Disintermediation Economics

Eva Kaili · Dimitrios Psarrakis

Editors

Disintermediation
Economics
The Impact of Blockchain on Markets
and Policies
Editors
Eva Kaili Dimitrios Psarrakis
European Parliament European Parliament
Bruxelles, Belgium Bruxelles, Belgium

ISBN 978-3-030-65780-2 ISBN 978-3-030-65781-9 (eBook)

https://doi.org/10.1007/978-3-030-65781-9

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 Contents

1 Disintermediation Economics: An Introduction 1

Dimitrios Psarrakis

Part I Disintermediation in Microeconomics

2 Blockchain as an Economic Optimization Problem:
Value, the Firm and the Limits of Decentralization 17
Dimitrios Psarrakis
3 Economics of Smart Contracts: Efficiency and Legal
Challenges 33
Guenther Dobrauz-Saldapenna and Mark A. Schrackmann
4 Corporate Strategies for Blockchain-Based Solutions 47
Hans Verheggen
5 Distributed Data Economics 69
David Shrier

Part II Disintermediation in Macroeconomics and Finance

6 Blockchain for Growth: Applying DLTs to the UN
Sustainable Development Goals 93
Jane Thomason

v
vi Contents

7 The New Money: The Utility of Cryptocurrencies

and the Need for a New Monetary Policy 111
David Lee Kuo Chuen and Ernie Teo
8 Privately Issued Digital Currencies 173
Dante Alighieri Disparte
9 Crypto-Assets, Distributed Ledger Technologies
and Disintermediation in Finance: Overcoming
Impediments to Scaling: A View from the EU 193
Elisabeth Noble
10 Crypto-Assets and Disintermediation in Finance: A View
from Asia 215
Syren Johnstone

Part III Disintermediation in Political Economy and

Regulation
11 The Political Economy of the Blockchain 249
Pēteris Zilgalvis
12 Regulating Blockchain in the EU: Building a Global
Competitive Advantage 267
Eva Kaili
13 Advancing Digital Transformation in the Public Sector
with Blockchain: A View from the European Union 281
Emanuele Baldacci and Joao Rodrigues Frade
14 Disposable Identities? Why Digital Identity Matters
to Blockchain Disintermediation and for Society 297
Loretta Anania, Gaëlle Le Gars, and Rob van Kranenburg

Conclusion 329
Index 333
 Notes on Contributors

Loretta Anania works at the European Commission, DG Communication

Networks Content & Technologies, Next Generation Internet unit. With a
B.A. from Sussex University and a Ph.D. from MIT she worked in universi-
ties, as a journalist and a telecommunication consultant, while at the MIT
Media Lab. She has published on internet policy (access pricing, broad-
band convergence, multimodal interfaces, social media & search computing).
Twice elected Chairman of the Board of the International Telecommunica-
tions Society (www.its-world.org) Dr. Anania serves on the Board of QoMEX
(www.qomex.org). She managed over 200 European Union R&D projects
and is a panel speaker with a passion for social innovation and SDGs.
Emanuele Baldacci is the Director of Digital Services at the European
Commission’s Directorate-General for Informatics. From May 2015 to
February 2018 he was the Director of Methodology, IT and Corporate Statis-
tical Services at Eurostat, the statistical office of the European Union. From
October 2011 to April 2015 he was the Head of the Integration, Quality
and Research Department of the Italian Statistical Office. Before that, he
was a deputy division chief at the International Monetary Fund, a senior
economist at the World Bank and also served as chief economist at SACE,
Italy’s largest trade finance group. He has a Ph.D. in Demography from the
Universities of Rome, Florence and Padua; he is the author of several scien-
tific publications on fiscal sustainability, macroeconomic risk in advanced

vii
viii Notes on Contributors

and emerging economies, population ageing and social protection and official
statistics modernization.
David Lee Kuo Chuen is a Professor at the Singapore University of Social
Sciences and Shanghai University of Finance and Economics. He is also an
Adjunct Professor at the National University of Singapore. His other appoint-
ments are the Chairman of Global Fintech Institute, Vice President of the
Economic Society of Singapore and Council Member of British Blockchain
Association. As a Fulbright Scholar at Stanford University in 2015, he started
researching, mentoring and investing in inclusive blockchain projects. He
devotes his time to learning and sharing his knowledge on inclusive FinTech,
and publish books and articles on AI, Blockchain, quantum computing
and other emerging technology. He has 20 years of experience as CEOs
and Independent Directors of companies involved in FinTech, Manufac-
turing, Fund Management and Real Estate Development. He holds edito-
rial positions for Journal of FinTech and Journal of British Blockchain Asso-
ciation among others. His latest publications include The Handbook of
Digital Currency, the Handbooks of Blockchain, Inclusive FinTech, AI and
Quantum Computing, and Artificial Intelligence, Data and Blockchain in a
Digital Economy by Elsevier and World Scientific. He is also a consultant to
UNDP and ADB on blockchain, FinTech and CBDC.
Dante Alighieri Disparte Disparte is the Chief Strategy Officer and Head
of Global Policy for Circle, a leading digital financial services firm building
the most trusted treasury and payments infrastructure for the internet,
including the fastest growing dollar digital currency, USDC. Prior to joining
Circle, Dante served as a founding executive of the Diem (Libra) Associa-
tion, leading public policy, communications, membership, and social impact.
He has two decades of experience as an entrepreneur, business leader and
global risk expert, most recently as founder and CEO of Risk Cooperative,
a strategic risk advisory and insurance brokerage based in Washington, D.C.
Dante also serves as an appointee on the Federal Emergency Management
Agency’s (FEMA) National Advisory Council, the United States’ federal emer-
gency response agency. He is also a member of the World Economic Forum’s
Digital Currency Governance Consortium. Dante is a frequent speaker and
commentator on business and political issues shaping the world. His views
on risk, economic competitiveness and security issues are regularly featured
in leading media and publications, such as Harvard Business Review, BBC,
Forbes, and Diplomatic Courier, where Dante serves on the editorial advi-
sory board. Dante is a graduate of Harvard Business School and holds an
MSc. in Risk Management from the NYU Stern School of Business and a
 Notes on Contributors ix

B.A. in International and Intercultural Studies from Goucher College, where

he received the highest alumni recognition for public service. He is the co-
author of “Global Risk Agility and Decision Making” (Macmillan, 2016) and
was recognized as one of the 40 leaders under 40 by the Washington Business
Journal and in the inaugural Powermeter 100 list.
Guenther Dobrauz-Saldapenna is a Partner with PwC in Zurich, Leader of
PwC Legal Switzerland, a member of PwC’s Global Legal Leadership Team
directing the firm’s global legal practice in 90+ countries and the firm’s Global
Financial Services Legal Leader. Guenther specializes in supporting the struc-
turing, authorization and ongoing lifecycle management of financial interme-
diaries and their products. In addition he is focused on the implementation
of large scale regulatory change and compliance alignment projects at Swiss
and international financial institutions with particular focus on EU and Swiss
regulations. Guenther is also the trusted advisor to several governments, inter-
national organisations and supervisory authorities on creating new regulatory
frameworks. His passion as a practicing tech-enthusiast since 2002 is innova-
tion linked to Exponential Technologies with a particular focus on achieving
decentralization and he has also been working to promote sustainability since
2010 where he advocates a system-wide change towards a circular economy.
Guenther is the author of eight books on innovation and the European, Swiss
and Liechtenstein legal regulatory framework as well as of 100+ publications
in international expert magazines. He received his Masters and Ph.D. degrees
in law from Johannes Kepler University (Linz, Austria). Guenther also holds
an M.B.A. from the University of Strathclyde Graduate School of Business
(Glasgow, UK).
Joao Rodrigues Frade is a Head of Sector at the European Commission’s
Directorate-General for Informatics specializing in reusable solutions. Joao
has extensive experience in managing complex projects including the key
governance-aspects of highly distributed IT systems. In the last 18 years, Joao
participated in the development, implementation, deployment and evolution
of the most important large-scale distributed Trans-European Systems of the
European Union. Joao holds a bachelor’s degree in Economics, a master’s
degree in Information Systems and Technology Management and several
Certifications including blockchain strategy and innovation.
Gaëlle Le Gars is a French citizen and holds a doctorate in Contemporary
History from the University of Nantes specializing in International Relations
& Defence. She was a Fulbright scholar at the University of Washington.
She has been involved in EU digital policy for 20 years, both in and out of
the European Commission, during which she worked in a range of policy
x Notes on Contributors

areas from eGovernment to Smart and Sustainable Cities and the UN Urban
Agenda. Gaëlle currently works as an independent policy analyst. Her current
interests include digital identities, geocoded statistics, satellite imaging and
the geopolitical implications of the ongoing push for all three.
Syren Johnstone is the Executive Director of the Master of Laws (Compli-
ance & Regulation) Programme at the Faculty of Law, The University of
Hong Kong. A member of the Securities and Futures Commission’s Fintech
Advisory Group (2016–2021), he has contributed thought leadership on
various high-profile issues including via engagements as an expert for statu-
tory regulatory agencies, and his work has been referenced in Hong Kong’s
Legislative Council and the Court of Appeal. Syren formerly practiced as a
senior solicitor with Linklaters before taking up senior management roles
with international investment banks. He holds two masters degrees, in neuro-
science and law, from Oxford and London universities respectively. He is on
the roll of solicitors in England & Wales and Hong Kong.
Eva Kaili is a Member of the European Parliament. She is the Chair of the
Future of Science and Technology Panel in the European Parliament (STOA)
and the Centre for Artificial Intelligence (C4AI), Member of the Committees
on Industry, Research and Energy (ITRE), Economic and Monetary Affairs
(ECON) and the Special Committee on Artificial Intelligence in a Digital
Age (AIDA). She has been working intensively on promoting innovation as a
driving force of the establishment of the European Digital Single Market. She
has been the draftsperson of legislation in the fields of digital platforms, big
data, fintech, AI and cybersecurity, as well as the Rapporteur of the DLT
and Blockchain Resolution. She holds a degree in Architecture and Civil
Engineering, and a Master’s degree in European Politics.
Elisabeth Noble is a Senior Policy Expert at the European Banking
Authority. She leads the EBA’s work on crypto-assets, DLT and the platformi-
sation of financial services and coordinates the European Forum for Innova-
tion Facilitators. She represents the EBA in EU and international standard-
setter policy work streams relating to FinTech, market-based finance, finan-
cial system interconnectedness, market access and the regulatory perimeter.
She is contributing to the delivery of the EU Digital Finance Strategy and
was a member of the European Commission’s Expert Group on Regula-
tory Obstacles to Financial Innovation (now disbanded). Prior to joining the
EBA, Elisabeth spent 7 years at HM Treasury advising primarily on the UK
government’s response to the financial crisis and the post-crisis domestic and
EU regulatory reforms (2008–2014), including the reforms to the regulatory
 Notes on Contributors xi

architecture in the EU (Banking Union). Elisabeth has also spent some time
in the private sector.
Dimitrios Psarrakis is a Financial Technology and Innovation Strategy
specialist of the European Parliament. He works on the design of the Digital
Finance strategy of the EU and he is the draftsperson of the DLT and
Blockchain Resolution of the European Parliament. He is ranked among the
100 top world influencers in the area of RegTech and Blockchain and he is a
frequent speaker on topics related to FinTech, RegTech, Blockchain and Arti-
ficial Intelligence in Europe, America, and Asia. He is also the Director of the
Brussels Council, an organization that promotes European high standards of
governance and regulation in the digital economy and finance and links the
innovation ecosystems of Europe with the rest of the world. He has a graduate
degree in Finance from Harvard University.
Mark A. Schrackmann is manager on the legal, regulatory and compliance
services of PWC Zurich. He specializes in Banking and Financial Market Law
with a special focus on crypto and blockchain technology. He is author of
numerous publications on legal and regulatory topics, and holds a Master in
Law (lic. iur.) and a CAS in Financial Market Law from the University of
Zurich.
David Shrier is a globally recognized authority on financial and advanced
data applications, serial entrepreneur and corporate innovator, and author.
He is a Professor of Practice with Imperial College London, where he leads
labs on institutional digital assets and ethical applications of artificial intelli-
gence. Previously, David created and led finTech and blockchain classes for
the University of Oxford and MIT that engaged more than 15,000 inno-
vators in over 150 countries to build the new financial ecosystem. He has
published multiple books on fintech, blockchain and cybersecurity. In his
private sector work, David specializes in helping established organizations to
act strategically to build new revenue and new markets. He has developed
more than $8.7 billion of growth opportunities with C-suite executives. He
has cofounded four AI-enabled MIT spinouts. David Shrier was granted an
Sc.B. from Brown University in Biology and Theatre.
Ernie Teo is a technologist, economist and game theorist with a focus on
technology, fintech and blockchain. He is an Adjunct Senior Lecturer at the
National University of Singapore Business School where he teaches Fintech
and Blockchain. He is also Vice Chairman of Blockchain Association Singa-
pore and Co-Founder of Dedoco, a document process solution that is built on
blockchain to prevent tampering of the documents and create an audit trail
xii Notes on Contributors

for authentication and validation (signing). A pioneer of blockchain educa-

tion in Singapore, he conceptualized and taught the first blockchain course
as a part of a degree program at the National University of Singapore. Ernie
is active in the blockchain community in Singapore, giving talks and semi-
nars both in the industry and at universities. He also published in the area of
blockchain and fintech, such as the 2018 IEEE International Conference on
Cloud Engineering. He received his Ph.D. in Economics from the University
of New South Wales, Australia and also held academic positions at Nanyang
Technological University and Singapore Management University.
Jane Thomason is an author and thought leader in the applications of
blockchain technology for social transformation. She is Co-Founder of
the British Blockchain and Frontier Technology Association, Section Chief
Editor, Frontiers in Blockchain, and Member of the Advisory Board of the
Kerala Blockchain Academy. She is the lead author of “Blockchain Technologies
For Global Social Change ” (2019), lead author of the Chapter on “Blockchain-
Powering and Empowering the Poor in Developing Countries” in Transforming
Climate Finance and Green Investment with Blockchain (2018) Editor Alas-
tair Marke; Lead author of the Chapter on “Technology and healthcare oppor-
tunities in emerging markets” with Nichola Cooper in HealthTech. Law and
Regulation (2020) Editor Jelena Madir.
Rob van Kranenburg is founder of the IoT Council network (400 indi-
vidual expert members). He is specialized in ecosystem management, stake-
holder coordination and community engagement. He currently is a partner
in the Strategy Team for Next Generation Internet, NGI FORWARD. He
was co-editor of Enabling Things to Talk, Designing IoT solutions with the
IoT Architectural Reference Model, Springer Open Access.
Hans Verheggen is a partner with Deloitte and focuses on emerging tech-
nology for international organizations. He has more than 15 years of business
transformation experience with EU Institutions, NATO and the UN system.
Currently, Hans advises the European Commission, Council and Parliament
on digital strategy, cloud adoption, blockchain governance and AI use cases.
Previously, Hans has worked with corporate clients in energy & resources
and consumer & industrial products. Hans holds a master’s degree in Inter-
national Relations from the University of Antwerp and attended the Univer-
site de Paris I Pantheon-Sorbonne and Georgetown University’s School for
Continuing Education.
 Notes on Contributors xiii

Pēteris Zilgalvis is the Head of Unit for Digital Innovation and Blockchain
in the Digital Single Market Directorate in DG CONNECT and is the Co-
Chair of the European Commission FinTech Task Force. He was the Visiting
EU Fellow at St. Antony’s College, University of Oxford for 2013–2014,
where he was an Associate of the Political Economy of Financial Markets
Programme. From 1997 to 2005, he was Deputy Head of the Bioethics
Department of the Council of Europe, in its Directorate General of Legal
Affairs. In addition, he has held various positions in the Latvian civil service
(Ministry of Foreign Affairs, Ministry of Environment). He was Senior Envi-
ronmental Law Advisor to the World Bank/Russian Federation Environ-
mental Management Project and was Regional Environmental Specialist for
the Baltic Countries at the World Bank. He has been a member of the Cali-
fornia State Bar since 1991, completed his J.D. at the University of Southern
California and his B.A. in Political Science, Cum Laude at UCLA.
 List of Figures

Fig. 3.1 The place of a smart contract in a transaction (Source The

authors) 37
Fig. 5.1 The OPAL method to protect data (Source The author) 86
Fig. 7.1 Interbank payment landscape overview (Source Lai [2018]) 140
Fig. 7.2 Digital tokens—Libra versus DCEP (Source Authors) 144
Fig. 10.1 The Determined-By-Architecture (DBA) taxonomy (Source
Author) 235
Fig. 12.1 Lessig’s four modes of regulation applied to blockchain
systems (Source De Filippi and Wright [2018]) 273
Fig. 13.1 How blockchain ledgers work (Source DIGIT, European
Commission) 286
Fig. 14.1 The EU legislation shaping the Digital ID “governance
stack” (Source Authors) 310
Fig. 14.2 The Europe’s heterogeneous ID landscape (Source Asquared,
2018) 313
Fig. 14.3 Belgian user’s of ITSME since 2017 (Source ITSME
presentation, Rotterdam December 2019) 314
Fig. 14.4 Components of a Trust Framework (Source Makaay, E, T
Smedinghoff, and D Thibeau. “OpenID Exchange: Trust
Frameworks for Identity Systems,” 2017) 318
Fig. 14.5 A diagram of disposable identity enabled by the Zenroom
VM developed by DECODE (Source Authors/decode) 325
Fig. 14.6 The European Trust Framework: An alternative
to the governance stack (Source Authors) 325
Fig. 14.7 EU citizen rights and EU sovereignty (Source Authors) 326

xv
 List of Tables

Table 4.1 Blockchain use-classes and their corresponding governance

structures 60
Table 6.1 Blockchain for social change model 104
Table 7.1 Recent CBDC use cases by Central Banks 125
Table 7.2 Technological bottlenecks and pain points of digital money 137
Table 7.3 Attributes of various forms of money 143
Table 13.1 EBSI compared to other types of blockchain—DIGIT,
European Commission 292
Table 13.2 EBSI’s layered architecture 292

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