agencies, can play a role in making a distinction. Crypto projects should be able to advertise.
4. The Australian government should form a bipartisan view of the human rights aspects (see Alex Gladstein of the Human Rights Foundation) of private vs public blockchains and it should set out to the public the criteria government departments and services will consider when deciding to use one or the other. Public blockchains offer the opportunity to reduce significantly the need for centralised government maintained ledgers and records. The Government need a philosophical position, will the National Blockchain approach lead to a China type control permissioned blockchain or a Bitcoin type blockchain where there is no centralised party. The mantra for Government blockchain adoption should be ‘use public permissionless blockchain technology in all cases on a ‘if not why not.’ basis.’

I do not want to be too down on the Government for this initiative in blockchain as they seem to be excited by all this cool tech…but I do not think we should proceed in a blind fashion to the dangers of Government controlled blockchains and we should not assume that governments will welcome the immutability, transparency and censorship resistance nature of public blockchains. Now is the time to hold the government accountable to the democratic, freedom and liberty ideals that Australians have developed and defended throughout the course of our history.

Ian Love — August 2020