Australia in driving seat as global blockchain standards take shape

Australia in driving seat as global blockchain standards take shape

Westpac director Craig Dunn will tell China this week that more engagement from its technology leaders will help the global standards-setting process for blockchain, which Australia is leading, to create guidelines that will reduce the cost of deploying the emerging technology across the global economy.  

An Austrade trade delegation arrived in China over the weekend ahead of this week’s Wangxiang Global Blockchain Summit in Shanghai. Australia is chairing the International Standards Organisation (ISO) group developing standards for blockchain and distributed ledgers and Mr Dunn is chairing the work.

He told The Australian Financial Review ahead of a keynote address at the summit that “if you are going to have an international standard, given the significance of their work in blockchain, we need to have China involved”.

China is deeply interested in the work of the so-called ISO “technical committee 307”, which Australia chairs, given the potential for the new technology to create a new “internet of value”. Proponents believe blockchain will underpin a significant amount of future global commerce and trade. Common technical and operating standards could reduce costs of developing the technology, by encouraging interoperability and market access while engendering trust in the new systems.

Blockchain standards could help reduce a myriad of problems with the technology including performance, scalability, speed, privacy and limited interoperability.

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While China has clamped down on the cryptocurrency bitcoin and “initial coin offerings” (ICOs), which operate on blockchains, the technology itself forms a part of the country’s strategic thinking and is being tested by Chinese tech giants including Alibaba, Baidu, JD and Tencent. 

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“The users of the technology should become key developers of the standard, because that means we will get a better standard that more people are likely to use. The more people that are involved, the better. It is a consensus process, and you need the players to get involved for the consensus to have any real meaning,” said Mr Dunn. 

While Standards Australia manages the standards development independently of government, in China, there is a close relationship between the state and creating standards.

“Australia’s leadership in this global work being done to develop a global blockchain standard is respected by China, and there is an enormous amount of interest in how that will work,” said barrister Philippa Ryan, a senior lecturer in law at UTS. “They appreciate it is Australia doing the work and know they can work with us, and will do it in a trusted way.”

Russia, Germany and the United States are also closely monitoring Australia’s ISO work. IBM, Microsoft, Azure, Oracle, Amazon Web Services, Google, Facebook and Salesforce have all this year announced they are working on aspects of blockchain. Meanwhile, 26 central banks are also exploring its use. 

“This is a powerful technology and it is in the world’s best interest for the input on standards to be as broad as possible. We want the people at the cutting edge, the leading developers and users of the technology, to be in the room, because of their expertise,” Mr Dunn said.

Irony for libertarians

The idea of setting regulation and standards on blockchain is ironic given bitcoin was created as a system resistant to censorship and central control. However, it is broadly recognised that standards for the internet – such as for “TCP packet switching” – enabled the network to scale, operate across borders and work regardless of technology vendors. Similarly, cellular phone standards have allowed people to call each other regardless of location or operator. 

The development of blockchain is still immature and the ISO recognises the dangers in setting standards for emerging technologies too early. Blockchain’s myriad of current problems include concerns around performance, scalability, speed, limited interoperability, privacy and the lack of clarity around legal risk and governance. 

“International standards can help address many of these challenges,” Mr Dunn will tell the summit in China this week. They could reduce technical barriers to trade, lower switching costs for users, and their ability to lift competition and facilitate cross-border partnerships, he will say.

Given ISO standards typically take two to three years to finalise, Mr Dunn said “some time in 2020 a blockchain standard could be in place”. 

“We understand there is a danger finalising standards too early,” he said.

“But the momentum around the technology is undeniable, so in some areas, a standard in the near term will be helpful.”

The CEO of Standards Australia, Bronwyn Evans, said: “Australia was quick to identify not only the potential of blockchain, but the need for international standards. The buy-in from experts around the world, and their continued support and participation, has been key in the early days of blockchain, and will continue to be vital to the increased use of this technology.

“Blockchain has the potential to completely transform the services we interact with every day. What started as a matter of public priority in Australia in 2016, has since evolved into global collaboration to unlock the significant benefits of this progressive technology.” 

The ISO blockchain standards committee has members from 50 countries. There are also observers from the Ethereum Enterprise Alliance, which had been formed by Microsoft, Intel and seven of the world’s largest banks; the International Telecommunication Union and SWIFT, the global bank interbank payments network.

Australia’s role chairing the ISO committee means the country is punching above its weight applying the technology. The World Bank last month launched the world’s first bond on a blockchain developed by Commonwealth Bank. The ASX is preparing to use the technology to settle and clear the Australian equities market. And the legal profession has created the Australian National Blockchain to run smart contracts governed by local rules. 

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