Blockchain technology, the underlying system that powers cryptocurrencies such as Bitcoin and Ethereum, has been gaining popularity and attention in recent years. But beyond its use for digital money, blockchain has the potential to transform various sectors of the economy and society, especially in developing countries like Malaysia.
What is blockchain and how does it work?
Blockchain is a distributed ledger that records transactions and data in a secure, transparent and immutable way. Each transaction or data is stored in a block, which is linked to the previous block using cryptographic encryption. This creates a chain of blocks that can be verified by anyone who has access to the network.
Blockchain eliminates the need for intermediaries, such as banks or governments, to validate transactions or data. Instead, it relies on a network of nodes (computers) that participate in the consensus process to ensure the integrity and validity of the ledger. This reduces the cost, time and risk of fraud or corruption.
How can blockchain benefit Malaysia?
Malaysia is a developing country that faces various challenges in its economic and social development. Some of these challenges include:
- Financial inclusion: According to the World Bank, about 8% of Malaysians do not have access to formal financial services, such as bank accounts or credit cards. This limits their ability to save, invest, borrow or participate in the digital economy.
- Trade facilitation: Malaysia is a trading nation that relies heavily on exports and imports. However, cross-border trade involves complex and costly processes, such as customs clearance, documentation, verification and payment. These processes can cause delays, errors and inefficiencies that affect the competitiveness and profitability of businesses.
- Public service delivery: Malaysia’s public sector provides various services to its citizens, such as education, health care, social welfare and infrastructure. However, these services often suffer from issues such as bureaucracy, lack of transparency, accountability and trust.
Blockchain technology can address these challenges by providing solutions that are more efficient, inclusive, transparent and secure. Some examples of how blockchain can benefit Malaysia are:
- Financial inclusion: Blockchain can enable the creation of digital identities and wallets that can store and transfer value without intermediaries. This can empower the unbanked and underbanked populations to access financial services and opportunities. For instance, HelloGold, a Malaysian start-up, uses blockchain to allow people to buy and sell gold online with low fees and minimum amounts.
- Trade facilitation: Blockchain can streamline and automate trade processes by creating a shared ledger that records and tracks the movement of goods and payments across borders. This can reduce the need for paper-based documents, intermediaries and manual verification. For example, TradeLens, a global trade platform developed by IBM and Maersk, uses blockchain to connect various stakeholders in the supply chain, such as shippers, carriers, customs and port authorities.
- Public service delivery: Blockchain can enhance public service delivery by creating a transparent and accountable system that records and verifies data and transactions related to public services. This can improve the quality, efficiency and trust of public services. For instance, LuxTag, a Malaysian company, uses blockchain to provide digital certificates for various products and assets, such as diplomas, artworks and luxury goods.
What are the challenges and opportunities for blockchain adoption in Malaysia?
Despite its potential benefits, blockchain adoption in Malaysia faces several challenges, such as:
- Regulatory uncertainty: Blockchain is a new and evolving technology that poses legal and regulatory questions regarding its status, validity and compliance. There is a lack of clear and consistent regulations and guidelines for blockchain applications in Malaysia, which may create confusion and risks for users and developers.
- Technical complexity: Blockchain is a complex technology that requires advanced skills and knowledge to understand, develop and use. There is a shortage of blockchain talent and expertise in Malaysia, which may limit the innovation and adoption of blockchain solutions.
- Cultural resistance: Blockchain is a disruptive technology that challenges the existing norms and practices of various sectors and stakeholders. There may be resistance or reluctance from some parties to adopt blockchain due to fear of change, loss of control or lack of trust.
However, these challenges also present opportunities for Malaysia to leverage its strengths and advantages to overcome them. Some of these opportunities are:
- Government support: The Malaysian government has shown interest and support for blockchain development and adoption in the country. It has launched several initiatives, such as Malaysia Blockchain Strategy 2020-2024, Malaysia Digital Economy Blueprint 2021-2030 and Malaysia Tech Week 2023, to promote awareness, education, research, innovation and regulation of blockchain technology.
- Industry collaboration: The Malaysian industry has demonstrated collaboration and cooperation among various stakeholders to foster blockchain ecosystem development. It has formed several associations and platforms, such as [Malaysian Industry-Government Group for High Technology (MIGHT)], [Malaysian Blockchain Association (MBA)] and [Malaysia Blockchain and Cryptocurrency Council (MBCC)], to facilitate dialogue, partnership and advocacy of blockchain technology.
- Social impact: The Malaysian society has shown interest and enthusiasm for blockchain technology and its social impact. It has engaged in various activities and events, such as [Blockchain for Social Impact Hackathon 2023], [Blockchain for Good Conference 2023] and [Blockchain for Sustainable Development Goals Summit 2023], to explore and showcase how blockchain can address social and environmental challenges.
Blockchain technology is a catalyst for economic development in Malaysia, as it can provide solutions that are more efficient, inclusive, transparent and secure for various sectors and challenges. However, blockchain adoption in Malaysia also faces challenges, such as regulatory uncertainty, technical complexity and cultural resistance. These challenges can be overcome by leveraging the opportunities, such as government support, industry collaboration and social impact. By embracing blockchain technology, Malaysia can enhance its competitiveness, innovation and sustainability in the global economy.
