Blockchain is a novel technology that can remove market inefficiencies and spur economic growth when applied to existing businesses or industries, says Kokila Alagh, founder of Karm Legal Consultants.
Speaking to Khaleej Times on the sidelines of the Gitex Global 2021 exhibition in Dubai, she explained that all the industries stand to benefit from blockchain technology. “Blockchain can empower smart cities as it enables information sharing without the need for a single administrator and a single point of failure. Blockchain allows network members to share data with a high degree of dependability and transparency. Cities have a diverse set of stakeholders, and data sharing among them is critical for providing high-quality urban services.”
For this data exchange, blockchain is anticipated to be utilised. Smart Dubai, for example, is exploring blockchain use cases across a variety of areas, including banking, education, and transportation, as part of its goal to make Dubai the happiest and most innovative city on the planet. In another use case, a program is underway to use blockchain to simplify registration processes for students travelling between different emirates.
“It is essential to note that having autonomous smart cities is not enough for them to contribute to social problems and function effectively while increasing service quality,” Alagh said. “Rather, ensuring interoperability and coordination across many smart cities is critical to ensure scaling of the technology and ensuring that the technology is standardised across cities.”
Blockchain today, she explained, is being seen from many angles. Mainly on how it can remove intermediaries and remove business efficiency existing in current businesses. “For example, in finance, there is no need to wait for intermediaries to validate transactions since encrypted shared ledgers do it in real-time. This implies payments may be handled considerably more quickly, matching contemporary consumer expectations and allowing for real-time sales monitoring. Inter-company transactions may also be resolved instantly, saving time for everyone in the organisation."
Alagh further explained that while people still possess many abilities that technology has yet to duplicate, data capture and dissemination becomes more precise as human participation decreases. This is especially useful in finance, auditing and accounting, where immediate and automated transaction records, fully synchronised across networks, have undeniably favourable implications for financial data dependability and validity. If an anomaly occurs, a consensus mechanism will take effect, ensuring that the most trustworthy version of the blockchain is maintained above all others.
Asked if there are any regulatory aspects and challenges that are impacting the speed of adoption, Alagh said: “From a regulatory perspective, the underlying technology, which is blockchain or distributed ledger technology, is not regulated per se. However, financial activities or regulated activities that involve the application of blockchain can be regulated depending upon the freezone and the regulator in the UAE.”
As an example, she noted that the Securities and Commodities Authority regulates security tokens and commodities tokens in the mainland; whereas the Financial Services Regulatory Authority regulates digital securities in the Abu Dhabi Global Market. Similarly, the Dubai Financial Services Authority has passed the amendments concerning security tokens and shall regulate regulated financial activities or financial instruments that are cryptographically represented on a blockchain or similar technologies.
Scalability, she noted, is a huge challenge that still needs to be tested on a large scale. “Further, integration with legacy systems and interoperability are some of the issues that need to be addressed when designing and developing blockchain applications. As more players actively invest in blockchain technology, the adoption of blockchain across industries will grow, which will bring the technology to the mainstream. However, this will also include a lot of failed startups and illicit attempts such as get rich quick schemes. Therefore, professional and retail investors must do their due diligence before investing in such technologies.”
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