MBIE consultation on influence of blockchain on productivity and wellbeing
The Ministry of Business, Innovation & Employment (MBIE) has this month opened for public consultation a draft Long-term Insights Briefing entitled The future of business for Aotearoa New Zealand: An exploration of two trends influencing productivity and wellbeing – purpose-led business and use of blockchain technology
In the draft consultation document, which is based on feedback from its Phase 1 industry consultation in July 2021, MBIE identifies blockchain as an emerging technology with the potential to revolutionise the way business in New Zealand is conducted in the next ten years and beyond. Specifically, MBIE is of the view that, within the New Zealand context, blockchain technology is likely to develop to:
- become an integral part of how New Zealand conducts business;
- converge with other technologies such as artificial intelligence and internet of things;
- promote increased used of network-based organisational forms such as decentralised autonomous organisations (DAOs) in both business and in social enterprise;
- be increasingly used by and for Māori.
Blockchain (also known as “distributed ledger technology”) is way of recording, verifying and maintaining data on a decentralised network, where the data are immutably recorded and stored in blocks of information, each cryptographically linked to the previous block and maintained by consensus of the nodes on the network. It is perhaps most famously known for being the technology that underpins cryptocurrencies such as bitcoin, but is increasingly being used in a multitude of applications both online and in the real world.
MBIE has chosen to explore blockchain as part of this consultation because they can see how, despite its relative infancy as a technology, it is an “agent for change” that is already starting to transform the way enterprises in New Zealand and overseas use data and transact. The consultation assumes that both government and business approaches to and use of blockchain will develop and become more widely adopted over time as the number of use cases increases.
At the same time, MBIE acknowledges that care should be taken to ensure that the slow uptake of advanced digital technologies in New Zealand does not act as a barrier for businesses looking to interact with the global market. It is hoped that by analysing some of these “early signals”, MBIE can deliver longer-term on the three pillars of the Government’s Digital Strategy for Aotearoa, namely mahi tika (trust), mahi tahi (inclusion) and mahi ake (growth)).
Of particular interest in the consultation paper is its examination of two related applications, namely:
- non-fungible tokens (NFTs) – NFTs first gained fame for their ability to represent unique ownership of lo-fi digital art (think Crypto Kitties and CryptoPunks), however their potential use cases (both for businesses and individuals) are far broader than this. NFTs, particularly when combined with “smart contracts” (self-executing contracts on the Ethereum blockchain), can in theory be used to optimise efficiency and simplicity of transactions involving any digital or real world asset including real estate transactions, identity verification, supply chains and more. We are already seeing this among our New Zealand client base as they look to tokenise assets ranging from property to contractual revenue streams and beyond.
- DAOs – DAOs are a new organisational form. Unlike a traditional company, where the board of directors is the executive arm separate and distinct from its shareholders, decision-making in the DAO context is reached by the tokenholders according to rules set and enforced by smart contracts. In theory this could allow more “liquid governance”, not only dispensing with a centralised board of directors but also allowing decisions to be made by tokenholders in real-time with less need for audit (because unauthorised actions cannot take place). DAOs are already used in many jurisdictions, and MBIE anticipates that they will become prevalent in New Zealand both as stand-alone business forms and integrated with current business operations. But before this can happen the legal status of DAOs will need to be clarified – in many countries (including in New Zealand) they currently have no separate legal status, effectively being treated as a general partnership. However, other jurisdictions are moving to allow formal recognition of DAOs – the state of Wyoming, USA permit DAOs to be registered LLCs, while the Australian Government responded to the 2021 Bragg Report by agreeing in principle to create a new limited liability legal entity for DAOs.
The consultation paper asks the public to answer the following questions:
- Are there any other aspects to the current development and use of blockchain that you are aware of?
- What else do you think may be probable or possible about future developments in the use of blockchain? Are there other opportunities or implications?
- What approaches should or could Aotearoa New Zealand take with blockchain to manage risks and enable opportunities?
It is no coincidence that the blockchain element of the consultation is interlinked with MBIE’s goal of strengthening productivity and wellbeing in New Zealand. MBIE recognises that, when harnessed correctly, the qualities inherent in blockchain (decentralisation, immutability, transparency, use of encryption etc.) will give rise to efficiencies in networks, systems and business, fewer mistakes, less fraud and faster processes. They will also empower community-led solutions, and lead to reduced inequality, data sovereignty and increased citizen/consumer trust and confidence, among others.
We will be making a submission in response to the consultation paper and strongly encourage any business which either has used or is contemplating using blockchain, NFTs or a DAO to:
- Read the consultation paper – if nothing else, it is a useful primer for those new to blockchain of the past (pae mahara), present (pae herenga) and future (pae tawhiti) state of the technology both in New Zealand and overseas; and
- Have their say by emailing LTIB@mbie.govt.nz before the public consultation closes at 5:00 pm on 24 June 2022.
Want to know more?
In the meantime if you have any questions about the legal issues surrounding the use of blockchain, NFTs or DAOs in your business, or the tokenisation of assets (whether natively digital or real-world), please contact our specialist Technology & Digital team.
PDF version: here.