Deputizing blockchain to fight public corruption

Puerto Rico recently announced that it may be looking for a blockchain solution to fight government corruption, particularly after a Puerto Rican mayor pleaded guilty to accepting a cash bribe of more than $100,000. 

But could a distributed digital ledger really make an impact in the unincorporated United States territory’s struggle against public fraud and wrongdoing?

It might if it were done in tandem with other public efforts, governance experts tell Cointelegraph. Puerto Rico could gain, too, by heeding lessons from other countries that implemented blockchain to fight corruption in recent years, including Georgia, India and Colombia, and it shouldn’t be reluctant to bring in outside help, though much of the key work should still be done by local agencies. Puerto Rico shouldn’t expect a quick technical fix.

“We have a real credibility problem,” the Puerto Rican House Speaker told Bloomberg, and more transparency and accountability — the sort that blockchain technology potentially offers — “might be part of the solution.”

Nir Kshetri, professor at the Bryan School of Business and Economics at the University of North Carolina at Greensboro, for one, thinks the Commonwealth official might be onto something. Blockchain technology can not only enhance anti-corruption efforts, but it can also be a game-changer, he told Cointelegraph.

“Blockchain systems can keep a full audit trail of all activities and transactions that government officials have been engaged with,” Kshetri said, adding, “The immutability feature means that government officials cannot delete files. Any change will be noticed immediately by other participants connected on the blockchain network.”

Others aren’t quite so certain but say that blockchain technology can keep the government clean if other conditions are right. “Blockchain can play a role in securing transactions and monitoring events, preventing fraud and corruption,” Per Aarvik, a researcher at the Chr. Michelsen Institute (CMI)/U4, told Cointelegraph, continuing, “but not without a regulatory framework as a foundation.”

Puerto Rico risks adopting expensive systems that “may have a limited effect, unless a wide range of issues are addressed,” he added. Along these lines, “There are lessons to be learned from other highly digitized countries such as Estonia or Singapore” — as well as the former Soviet republic of Georgia.

The technology can play a big role in the area of land titles, Jonas Hedman, professor at the Copenhagen Business School, told Cointelegraph, as has already been shown in Sweden, where such a program has been partially implemented, it also can have “a huge impact on procurement and elections. Imagine if an agency or state — like Puerto Rico, CIA, UN etc. — had an open ledger of all their spending?”

Advice for Puerto Rico

Asked about Puerto Rico’s plans to fight public corruption, Kshetri said the island territory needs to begin in the most corruption-prone areas. It will need to cross-validate the data that it receives before it is entered on the blockchain, and here it might be well served to use other emerging technologies, such as artificial intelligence, machine learning and remote sensing technology rather than relying on government officials.

Reforms should expect to face resistance, too, from actors who are currently benefiting from the status quo, both within and outside government. Involving outside parties — as with Colombia’s school meal procurement program — can enhance informal accountability.

That said, “Puerto Rico should not rely too much on foreign companies to implement blockchain to fight corruption,” Kshetri told Cointelegraph. “It should develop local blockchain manpower” — as what happened in India’s Andhra Pradesh state. “Local blockchain companies are more effective in providing low-cost solutions suitable for local needs.”

Georgia gets creative

Georgia is often cited as an instance where a blockchain has been used to secure a government registry, “but the story did not start with blockchain,” Aarvik told Cointelegraph. “The country had radically reformed the whole public sector before blockchain was introduced.”

This included carefully studying its corruption problem and then applying sometimes creative solutions, including moving some borderline practices into the legal sphere. “For example, most people were paying a bribe to obtain a passport or any other document that they needed urgently and were not ready to wait for,” according to Tamara Kovziridze, former chief adviser to Georgia’s prime minister. “Today, an international passport can be obtained within a day if a higher fee is paid.”

When blockchain firm Bitfury introduced its Exonum blockchain-as-a-service solution into the country to secure land titles, Georgia already had a working land-registry system, said Aarvik, adding that technical solutions can’t exist in isolation. Certain…