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In order to be recognized as an important tool in the Vienna Region, blockchain technology should generate visible value.
Interview. Next to artificial intelligence (AI) and the Internet of things (IoT), blockchain is one of digitization's prevalent buzzwords. We invited Johanna Konrad (CSO) and Russell E. Perry (founder and CEO) from "kompany" – the Viennese RegTech start-up founded in 2012 which provides commercial register data of millions of international companies worldwide in real-time – as well as blockchain and cryptocurrency expert Robert Schwertner to discuss the Vienna Region's performance in the blockchain sector and the necessary steps to evolve into a blockchain hotspot.
- Which blockchain developments do you currently observe?
Robert Schwertner: The Bitcoin hype introduced blockchain to a wider audience in 2016/17. Cryptocurrencies plummeted last year, consolidation is happening now. In my job as an executive consultant, I notice that more and more companies outside of the banking and FinTech sector get involved with blockchain. Including, for example, companies from the mobility sector, energy, transportation, real estate, retail, etc.
Johanna Konrad: We also notice that more and more industry sectors become active in blockchain. In that regard, I'd like to stress that blockchain shouldn't be reduced to the crypto domain. Of course, the blockchain hype was pushed by cryptocurrencies, but through applications and services, the technology now has an effect on areas where it makes sense to increase efficiency by focusing on distributed systems. Blockchain applications lend themselves to all areas where it's necessary to precisely track transactions between A and B and have these steps screenable at any moment.
Russell E. Perry: More and more blockchain projects are primarily about infrastructure, or about applications which can be used in various business areas. For example, we are active in the verification business, also called KYC, "Know Your Customer". In this sector, the blockchain technology not only allows us to offer revision-safe auditing, but also to display the revision history. Every transaction is saved in the blockchain, and when companies verify each other, we can create a journal.
- Does the blockchain hype slow down or stimulate the economy?
Robert Schwertner: During the phase where investments are made in blockchain, it costs money and does not stimulate the economy. In the long run, it does. One of the problems is that a lot of unwieldy terms connected to blockchain are in circulation which people don't understand, and therefore they don't see the necessity. Therefore, I have developed the "CryptoRobby" character who took off to explain the world of blockchain in simple words. We need solutions where people see the advantages. For example: that blockchain offers an opportunity to transfer money and payments without a banking account.
Johanna Konrad: The technology is important wherever it generates value, but this is independent of whether that means monetary value, the facilitation of a process, or an increase of the safety of a transaction. We need use-cases where the technology is a means to an end in order to do something better, faster, easier, and there are endless application possibilities.
- Berlin is currently priding itself as the European blockchain mecca. In your opinion, what is the current blockchain hotspot?
Robert Schwertner: There is a lot of experimentation in Berlin. This is the result of an open mind towards new technologies. But I think the actual European hotspots are Malta – a lot of companies move there because of tax advantages – and Switzerland, especially Zug, where the so-called "CryptoValley" has developed. I work with many Asian companies who dream of visiting CryptoValley. Outside of Europe, China is very strong. I've recently done patent research for the traffic and mobility sector and noticed that 80 percent of all blockchain patents are registered in China. They are a real power.
- Vienna held a blockchain conference in April, blockchain hubs are being created, and the Austrian Blockchain Center (ABC) was established to push research and development. Where does Vienna stand in the international comparison?
Russell E. Perry: The Austrian Blockchain Center is a good initiative, but it isn't enough to pride oneself as a first mover or even as a smart follower. Even with the 20 million Euros invested in the ABC, you cannot expect great leaps forward when the money is distributed in an indiscriminate all-round fashion.
Robert Schwertner: On an international level, this subsidy is comparatively small. One example: In China, a blockchain business park in the province of Zhejiang, removed from the large metropoles, was funded with 1.8 billion US dollars. Still, Vienna takes a lot of correct approaches. The blockchain conference in Vienna at the beginning of April, which drew large companies like BMW, Bosch or Daimler, is a good example of how the Vienna Region could draw attention to itself internationally. It is almost symptomatic of our country that this initiative was brought to life by very dedicated people without government funding.
- Do domestic start-ups sufficiently respond to the blockchain boom?
Robert Schwertner: We are undoubtedly lagging behind. There are 30 blockchain start-ups at the most in the entirety of Austria. In comparison: in Zug's CryptoValley alone, there are about 600 start-ups.
Russell E. Perry: There is no lack of creative minds, but of political will to keep the talents in the country. We have subsidies that work well for the first phase of founding an enterprise, but there is no follow-up so that a company could scale and grow internationally. We need to prevent domestic talents from relocating. On the other hand, we are adapting to the situation. Since there are not many blockchain start-ups, we ensure that we are well-connected internationally.
- What needs to happen so that the Vienna Region can evolve into a European blockchain hotspot?
Robert Schwertner: There are appropriate initiatives such as the Research Institute for Cryptoeconomics at the WU in Vienna, where the economic aspect is well-analyzed. This institute is internationally unique. But we also need support for programmers. There are two dozen excellent blockchain programmers at the most in Austria. This is not enough to compete internationally. I do not see any current development in this regard – also in terms of demand. Way too few domestic companies are looking for blockchain experts.
Johanna Konrad: One of the problems is that the regulations aren't clear, for example regarding blockchain-based financial transactions. This limits innovation. The option of bringing international talents into the country is difficult, too. Just think of the processes regarding the Red-White-Red Card which take way too long. We need further improvement of the ecosystem so that start-ups can grow in this country. Especially the missing follow-up financing options make it difficult to build competitive hubs.
- Is there potential at all for Vienna as a blockchain hotspot?
Johanna Konrad: I don't think that it's a pertinent goal to turn Vienna into a European blockchain center by all means. It is more important to attract attention by generating real value, regardless of whether it's on the basis of blockchain or artificial intelligence, driven by the government or by start-ups. It would be shortsighted to limit ourselves to just one technology.
Russell E. Perry: It is crucial to clearly define our goal. The government needs to create the necessary framework to reach this goal. Politics are too observant for my taste. This is not the way to success. I see good approaches in the ecosystem, though. We are well-connected in this area, also thanks to the support of the Vienna Business Agency.
Johanna Konrad: There is definitely potential to attract talents to Vienna. Talking to international experts, I keep hearing how much they would like to relocate to Vienna because of its high quality of life. Ultimately, however, companies compare the total package with other regions and choose countries where they can grow best.
Robert Schwertner: As you say, in terms of the feel-good ranking, the Vienna Region is already at the top. I absolutely see Vienna's potential for becoming a blockchain hotspot. This would require a constructive program. A conceivable goal could be to bring 100 blockchain programmers into the region within a certain timeframe and give these experts a lab where they can experiment – a real blockchain technology institute for Vienna which focuses on development and programming, including everything necessary from start-ups to venture capital.
- Would a cryptocurrency of our own create opportunities for the Vienna Region?
Robert Schwertner: Absolutely! Large companies such as Facebook have been working on a token of their own for a long time. A unique cryptocurrency for the Vienna Region, e.g. a VR token, would be the ideal opportunity to familiarize the public with blockchain. For example: a storable cryptocurrency for the e-wallet on your smartphone which you can use to transfer payments without a banking account.
RegTech is a combination of the terms "regulatory" and "technology". A RegTech company is therefore a subdomain of the FinTech industry.
Interview by medienkomplizen | Christian Scherl
Photos: Johanna Konrad © kompany; Russell E. Perry © kompany; Robert Schwertner © CryptoRobby