3FOOD

Third Industrial Revolution Consulting Group
develop a B2B credit management system like Sardinia’s Sardex 264 or to nationally extend
voucher systems such as Redange’s “Beki,” 265 the Blockchain removes the risk that the
administrator of the program manipulates balance data to allow double-spending or other
abuses. What’s more, the traceability and auditability of blockchain transactions could help the
government unlock additional benefits from the circulation of these tokens. For example, it
could allow the development of automated value-added tax collection, helping to broaden the
tax base, which the European Commission staff has described as an important objective for
Luxembourg. 266
It should be noted that if there is an expansion in the use of digital currencies, be they
decentralized currencies such as bitcoin or digital representations of sovereign currencies, there
could be a disruptive impact on banks and therefore on economies with large banking sectors
such as Luxembourg’s. In fact, banks face even more significant disruption if central banks go
ahead with plans to issue their own digital currencies under a distributed-ledger structure. This
is being studied by the Bank of England, the People’s Bank of China and the Reserve Bank of
Australia. It would not be a surprise if the European Central Bank also studies the prospect,
which has been a subject of discussion at Financial Stability Board-sponsored meetings to
explore the monetary policy implications of blockchain technology. The significance for banks is
that if individuals and companies are holdling funds simply for payments and short-term
custody, a trusted digital currency option will make them less inclined to hold money in shortterm
bank deposits, since transactions can simply be managed wallet to wallet, bypassing the
banking system. While that represents a threat to bank income, it must be viewed against the
prospect for greater income from credit issuance as blockchain technology unlocks capital for
new asset classes and for new customers among previously financially excluded populations.
While such shifts are not imminent, Luxembourg’s banking sector need to be prepared for what
could be a profound realignment within the industry. In the spirit of the best defense being a
strong offense, it’s yet another reason to develop new opportunities to deploy capital within
new asset classes such as blockchain-based tokenized securities.
264 Posnett, E. “The Sardex Factor,” The Financial Times, September 18, 2015.
http://www.ft.com/intl/cms/s/2/cf875d9a-5be6-11e5-a28b-50226830d644.html
265 Luxemburger Wort, “'Sold out' bank notes - Redange 'Beki' currency, a victim of its own success,” Luxemburger
Wort, May 7, 2015. https://www.wort.lu/en/luxembourg/sold-out-bank-notes-redange-beki-currency-a-victim-ofits-own-success-554b2aa60c88b46a8ce58ca6
266 European Commission, “Commission Staff Working Document: Country Report Luxembourg 2016,” February 26,
2016; http://ec.europa.eu/europe2020/pdf/csr2016/cr2016_luxembourg_en.pdf
301