It is reasonable to believe the author, Nasser Saifi, knows what he is talking about because he is the former chief economist of the Dubai International Financial Centre, a former vice-governor of the Bank of Lebanon and a former economics and industry minister in that country.
This is not just some freelance winging it.
He says Dubai already has the first part of the system up and running when the Dubai Land Department became the world’s first government entity to adopt blockchain fully as of a few weeks ago.
It now records all real-estate contracts, including lease registrations and links them with the Dubai Electricity and Water Authority, the telecommunications system and various property-related bills.
When the rollout is completed and all its transactions are through blockchain and paperless, the Dubai government expects to save 25 million working hours annually.
The region’s regulators have tried not to get in the way of innovation. Those in the UAE and Dubai — ADGM and DIFC — are embracing fintech and its underlying technologies. ADGM’s Regulatory Laboratory (RegLab) is providing a light regulation sandbox environment for regional start-ups, one of the first programmes of its kind in the region. Both centres have held global competitions to identify and support innovators in fintech.
But perhaps most dramatically Dubai is also preparing to issue emCash as an official crypto-currency. This really would change things because issuing digital retail cash would effectively mean the demise of banking as we know it. Indeed, Saifi quotes a paper published by America’s National Bureau of Economic Research which says just that, albeit in the tortured prose of academics: “A sovereign digital currency could have profound implications for the banking system, narrowing the relationship between citizens and central banks and removing the need for the public to keep deposits in fractional reserve commercial banks.”
Blockchain’s data integrity should mean there will be much less systemic risk and everything should be much cheaper. Stock exchanges could operate at much lower costs or disappear, fraud would become near impossible, accounting, auditing and assurance services could become redundant. Imagine a world without accountants.
Commercial banks and stock exchanges could also become an extinct species within the next 20 years. Monetary policy would have to radically change as central banks would no longer be in control of it. The laws and regulations of banking, securities markets, credit markets and so forth will need to be radically overhauled to accommodate the shift in technologies.
Someone once said innovation either happens much faster than you imagine it will, or not at all. The point about what is happening in Dubai is what it says about the emerging technological landscape.
The question the City needs to ask is how it might respond if Dubai gets even halfway to where it intends to be, because where it goes others will surely follow. Even if Dubai does not get everything right, someone out there will.
In normal times the City might well relish the challenge, but these are not normal times.
Everyone is preoccupied with Brexit, and has no time for anything else. It is sucking up all the oxygen and dominating the agenda at the expense of many fundamentally more important and rewarding things which would be a far better use of energy.
There is a price to be paid for this misallocation of resources as with the parable of the two dogs fighting over a bone. So preoccupied were they fighting each other that they allowed a fox to sneak in and steal their lunch.
