Generating billions in next taxes and trillions in new company revenues...

What if the UK could generate billions in new taxes and trillions in new company revenues? That would probably be the size of a new global blockchain economy and unlike previous technology revolutions, speed of regulation is key. At this moment China is pushing its governmental crypto currency while making any other crypto coins illegal, the USA central government is still apply laws from 1934 (a.k.a. The Howey Test) to delay crypto tokens amid several states pushing hard in the other opposite direction, the EU has a proposed regulation (i.e. CiMA) but has not voted it through. The United Kingdom has a Bank of England and FCA who are opposing crypto while many MPs are positive towards it.

If the UK does nothing

If the UK does nothing then China, the US and the EU will get their act together and the next decentralised Googles, Facebooks,... will be based in one of these countries.

Any criticism about crypto fraudsters and the climate impact of yesteryears blockchains will make some headlines this year but with a Ukrainian war and a potential stagflation crisis will soon be forgotten. Prohibition or over-complex regulation will just make companies avoid the UK all together but it is impossible to block a decentralised solution from being used by UK citizens. The closest similarity is Uber. All EU taxi laws did not stop people from downloading the app and although Transport for London tried very hard, they at the end had to provide Uber with a licence. Not doing anything, prohibition or moving slow will just bring a decentralised Facebook without tax revenues and only the disadvantages.

The alternative scenario

What if the UK copies and improves the eResidency programme from Estonia? You go to a UK embassy anywhere in the world or for instance a UK postal service, pay ￡100, get your fingerprints scanned, a picture taken and your passport copied and you will receive a digital eResidency. With this you will be able to open a crypto wallet, a decentralised company and pay taxes. 20% of all new companies in Estonia have been founded by eResidents and 80,000 eResidents (20% of the population of its capital and 6% of its overall population) have brought in 54M in extra taxes.?

Smart contracts or decentralised autonomous organisations (DAO) are the new innovation in blockchain. They are organisations written in computer code and are like fully automated companies which allow token holders to vote on what they should do. DAOs can provide loans, allow you to invest and even fix the climate, e.g. KlimaDAO. These smart contracts should also be able to get eResidency and assign delegated authority either to specific eResidents or any holder of a governance token with voting rights. Let’s call them rDAOs or resident DAOs.

Any process from creating a company, Know Your Customer / Business [KYC/KYB] / Anti-Money Laundering [AML] to paying taxes should be implemented via DAOs. So that eDAOs can talk to the governmental DAOs to check if an eResident is registered and not on any embargoed list, create a company, check if a funds transfer can be allowed and if taxes have to be deducted.

What would be the advantages?

Automation has a tendency to destroy inefficient manual or repetitive labour. However automation also is a job creator. Amazon created directly almost 1M new jobs in the US. Google was responsible for the creation of more than 130,000 highly paid jobs. But more importantly around all these hi-tech companies new industries have blossomed. Social media marketing, mobile app development, digital marketplaces, and many more. All these employees in new jobs need many other services from legal support to houses to restaurants to holidays and much more. Governments cannot stop the destruction of automatable jobs but they can make regulatory schemes that enable new industries to blossom. The FCA sandbox has converted Britain into the global leader of financial technology companies. Britain can easily become the global leader of decentralised autonomous organisations but for now there are more British residents who have registered their DAO outside of the UK than inside. If Britain wants to show the world that Brexit was not a mistake, then making a DAO friendly regulation, DAO sandbox, governmental DAOs for eResidency / taxes / automated company processes,... would be the fastest path. If not done urgently then please do not come and complain in 5 years time that American, EU or Chinese DAOs are generating large revenues in the UK but not paying taxes. We have seen that before.

What is your opinion?