Autor Cointelegraph By Andrew Singer

Regulators around the world have been thinking seriously about the risks associated with stablecoins since 2019 but recently, concerns have intensified, particularly in the United States. In November, the United States’ President’s Working Group on Financial Markets, or PWG, issued a key report, raising questions about possible “stablecoin runs” as well as “payment system risk.” The U.S Senate followed up in December with hearings on stablecoin risks.It raises questions: Is stablecoin regulation coming to the U.S. in 2022? If so, will it be “broad stroke” federal legislation or more piecemeal Treasury Department regulation? What impact might it have on non-bank stablecoin issuers and the crypto industry in general? Could it spur a sort of convergence where stablecoin issuers become more like high-tech banks?We are “almost certain” to see federal regulation of stablecoins in 2022, Douglas Landy, partner at White & Case, told Cointelegraph. Rohan Grey, an assistant professor at Willamette University College of Law, agreed. “Yes, stablecoin regulation is coming, and it’s going to be a dual push” marked by a growing impetus for comprehensive federal legislation, but also pressure on Treasury and related federal agencies to become more active. Others, however, say not so fast. “I think the prospect of legislation is unlikely before 2023 at least,” Salman Banaei, head of policy at cryptocurrency intelligence firm Chainalysis, told Cointelegraph. As a result “the regulatory cloud looming over the stablecoin markets will remain with us for a while.” That said, the hearings and draft bills that Banaei expects to see in 2022 should “lay the groundwork for what could be a productive 2023.”Temperature is risingMost agree that regulatory pressure is building — and not just in the U.S. “Other countries are reacting to the same underlying forces,” Grey told Cointelegraph. The initial catalyst was Facebook’s 2019 Libra (now Diem) announcement that it aimed to develop its own global currency— a wake-up call for policymakers — making it clear “that they could not stay on the sidelines” even if the crypto sector was (then) “a small, somewhat quaint industry” that posed no “systemic risk,” Grey explained. Today, there are three main factors that are propelling stablecoin regulation forward, Banaei told Cointelegraph. The first is collateralization, or the concern, also articulated in the PWG report, that, according to Banaei:“Some stablecoins are providing a misleading picture of the assets underpinning them in their disclosures. This could lead to holders of these digital assets waking up to a seriously devalued stake as a function of a repricing and possibly a run.”The second worry is that stablecoins “are fueling speculation in what is perceived as a dangerous unregulated ecosystem, such as DeFi applications that have yet to be subjected to legislation as other digital assets have,” continued Banaei. Meanwhile, the third concern is “that stablecoins could become legitimate competitors to standard payment networks,” benefitting from regulatory arbitrage so that one day they may provide “broadly scalable payments solutions that could undermine traditional payments and banking service providers.”To Banaei’s second point, Hilary Allen, a law professor at American University, told the Senate in December that stablecoins today aren’t being used to make payments for real-world goods and services, as some suppose, but rather their primary use “is to support the DeFi ecosystem […] a type of shadow banking system with fragilities that could […] disrupt our real economy.”Grey added: “The industry got bigger, stablecoins got more important and stablecoins’ positive spin got tarnished.” Serious questions were raised in the past year about industry leader Tether’s (USDT) reserve assets but later, even more compliant seemingly well-intentioned issuers proved misleading with regard to reserves. Circle, the primary issuer of USD Coin (USDC), for instance, had claimed that its stablecoin “was backed 1:1 by cashlike holdings” but then it came out that “40 percent of its holdings were actually in U.S. Treasurys, certificates of deposit, commercial paper, corporate bonds and municipal debt,” as the New York Times pointed out.In the past three months, a kind of “public hype has entered a new level,” continued Grey, including celebrities promoting crypto assets and nonfungible tokens, or NFTs. All these things nudged regulators further along. Regulation by FSOC?“2022 is probably too early for comprehensive federal stablecoin legislation or regulation,” Jai Massari, partner at Davis Polk & Wardwell LLP, told Cointelegraph. For one thing, it’s a midterm election year in the U.S., but “I think we’ll see a lot of proposals, which are important to form a baseline for what stablecoin regulation could be,” she told Cointelegraph.If there is no federal legislation, the Financial Stability Oversight Council, or FSOC, might act on stablecoins in 2022. The multi-agency council’s 10 members include heads of the SEC, CFTC, OCC, Federal Reserve and FDIC, among others. In that event, non-bank stablecoin issuers might expect to be subject to liquidity requirements, customer protection requirements and asset reserve rules — at a minimum, Landy told Cointelegraph, and regulated “like money market funds.” Banaei, for his part, deemed an FSOC intervention in stablecoin markets “possible but unlikely,” though he could see Treasury actively monitoring stablecoin markets in the coming year.Will stablecoins have deposit insurance?A stronger step might require stablecoin issuers to be insured depository institutions, something recommended in the PWG report and also suggested in some legislative proposals like the 2020 Stable Act which Grey helped to write. Massari doesn’t think imposing such restrictions on issuers is necessary or desirable. When she testified before the Senate’s Committee on Banking, Housing and Urban Affairs on Dec. 14, she stressed that a “true stablecoin” is a form of a “narrow bank,” or a financial concept that dates back to the 1930s. Stablecoins “do not engage in maturity and liquidity transformation — that is, using short-term deposits to make long-term loans and investments.” This makes them inherently safer than traditional banks. As she later told Cointelegraph:“The superpower of [traditional] banks is that they can take deposit funding and not just invest in short-term liquid assets. They can use that funding to make 30-year mortgages or to make credit card loans or investments in corporate debt. And that is risky.” It’s the reason traditional commercial banks are required to buy FDIC (i.e., deposit) insurance through premium assessments on their domestic deposits. But, if stablecoins limited their reserve assets to cash and genuine cash equivalents such as bank deposits and short-term U.S. government securities they arguably avoid the “run” risk and don’t need deposit insurance, she contends.There’s no question, however, that fear of a stablecoin run remains on the minds of U.S. financial authorities. It was flagged in the PWG report and again in FSOC’s 2021 annual report in December:“If stablecoin issuers do not honor a request to redeem a stablecoin, or if users lose confidence in a stablecoin issuer’s ability to honor such a request, runs on the arrangement could occur that may result in harm to users and the broader financial system.”“We can’t have a run on deposits,” commented Landy. Banks are already regulated and don’t have issues with liquidity, reserves, capital requirements, etc. All that’s been dealt with. But, that’s still not the case with stablecoins.“I think there are positives and negatives if stablecoin issuers are required to be insured depository institutions (IDI),” said Banaei, adding: “For example, an IDI could issue FDIC-protected stablecoin wallets. On the other hand, fintech innovators would then be compelled to work with IDIs, making IDIs and their regulators effectively the gatekeepers for innovation in stablecoins and related services.”Grey thinks a deposit insurance requirement is coming. “The [Biden] Administration seems to be adopting that view,” and it’s gaining traction overseas: Japan and Bank of England both appear to be leaning in this direction. Those authorities recognize that “It’s not just about credit risk,” he told Cointelegraph. There are operational risks, too. Stablecoins are just so much computer code, subject to bugs and the technology might fail, he told Cointelegraph. Regulators don’t want consumers to be hurt.What’s coming next?Looking ahead, Grey foresees a series of convergences in the stablecoin ecosystem. Central bank digital currencies, or CBDCs, many of which appear close to roll-out, will have a two-tier architecture and the retail tier will look like a stablecoin, he suggests. That’s one convergence. Second, some stablecoin issuers like Circle will acquire federal bank licenses and eventually look like hi-tech banks; differences between legacy banks and fintechs will narrow. Landy, too, agreed that bank-like regulation of stablecoins would likely “force non-banks to become banks or partner with banks.” The third possible convergence is a semantic one. As legacy banks and crypto enterprises move closer, traditional banks could adopt some of the language of the cryptoverse. They may no longer speak about deposits — but rather stablecoin staking, for instance. Landy is more skeptical on this point. “The word ‘stablecoin’ is hated in the regulatory community,” he told Cointelegraph and might be jettisoned if and when stablecoins come under U.S. government regulators. Why? The very name suggests something that stablecoins are not. These fiat-pegged digital coins are anything but “stable” in the view of regulators. Calling them such could mislead consumers. DeFi, algorithmic stablecoins and other issuesAdditional matters need to be sorted out too. “There is still a big issue of how stablecoins are being used in DeFi,” said Massari, though “banning stablecoins is not going to stop DeFi.” And, then there is the issue of algorithmic stablecoins — stablecoins that aren’t backed by fiat currencies or commodities but rather rely on complex algorithms to keep their prices stable. What do regulators do with them? In Grey’s view, algorithmic stablecoins are “more risky” than fiat-backed stablecoins, but the government failed to deal with this topic in its PWG report, perhaps because algorithmic stablecoins still aren’t widely held. Overall, isn’t there a danger here of too much regulation — a worry that regulators might go too far in reining in this new and evolving technology? “I think there is a risk of overregulation,” said Banaei, particularly given that China appears close to launching its CBDC, “and the digital Yuan has the potential to be a globally scalable payments network that could take significant market share over payments networks coming under the reach of U.S. policymakers.”The U.S. and other aligned regulators should be cautious in how they proceed on stablecoins and make sure that they do not stamp out room for innovators to innovate due to an overemphasis on competing priorities, added Banaei: “Fostering innovation is our killer app and we should be careful to keep it going with digital assets.”

The cryptocurrency and blockchain industry experienced explosive growth in 2021, particularly in its decentralized finance (DeFi) and nonfungible token (NFT) sectors. The year was also marked by continued price volatility, baffling behavior from China, a grand experiment in Central America, escalating institutional interest, and the rise of some faster smart-contract networks — all of which is reflected in this year’s list of industry “winners and losers.”Winners in 2021KazakhstanWhen China effectively banned Bitcoin (BTC) mining operations in May 2021, Kazakhstan rushed in to fill the vacuum, pitching displaced miners and others on its cheap and plentiful coal supply. Many set up operations in the Central Asian country, including a top-five crypto mining pool operated by BIT Mining. By July 2021, Kazakhstan’s average monthly hash rate share stood at 18.1% — that is, it accounted for nearly a fifth of the world’s Bitcoin mining output, second only to the United States (42.7%), and a stunning increase from only 1.4% in September 2019, according to the Cambridge Centre for Alternative Finance.Whether Kazakhstan will maintain its global share of BTC mining in 2022, given reports of widespread power shortages in the country as winter approaches remains to be seen.CoinbaseCoinbase Global, the largest cryptocurrency exchange in the U.S., became the first crypto company to list on a U.S. stock exchange when it debuted on April 14 on Nasdaq. It closed that day at $328.28 with a market capitalization of $86 billion, a stunning launch that invited comparisons with Facebook’s and Airbnb’s initial public offerings. Its share price came back to earth by year’s end, however, standing at $243.35 on Dec. 18, with a still-strong market cap of $52.37 billion.Coinbase’s listing was widely viewed as another sign that crypto had gone mainstream, with more public offerings to come. “Coinbase will be the torchbearer for the whole blockchain community in the public market,” Kavita Gupta, founding managing partner at Delta Growth Fund, told Cointelegraph.SolanaA tide of new smart contract-enabled networks emerged on the scene in 2021. The largest and fastest-growing among them was Solana, a super quick proof-of-stake network that claims to have clocked 50,000 transactions per second (TPS). By comparison, Ethereum does about 30 TPS. “No project — maybe in crypto’s history — has gotten hotter, faster than Solana in 2021,” wrote Messari’s Ryan Selkis. The open-source blockchain hosts a growing number of NFT and DeFi projects, although it was subject to several distributed denial-of-service attacks through 2021. Solona’s (SOL) native cryptocurrency comfortably ranks fifth among all coins as of Dec. 20, according to Cointelegraph Markets Pro, trailing only BTC, Ether (ETH), Binance Coin (BNB) and Tether (USDT).Nayib Bukele/El SalvadorEl Salvador made history in 2021 — becoming the first country to declare Bitcoin (BTC) legal tender. The country’s dynamic president, Nayib Bukele, captivated the crypto world with his doings: harnessing energy from a volcano to power his country’s BTC mining operations, air-dropping $30 of BTC to every adult in the country, and, in late November, announcing the launch of Bitcoin City, a fully functional city built around Bitcoin, funded initially by $1 billion Bitcoin bonds. Only time will tell whether all this amounts to a clear economic “win” for El Salvador’s people, but Bukele arguably, through buying the dips, brought some 21st-century innovation and luster to a poor Central American land whose economy is heavily dependent on remittances — i.e., money sent home by foreign workers.Mike Winkelmann, aka BeepleWhen art house Christie’s put up for auction in February a digital collage — the first major auction house to offer a purely digital work with a unique NFT — it didn’t even attach a price. No one knew how to value it. The work “Everydays: The First 5000 Days” by Mike Winkelmann (aka Beeple) sold for $69.3 million, and the art industry may never be the same. Related: NFT ‘art revolution’: Beeple on his 5,040-day labor of love, Cointelegraph MagazineTo put this into context: The work fetched more at auction than pieces by Georges Seurat, Paul Gaugain or Salvador Dalí, and catapulted the relatively obscure Beeple into the company of the world’s highest-earning contemporary artists, such as David Hockney and Jeff Koons. It also sent notice to those outside the cryptoverse that nonfungible tokens would be a force with which to be reckoned. Sales of NFTs skyrocketed through 2021, and in late November, “NFT” was declared “word of the year” by dictionary publisher Collins. AvalancheAvalanche was another speedy smart contract network that shot into the top 10 in 2021. “Solana and Avalanche are the new stars” among DeFi multichains, declared CoinGecko, with 6% and 2% total value locked (TVL), respectively, in the third quarter. (Avalanche hosts the Aave DeFi protocol.) Those TVL gains came at the expense of Ethereum, which held virtually all DeFi TVL at the year’s beginning (99%). Its share was 76% at the end of the third quarter by comparison.Avalanche’s native currency, AVAX, is ranked 10th in market value in late December at $27.3 billion, which is buoyed arguably by its deal with Deloitte to support the consulting firm’s work with the U.S.’s Federal Emergency Management Agency.Sam Bankman-Fried/FTXIn 2021, Sam Bankman-Fried was declared “the richest person in crypto” largely on the strength of his ownership stake in FTX, the cryptocurrency derivatives exchange, which he founded in 2019. By the end of 2021, FTX had become the second-largest crypto derivatives exchange, according to CoinGecko, trailing only Binance (Futures). Messari called FTX “the fastest-growing company of all time,” noting that Bankman-Fried had built a $25-billion enterprise in less than three years with fewer than 100 employees.FTX closed a $900-million funding round in July that valued the exchange at $18 billion, up from $1.2 billion earlier, with participation from SoftBank, Sequoia Capital, Coinbase Ventures, Multicoin, VanEck and the Paul Tudor Jones family, among others. In June, FTX acquired the long-term naming rights to the Miami Heat’s NBA basketball arena. OpenSeaThe NFT phenomenon has been a boon for digital artists who can sell their works without agents and physical art galleries, but they still need digital marketplaces. OpenSea, a first mover in the NFT art sector and the leading marketplace, emerged as one of the year’s biggest winners. OpenSea takes a relatively modest 2.5% commission for each sale on its platform, but this yielded a substantial $79 million in revenue in August, its peak month in 2021, according to Cointelegraph consulting. Through part of November, revenues exceeded $235 million YTD. Come December, not much had changed: “The world’s dominant NFT marketplace is raking in cash hand over fist,” said Messari.ProShares ETFA barrier of sorts was surmounted in mid-October with the launch of the first Bitcoin exchange-traded fund (ETF) sanctioned by the United States Securities and Exchange Commission. The ProShares Bitcoin Strategy ETF (BITO) made a dramatic debut on the New York Stock Exchange as the second-most heavily traded opening-day fund on record, with some calling it “a watershed moment for the crypto industry.”Its launch ended eight years of futility on the part of U.S. fund issuers — a Winkelvoss ETF was the first to be rejected by the SEC back in 2013 — but some were nevertheless disappointed that the breakthrough fund was a futures-based ETF and didn’t track the price of Bitcoin (BTC) directly. The SEC apparently preferred to have two layers of regulatory protection — i.e., supervision by both the Commodity Futures Trading Commission and the SEC — and this was further confirmed several weeks later when the SEC rejected VanEck’s application for a spot-market ETF.Losers in 2021ChinaChina controlled two-thirds (67%) of the world’s crypto mining production as recently as September 2020, but in May, it banned mining operations for reasons no one really knows, but it perhaps was related to a need to protect its own central bank digital currency (CBDC), which appears close to its full roll-out. In any event, Bitcoin’s hash rate immediately dropped 50%, which roiled markets for a bit. Other nations quickly picked up the mining slack, however, including the U.S., Kazakhstan, Russia and Canada. In retrospect, many viewed China’s action as a gift to the West. “Today the [Bitcoin] network is more decentralized than ever and price has risen 50%,” said analyst Willy Woo. Meta (Diem)Facebook’s Libra stablecoin venture (now Diem) was announced in 2019 with great fanfare and a blue-chip roster of partners, but the project was continuously delayed and its scope reduced. Today, one doesn’t hear too much about Diem except perhaps with regard to departures — e.g., Dante Disparte left for Circle, while more recently, David Marcus, head of cryptocurrency activities, said he would leave the company by year’s end. Facebook, rebranded as Meta, has been under fire from U.S. lawmakers for the “influence” it exerts over social media generally, and its stablecoin project, once slated to debut in early 2021, may have been collateral damage. There isn’t much clarity in any event. As The New York Times commented, “The Libra cryptocurrency was eventually rebranded Diem, while the company’s efforts at a crypto wallet were called Novi. The mishmash of names often has been confusing, even for company insiders.”Central Bank of NigeriaIn February, the Central Bank of Nigeria ordered all its local banks to shut down the accounts of customers using cryptocurrencies. The CBN’s governor said most crypto accounts were being used to fund “illegitimate” activities such as money laundering and financing terrorism.Nigeria is expected to soon launch a central bank digital currency, like China, so perhaps the CBN was following China’s playbook of clearing away all competing crypto operations in anticipation of its CBDC roll-out. If so, its effort failed dismally. Not only did crypto survive, but by August, Nigeria had the world’s second-largest market for peer-to-peer Bitcoin trading. Virgil GriffthThere was a time when Virgil Griffith was something of a cause celebre in the crypto world. The former Ethereum developer and U.S. citizen traveled to North Korea in early 2019 to attend a cryptocurrency conference. In November of that year, he was arrested in Los Angelos for violating U.S. sanctions law. “I don’t think what Virgil did gave DRPK any kind of real help in doing anything bad. He delivered a presentation based on publicly available info about open-source software,” declared Ethereum co-founder Vitalik Buterin around that time.In September 2021, just before his criminal trial was to begin, Griffith “pleaded guilty to conspiring to violate U.S. law by traveling to North Korea to give a presentation on how to use blockchain technology to launder money and evade sanctions,” the Wall Street Journal reported. He could face up to six-and-a-half years in prison as part of the plea deal. It was unclear what caused him to change his plea.Iron Finance (TITAN)Maybe it’s not such a good idea collateralizing a stablecoin — e.g., IRON — with another stablecoin in USD Coin (USDC) and an obscure governance token (TITAN). In this case, the result was what was described as “the world’s first large-scale crypto bank run” — specifically, a run on the Iron Finance protocol. The result: TITAN plummeted from a price of more than $60 to a few thousandths of a cent within a few hours in late June. CipherTrace later said the incident was the result of a design flaw: “Iron.Finance lacked a proper stabilizing mechanism.” But in the meantime, a number of investors were burned, among them Dallas Mavericks owner Mark Cuban, who called for regulation to determine “what a stablecoin is and what collateralization is acceptable.” Iron Finance (ICE) was trading at around $0.002 on Dec. 20.

Puerto Rico recently announced that it may be looking for a blockchain solution to fight government corruption, particularly after a Puerto Rican mayor pleaded guilty to accepting a cash bribe of more than $100,000. But could a distributed digital ledger really make an impact in the unincorporated United States territory’s struggle against public fraud and wrongdoing? It might if it were done in tandem with other public efforts, governance experts tell Cointelegraph. Puerto Rico could gain, too, by heeding lessons from other countries that implemented blockchain to fight corruption in recent years, including Georgia, India and Colombia, and it shouldn’t be reluctant to bring in outside help, though much of the key work should still be done by local agencies. Puerto Rico shouldn’t expect a quick technical fix. “We have a real credibility problem,” the Puerto Rican House Speaker told Bloomberg, and more transparency and accountability — the sort that blockchain technology potentially offers — “might be part of the solution.”Nir Kshetri, professor at the Bryan School of Business and Economics at the University of North Carolina at Greensboro, for one, thinks the Commonwealth official might be onto something. Blockchain technology can not only enhance anti-corruption efforts, but it can also be a game-changer, he told Cointelegraph.“Blockchain systems can keep a full audit trail of all activities and transactions that government officials have been engaged with,” Kshetri said, adding, “The immutability feature means that government officials cannot delete files. Any change will be noticed immediately by other participants connected on the blockchain network.”Others aren’t quite so certain but say that blockchain technology can keep the government clean if other conditions are right. “Blockchain can play a role in securing transactions and monitoring events, preventing fraud and corruption,” Per Aarvik, a researcher at the Chr. Michelsen Institute (CMI)/U4, told Cointelegraph, continuing, “but not without a regulatory framework as a foundation.”Puerto Rico risks adopting expensive systems that “may have a limited effect, unless a wide range of issues are addressed,” he added. Along these lines, “There are lessons to be learned from other highly digitized countries such as Estonia or Singapore” — as well as the former Soviet republic of Georgia. The technology can play a big role in the area of land titles, Jonas Hedman, professor at the Copenhagen Business School, told Cointelegraph, as has already been shown in Sweden, where such a program has been partially implemented, it also can have “a huge impact on procurement and elections. Imagine if an agency or state — like Puerto Rico, CIA, UN etc. — had an open ledger of all their spending?”Advice for Puerto RicoAsked about Puerto Rico’s plans to fight public corruption, Kshetri said the island territory needs to begin in the most corruption-prone areas. It will need to cross-validate the data that it receives before it is entered on the blockchain, and here it might be well served to use other emerging technologies, such as artificial intelligence, machine learning and remote sensing technology rather than relying on government officials.Reforms should expect to face resistance, too, from actors who are currently benefiting from the status quo, both within and outside government. Involving outside parties — as with Colombia’s school meal procurement program — can enhance informal accountability. That said, “Puerto Rico should not rely too much on foreign companies to implement blockchain to fight corruption,” Kshetri told Cointelegraph. “It should develop local blockchain manpower” — as what happened in India’s Andhra Pradesh state. “Local blockchain companies are more effective in providing low-cost solutions suitable for local needs.”Georgia gets creativeGeorgia is often cited as an instance where a blockchain has been used to secure a government registry, “but the story did not start with blockchain,” Aarvik told Cointelegraph. “The country had radically reformed the whole public sector before blockchain was introduced.”This included carefully studying its corruption problem and then applying sometimes creative solutions, including moving some borderline practices into the legal sphere. “For example, most people were paying a bribe to obtain a passport or any other document that they needed urgently and were not ready to wait for,” according to Tamara Kovziridze, former chief adviser to Georgia’s prime minister. “Today, an international passport can be obtained within a day if a higher fee is paid.”When blockchain firm Bitfury introduced its Exonum blockchain-as-a-service solution into the country to secure land titles, Georgia already had a working land-registry system, said Aarvik, adding that technical solutions can’t exist in isolation. Certain pre-conditions must be met. Or as Kovziridze told CMI: “The rule-of-thumb is that if elites remain corrupt, no country can really defeat corruption.”Aarvik has this message for Puerto Rico: Blockchain experts hired to discuss solutions with governments may be tech experts or digital fintech specialists, but they may not necessarily be designers of sound governance systems. Unless the reform design “includes the full range of competencies from law, social science, economics and tech, I don’t believe the project will yield the expected results.”Kshetri agreed that land registration is an area where distributed ledger technology can make a difference, citing a promising blockchain-based pilot program in India’s Andhra Pradesh state. “Bribery in land administration is rampant in India,” he told Cointelegraph. A typical land record on the blockchain has 58 attributes, “such as unique ID, plot code, geo-coordinates, survey number, boundary information — e.g., information about neighboring plots, location in relations to roads or other landmarks— classification of land as well as dynamic attributes that are subject to change, such as owner and mortgage information.”But what’s critical is that it also introduces a system of checks and balances. Kshetri added:“A blockchain-based system in which many agencies act as nodes or validators of transactions could serve as a counterbalance for one another to assure that no agency can manipulate the system without being noticed by others.” The “validators” in the state’s land records include its revenue department, the chief commissioner of its land administration department and other officials. “If any node tries to change the record, the landowner will receive a text message. The immutability feature means that data cannot be deleted.”Colombia cracks down on crooked contractors In Colombia, crooked contractors were inflating bills for school meals, selling chicken breasts to the government for more than four times their cost in supermarkets and, sometimes, not delivering purchased goods at all, Kshetri told Cointelegraph, so the government teamed up with the World Economic Forum and the Inter-American Development Bank to implement a public blockchain procurement program to track the supplier selection process in the city of Medellín. This required a tenderer to publicly commit to contract terms and selection criteria prior to eliciting bids, explained Kshetri, saying, “Risks such as tailoring selection criteria after the request for proposal is published to favor specific contractors are eliminated.” Because the vendors are competing, “a blockchain-based solution’s permanent and tamper-proof bid records can ensure that a firm cannot alter submitted bids after learning new information about competing bids,” Kshetri explained. Adding other technologiesIn the fight against public wrongdoing, blockchain technology can be paired effectively with other emerging technologies, too. “In the cobalt supply chain, there is a concern that blockchain systems can be corrupted if the government agents whose role is to tag bags collude with smugglers and enter incorrect data,” Kshetri reported, but the implementation of artificial intelligence and drones can be used to cross-verify the data. Traceability-as-a-service provider Circulor, for example, has developed solutions on blockchain and AI in the cobalt sector. When miners enter supply chain data, their identities are confirmed with facial recognition software. Related: US infrastructure law could brace up digital assets — but first some fixesAll in all, blockchain technology can be an effective means to fight government malfeasance as it introduces more “transparency into governmental spending,” which makes corruption more difficult to commit, as Hedman noted. But it can’t work in isolation, and it won’t work if a government is corrupt at the top. The Georgia experiment was successful, according to Kovziridze, because “the top leadership was non-corrupt.”A holistic approach to combating public corruption is key, “rather than technological quick fixes,” added Aarvik. But to streamline processes, increase public self-service and omit previous corruption-prone processes, digitalization, including blockchain technology, “is absolutely a powerful tool,” he told Cointelegraph.