This is how Germany is gambling the future of crypto

In 2019, there was good news for Germany as a blockchain location. At the time, the federal government had published its blockchain strategy, emphasizing the importance and promotion of the technology. About three years later, with the exception of the tokenization of securities, things are looking pretty lean.

Nothing came of the intended blockchain pilots in administration and more specifically in data protection and digital identities. The quick oblivion of the blockchain strategy of 2019 is reminiscent of many people’s New Year’s resolutions to exercise more and eat healthy. Experience has shown that the initial motivation does not last long.

New government, new opportunity for blockchain?

One could argue that the new federal government wants to implement its own and novel approach to promoting blockchain technology. As far as the Ministry of Finance is concerned, it may even be partially true. For example, Finance Minister Christian Linder has set up the Digital Finance Forum to establish a closer exchange with the crypto sector in particular. The future financing law prepared by the BMF and the BMJ also makes progress with regard to digital securities. Apart from these exceptions, however, the opposite impression arises. Apparently, the federal government wants nothing more to do with blockchain technology.

The Federal Government’s Digital Strategy

In its digital strategy, published at the end of August, the federal government announced how important it considers which technologies. While artificial intelligence (AI) or the Internet of Things (IoT) can be enjoyed as key technologies, blockchain technology is practically non-existent. Rather, it only takes place on the sidelines by addressing the problems associated with it, such as lack of sustainability and tax avoidance. In this context, reference is made to the importance of joint European supervision.

Responsibility is thus increasingly being shifted to Brussels. Strict regulation yes, financing no. Blockchain technology is therefore the dirty child of technologies. You really want nothing to do with her. As a result, they were promptly thrown out of the club by key technologies.

No key technology, no money

The term key technology is not just an insignificant empty phrase. The key technology assessment indicates which technologies are considered particularly eligible for support from the perspective of the German state. So while an entrepreneur can hope for funding for his AI start-up, and the university can also count on research grants in the field of AI, the blockchain sector gets virtually nothing. As a second-class technology, it now has to wait in line far down in Germany and can at best only hope that a few crumbs fall off.

Startup strategy for the federal government

The same sad picture can also be found in the federal government’s startup strategy, which was also recently published: blockchain is non-existent. While politicians have repeatedly pointed out the importance of the blockchain start-up sector in the past, the start-up strategy does not seem to have stuck. Even apart from the funding aspect, this is a problematic signal. This suggests that blockchain entrepreneurs in Germany are tolerated at best. At least that’s not how you build an innovation center.

Blockchain is not popular

The case of blockchain technology and politics shows how important it is to have a large and strong lobby. Blockchain technology is largely represented by voluntary stakeholders and smaller start-ups. Therefore, in light of the many topics and current challenges, the federal government appears to be sacrificing the promotion of blockchain technology. After all, there is no significant resistance to be expected.

Whether a technology gets attention and money seems to depend more on the political and ideological preferences of individual parties and their voters than on their influence on Germany as a business location. Individual MPs from the SPD and the Greens had repeatedly positioned themselves as crypto-opponents, stressing how bad blockchains are for the climate and yet are primarily used for money laundering. Despite educational efforts by the blockchain sector, these prejudices have persisted to this day.

High government quota: Germany must make a decision

It is a legitimate economic model if the state stays out of active industrial and business development. In this case, however, one can expect a state quota of well below 50 percent in order to keep the burden on the economy low.

Instead, it is not appropriate to be the world champion in taxing income and inflating the government quota for years in the case of Germany. If you think you should be so actively involved in the economy, please do it less ideologically and more according to basic evaluation criteria, which are also popular in the private sector. Otherwise, there is a risk that budget funds will be misallocated, which will not lead to the desired economic growth.

Cabinet retreat at Meseburg Castle speaks volumes

How badly Germany needs a blockchain strategy worthy of the name was shown at the press conference for the government meeting on August 31 (click here for the video recording). Finance Minister Christian Linder was asked by a journalist (minute 33:19) whether it was really not possible to transfer one-off benefits to citizens in the wake of the energy crisis.

His answer (from minute 34) speaks volumes. He admits – with some irony – that our financial and administrative infrastructure is so outdated that the federal government is technically unable to process millions of transfers at the same time. According to the authorities, it takes about 18 months to collect all IBAN account numbers and combine them with the tax number.

If one had a modern digital financial and administrative infrastructure, such projects could be implemented more or less at the push of a button. But if you still rely on analog and non-programmable infrastructures based on the same technical standards we had 30 years ago, then you shouldn’t be surprised by such problems.

The fact that we now have a technology that would be useful in these very areas has apparently not yet gotten around the federal government. Attentive readers know what technology is meant here.

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