LONDON (Reuters) - The British government is exploring using the blockchain technology that underpins the bitcoin currency to increase efficiency in the distribution of taypayers’ money such as grants, a minister said on Tuesday.
A blockchain works as a decentralized ledger that is verified and shared by a network of computers, and can be used to record data as well as to secure and validate an exchange of assets, such as currencies or commodities.
Banks and other financial institutions are increasingly investing in blockchain technology, reckoning it could cut their costs and make their operations faster and more transparent.
Cabinet Office Minister Matt Hancock said the government was examining how the technology could be used to manage and keep track of the distribution of public money, such as grants and student loans, saying it could “foster a new culture of trust”.
“Government cannot bury its head in the sand and ignore new technologies as they emerge,” Hancock, who holds the post of paymaster general, said a blockchain networking event in London.
“That is partly what happened in the past in government with the web ... We cannot let (that) happen again by standing still.”
Britain has had a patchy record with government IT systems. Previous IT problems have hit the passport agency, the tax credit system and most notably the National Health Service which was forced in 2011 to announce the abandonment of a multi-billion pound scheme to computerize every patient record.
Hancock cautioned against getting too caught up in the hype.
“Blockchain technology is not going to solve every problem; it’s not going to work in every context,” he said.
It is still early days for blockchain: The original bitcoin blockchain was started just over seven years ago, and most financiers and technologists reckon the technology will not be adopted broadly for another five to 10. Many compare the current level of development to the early days of the Internet.
Earlier this year, the government’s chief scientific adviser urged the government to explore how it could use blockchain. The Bank of England has called it a “key technological innovation”, and has a team working on ways that it could be used, such as for issuing central bank money. ($1 = 0.6870 British Pounds)
Reporting by Jemima Kelly; Editing by Alison Williams