The power of blockchain technology is so deep that it can simplify complex tasks and enhance transparency to solve many of the problems that have beset economic systems. The UAE has better understood the technology’s profound implications for public data repository and digital security of national documents.
In January, the Fourth Industrial Revolution UAE, Dubai Future Foundation and the World Economic Forum released a joint report titled Inclusive Deployment of Blockchain: Case Studies and Learning from the United Arab Emirates to explore the potential impact of using blockchain. The report conducted a study on more than 100 stakeholders from over 60 governmental and non-governmental entities who are already using the technology in some form. The findings showed that 80 percent of public sector entities firmly believe in implementing an applicable blockchain solution during early phase.
At the peak of blockchain’s popularity, the UAE government launched the Emirates Blockchain Strategy 2021 to digitise 50 percent of government transactions and facilitate the documentation process at the time and place of convenience for customers. Arif Amiri, CEO of DIFC Authority, told International Finance, “The UAE’s Blockchain Strategy 2021 relates to getting government transactions on blockchain platforms.”
The strategy is intended to change the way data is collected, stored and accessed—eventually reducing operational costs and time consumption. In short, the UAE government expects to save Dh11 billion in frequent transactions and documents processes, in addition to 398 million printed documents and 77 million work hours annually. This points to the next advancement which was the establishment of a KYC blockchain platform to fasten documentation processes and share verified data about customers.
KYC blockchain is a boost to public and private sectors
DIFC formed an alliance under a tripartite agreement with Mashreq Bank and Norbloc to develop the region’s first blockchain KYC data sharing platform for businesses and corporations in Dubai. It is the backbone of the project having a “vision to drive the future of finance.”
Norbloc is an enterprise-grade blockchain-driven ecosystem and one of the participants in DIFC Fintech Hive’s inaugural 2018 programme, while Mashreq Bank is a long-term partner for Fintech Hive. “Although it was the first solution of its kind in the UAE, we had been looking at it for some time with our partners,” Amiri said.
According to Amiri, the consortium agreement governs KYC efforts between banks, government bodies, financial institutions and other licencing authorities that subscribe to the platform. In fact, the consortium provides a business framework that supports the requirements of registered companies, financial institutions and regulators, enabling secure, trusted and customer-controlled KYC data sharing—in line with the UAE Blockchain Strategy. Already 80 percent of public and private sector entities in the country are using blockchain. In fact, “the consortium’s efforts go beyond government entities and help private companies accelerate their adoption of blockchain,” he added.
Enhances ease of doing business and FDI
In fact the creation of KYC blockchain has the potential to support companies and banks organise their operational structures. If companies start using the blockchain platform it will enable them to digitally build a single KYC record authenticated with electronic ID for simultaneously sharing it with other financial institutions.
Amiri said that the platform will be “making it faster and more efficient for them to get up and running. Sharing data through blockchain will enhance the quality and integrity of corporate KYC information, reduce the cost of data verification and simplify the customer experience.”
In practice, the blockchain platform will speed up the process time in acquiring a bank account number for newly registered companies and lower the cost of managing KYC data for registered companies. When companies consider opening in new locations, complexity of setting up procedures, including opening a corporate bank account is a major consideration. The shared KYC platform is the solution to speeding up the process of opening a bank account and reducing the cost of KYC—and even provides great advantages for organisations, particularly regarding redundancy, security and compliance.
Amiri made an interesting point that “companies that embrace the KYC platform contribute to market stability by preventing cyber-attacks and money laundering.” Moreover, the initiative provides financial institutions and businesses with a platform to undertake seamless operations, essential in attracting global and regional investor interest. KYC blockchain, theoretically, ensures “financial information remains transparent and secures the investor-organisation relationship which can give institutions and businesses better peace of mind,” he said.
It is credit positive for lenders
KYC blockchain is also credit positive for lenders in the UAE, observed Moody’s. The platform will ensure robust compliance and have legal implications if lenders do not comply with KYC regulations. On the bright side, it will help them to minimise regulatory oversights of banks in collection and management of KYC data and further provide enhanced data in credit risk management for client underwriting and debt collection.
Also, the consortium is anticipated to support profitability and franchises of the UAE banks by enhancing customer service on many levels. In Amiri’s view, it made perfect sense to launch the first-to-market blockchain solution in the country as “the UAE, Dubai and DIFC are always looking for ways to make it easier for people to do business here.”
DIFC pushes blockchain innovation to the forefront
“DIFC is prioritising the use of technology and innovation, including blockchain, across everything we do with clients,” Amiri said, further explaining that “we also provide a leading legal and regulatory framework that encourages companies to innovate, test and use blockchain technologies.”
Also, cooperation between Smart Dubai and the DIFC Courts have led to the world’s first ‘Court of the Blockchain’, he said. It uses blockchain to verify court judgments in jurisdictions beyond DIFC Courts.
“DIFC bodies also have memorandum of understanding in place reinforcing our dedication to embracing this key technology. This includes Tribe Accelerator, the first Singapore government supported blockchain accelerator. Blockchain technology will evolve over the next five to ten years. Our approach to it will also continue to evolve as part of our commitment to drive the future of finance,” Amiri concluded.