In March 2020, COVID-19 was declared by the World Health Organization to be a pandemic. Just over six months after that declaration, there have been almost 33 million cases of the disease worldwide and nearly 1 million deaths. While most of the stories from the pandemic involve its astronomical cost in terms of human life and suffering, the disease has also revealed a number of problems in our global economic infrastructure. A surprising number of these weaknesses might be addressed, or at least reduced, with blockchain technology.
As a result of COVID-19, businesses around the globe, including in the most economically advanced countries, have encountered supply issues that they were woefully unprepared to address. They could not collect and access important information rapidly enough to quickly deploy available resources to where they were needed most.
Blockchain tech and the pandemic
Blockchain-based solutions to the informational gaps and delays are already being put into place by a number of the largest global companies. Similarly, supply-side resiliency and adaptability are being improved with blockchain technology as well. Because blockchain technology is perhaps uniquely suited to validating, securing and transmitting data, it is ideal to resolve problems that have sometimes plagued multi-party transactions, particularly when those arrangements cross national borders.
In China alone, as many as 20 blockchain-based applications designed to address COVID-19 were launched in the first two weeks of February 2020. Those new applications included online screening to securely manage health records and a platform to support the proper management and allocation of relief supplies to areas hardest hit.
Many countries have used the technology to monitor and trace the activity of infected and exposed individuals. One such effort, reported in Barron’s, described the use of bracelets to enforce quarantine programs for foreign visitors entering the region.
In the United States, there are a wide number of ways in which blockchain technology might improve the national response to COVID-19 and to strengthen our economic ecosystem long term. For example, blockchain platforms can improve reliability, transparency and security of data, helping to resolve complaints that data has been manipulated or its accuracy compromised in other ways. It could help track the spread of the virus, providing consistent, accurate and essentially real-time information. It could aid in the tracking of effective medical responses. It could improve the management of healthcare insurance. It could be used to facilitate compliance with drug safety requirements when a vaccine is available for trials and distribution. It can also help with supply-side issues, particularly since many of the goods Americans are used to seeing on the shelves here originate in other countries.
Cryptocurrency and the pandemic
Crypto assets also have a role to play. The pandemic has raised increasing concerns about the extent to which governments and big businesses are using data collected as a result of an increased virtual presence of most individuals.
In the U.S., coin shortages focused attention on the costs and inefficiencies of conventional currency. Concern about the extent to which the virus might linger on the surface of conventional coins and bills has increased the push toward cashless transactions. Delays and fees associated with the transmission of conventional funds have also garnered increasing attention. The plight of the unbanked has also worsened. With an estimated 1.7 billion unbanked adults in the world, in times of economic difficulty, this can be a critical issue. Many of these issues could, at least theoretically, be addressed with crypto assets.
Various commentators have observed that the pandemic, and the international response to it, has markedly pushed the world toward an online ecosystem including digital financial transactions.
Consumers, increasingly adjusting to working from home, have been both forced and willing to deal with handling financial transactions electronically. Investment advisors and financial consultants are also adjusting to the “new normal” and recognizing the potential of online tools and resources, including digitized financial investments.
Many national governments and central banks have been turning their attention to centralized digital currencies. Another alternative that has been increasingly mentioned involves stablecoins backed by the U.S. dollar or the euro. Facebook’s Libra, with its scaled back plans to offer multiple options each backed by a local fiat currency, might be in a position to accelerate this process.
And what, you might ask, are U.S. regulators doing to support this kind of innovative technology? It depends very much on which agency is being considered. The Office of the Comptroller of the Currency released a letter in July 2020 clarifying rules that allow national banks and federal savings associations to provide customers with cryptocurrency custody services. According to Governor Lael Brainard of the Board of Governors of the Federal Reserve System, the Fed is actively seeking to remain on the frontier of research and development with regard to central bank digital currencies.
On the other hand, the Securities and Exchange Commission and Department of Justice continue to actively enforce the registration requirements of the federal securities laws in the crypto space. In addition to pursuing cases involving fraudulent offerings, cases like SEC v. Telegram and SEC v. Kik indicate an aggressive enforcement mentality for even legitimate deals that fail to comply with the often byzantine requirements of available exemptions from securities registration requirements.
SEC Commissioner Hester Peirce has, in fact, critiqued the SEC’s actions in these cases as likely to push crypto-entrepreneurs offshore or, as in the case of Telegram, to shut down potentially viable and valuable innovation completely.
The changing and challenging environment in which we find ourselves, partially as a result of the pandemic that has yet to cease impacting the global economic picture, means that there is every reason to encourage blockchain-based solutions to many of our current problems.
From concerns over voter fraud to problems with supply-side failures and lack of resiliency to increasing access to stable and secure financial transactions, blockchain and crypto assets have tremendous potential. Perhaps it is time for more of our regulators to focus on encouraging desirable innovation in the space instead of expanding their regulatory reach.
The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Carol Goforth is a university professor and the Clayton N. Little Professor of Law at the University of Arkansas (Fayetteville) School of Law.
The opinions expressed are the author’s alone and do not necessarily reflect the views of the University or its affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.