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Could Denmark's Blockchain Proposal Work?

08 October 2020 16:00, UTC
Denis Goncharenko

Denmark is widely considered the least corrupt country in the world. According to the Corruption Perception Index which is done annually by Transparency International, the main reason for this is the high levels of trust in Danish society. Besides, there is a high degree of press freedom, access to information, and standards of integrity for public officials in Denmark which also plays an important role in low rates of corruption. However, it doesn’t mean that occasionally Denmark isn’t hit by corruption scandals, especially in politics. But the current situation is stable and they continue to implement new ideas in the fight against corruption.

Recently, the Ministry of Foreign Affairs of Denmark has released a new report which suggests that focusing on digital instruments has become essential. Particularly, he believes that IT technologies and services, such as blockchain, big data, and e-governance can prevent administrative, day-to-day, or political corruption. The report was launched during the International Anti-Corruption Conference (IACC).

However, it’s not necessarily known how well this could work as it's quite hard to implement such a structure from scratch. It could just mean that the access to different files or transactions will be recorded on the blockchain, but that's pretty much a violation of blockchain's principles of absolute anonymity. This will cause dissatisfaction with the blockchain users as it’s widely perceived to be anonymous and immune to data protection laws. But Denmark has its reasons.

Why did Denmark propose using blockchain?

Another reason why Denmark decided to use blockchain to fight corruption could be to weed out illegal crypto transactions in the country. They can be trying to protect vulnerable people and increase security. While they have no guarantee that this idea will work, there are examples of similar ideas in other countries as well.

For instance, the same idea was being discussed in neighboring Norway when statistics on how much free money offers for Norwegians were being listed every month on local iGaming platforms. Many of these offers were in BTC to hide the transactions as the country only allows 2 government-owned companies to offer these services. The reason why Denmark proposed that they use the blockchain technology in order to fight against the corruption in the country could be that Denmark is also hoping for a similar effect of just preventing the illegal use of blockchain with blockchain.

How will the blockchain be used?

06-12-2019 15:57:22  |   Regulation
It’s a commonly known fact that the blockchain can store records immutably and transparently. It provides everyone equal access to the data which is stored in the ledger which is important for claiming your rights over aid, land, and money without any kind of involvement of a third party. Also, blockchain reduces the need for banks, accountants, and other official institutions and actions such as registration of births and deaths, vehicle registration, and so on.

The Danish government believes that new digital tools can help them achieve land ownership and transparency regarding the distribution of finance, which is important to reduce corruption. Blockchain technology will effectively solve problems of sharing resources without any formal identities and bank accounts. Besides, the blockchain can easily be used by the public sector to detect all activities and protect records and certificates from alterations.

However, it’s important to pay attention to the fact that it’s impossible to delete data that was once entered into a blockchain which means problems solved by the technology will depend on the quality of the data into the blockchain and incorrect data can have a negative impact and cause bad consequences for an individual.

As the Minister for development cooperation, Ulla Tornaes said, digital technologies can be important tools for fighting against corruption but implementing this new strategy is still a dilemma as it opposes huge risks as well. But they believe that the possibilities will exceed the disadvantages and Blockchain will open new ways for anonymous reporting.

Interestingly, special attention was given to some gender issues. Minister mentioned at the conference that the ways men and women are affected in opposing digitalization in the fight against corruption are different. The reason for this difference is that most women in developing countries are not allowed to access technologies, while in general, men do not face such restrictions. Minister is concerned that with the use of blockchain technology, this division between men and women will become more apparent.

26-08-2020 16:46:54  |   News
Denmark isn’t the first country that wants to implement the strategy of blockchain as an anti-corruption tool. For example, recently China decided to use blockchain to control its judges and police officials more effectively, increase domestic security, and reduce corruption. This way identification of procedural violations in trials and investigations will be easier and the government will be able to check the deviations in verdicts and sentences of the judges.

Blockchain as an anti-corruption tool

Blockchain is often considered as an effective method to fight against corruption which is why Denmark's announcement wasn’t a surprise. Blockchain usually attracts the attention of development organizations and anti-corruption communities because it has the ability to protect public offices from fraud. Although it can be a risky strategy, its effectiveness largely depends on contextual elements, such as legal systems, infrastructures,, and socio-political settings of the country. But it has so many advantages, like protecting identity, transparency, and private information which is important for increasing trust in institutions. However, because of the associated risks, digital infrastructure, strict regulations, and digital literacy is important, especially in developing countries, before using blockchain technology against corruption. Besides, those who make decisions should understand the technology before deciding whether it’s worth using it or not.

Finally, what we can say is that using blockchain technology poses a great threat to Denmark and may worsen the situation if not used properly, but estimating current risks and making reasonable decisions may help the government in its effective implementation in the fight against corruption.

Image courtesy of Bitcoin Exchange Guide