Liechtenstein Bankers Association

Blockchain and sustainability: contradiction or complement?

In an interconnected, global world, a transparent, immediate, seamless traceable, forgery-proof and chronological record of transactions of as many assets as possible becomes a major challenge. Blockchain technology is the long-sought solution to this. The hype has given way to a certain scepticism in recent months. Two misconceptions are responsible for this. On the one hand, blockchain is too often reduced to its best-known application - the cryptocurrency Bitcoin. And Bitcoin, like all cryptocurrencies, be expressed about blockchain, especially in the fight against climate change. Yet blockchain technology can certainly be described as a booster in the fight for a more sustainable world.

has recently had to struggle with enormous price fluctuations. On the other hand, blockchain has the reputation of requiring enormous computing capacities and of being an energy hog. However, such concerns only apply to certain applications of the underlying technology, such as Bitcoin. Depending on the network architecture, choice of protocols and set-up, a modern blockchain does not consume more energy than conventional database solutions. This last objection in particular has caused concerns to Digitalisation and sustainability: the twinset of the future Liechtenstein and its banks have never joined this chorus of critics. On the contrary: for us banks, digitalisation and sustainability belong together like twins. They are therefore also the two cornerstones of the Roadmap 2025,

multi-year strategy published last year. It is certainly also important that we define sustainability much more comprehensively than the admittedly currently most urgent fight against climate change. We align our efforts with the broadly defined 17 UN Sustainable Development Goals (SDGs). However, not only the banks, but also Liechtenstein’s government recognised the potential of digitalisation very early on. For example, with the socalled Blockchain Act, a holistic and technology-neutral, legal framework for all blockchain related applications has been introduced for the first time worldwide already back in 2020.

Transparency, new sources of financing and new incentives But how exactly can blockchain make the world more sustainable or help reduce CO2 emissions in accordance with the Paris Climate Agreement? The traceability of transactions on a blockchain, once again, plays a central role. For example, the technology makes alignment with sustainability goals more visible by enabling data and information about projects to be tracked and understood transparently. Blockchain-based platforms can be used to standardise data, evaluate investment performance and improve compliance with ESG standards, for example. This potential will be amplified in the not-so-distant future when the Internet of Things is integrated and linked with artificial intelligence and quantum computing.

However, other aspects are at least as important in this context. For example, blockchain makes it possible to open up new sources of financing and to better mobilise existing industry commitments to CO2 reduction by setting up new financing platforms. As a reminder, at the global level, it is estimated that the annual investment required to achieve the SDGs is around USD 7 trillion. A substantial part of this will have to come from the private sector. Reducing the cost of capital for infrastructure projects while improving liquidity, transparency and access to finance can make the ambitious goals much more realistic. Finally, blockchain

LIECHTENSTEIN AND ITS BANKS HAVE NEVER JOINED THIS CHORUS OF CRITICS. ON THE CONTRARY: FOR US BANKS, DIGITALISATION AND SUSTAINABILITY BELONG TOGETHER LIKE TWINS. THEY ARE THEREFORE ALSO THE TWO CORNERSTONES OF THE ROADMAP 2025, OUR MULTI-YEAR STRATEGY PUBLISHED LAST YEAR.

can improve awareness and access by acting as a transaction-enabling infrastructure for new business models. This creates incentives and thus increases the willingness of institutions and consumers to contribute to building a sustainable economy and society.

Blockchain: a sustainability accelerator The potential applications are vast. According to a new study by the World Economic Forum and PwC, two-thirds of the 169 sub-goals of the SDGs could be supported or even fuelled by technological innovations.

With the Blockchain Act and the experience already gained with it at an early stage, the Liechtenstein financial centre is in an excellent position to use the new technologies to fulfil its responsibility for and aspiration to greater sustainability. The financial resources are available, as is the knowledge of what needs to be done. What is needed now is consistent action and the necessary courage and leadership. In this way, the financial centre will live up to its claim of “thinking in generations”, i.e. above all also for the future. ■

About Liechtenstein Bankers Association (LBA) The Liechtenstein Bankers Associafion was founded in 1969 and is the voice of Liechtenstein banks at home and abroad. It is one of the most important associafions in the country and plays an important role in the successful development of the financial centre. As a member of the European Bankers Federafion (EBF), the European Payments Council (EPC), the European Parliamentary Financial Services Forum (EPFSF), the Liechtenstein Bankers Associafion is an important member of key bodies at European level and plays an acfive role in the European legislafive process. Since 2017, the Liechtenstein Bankers Associafion has also been a member of the Public Affairs Council (PAC) with offces in Washington and Brussels, and since 2018, a member of the internafional network “Financial Centres for Sustainability” (FC4S). With the Roadmap 2025, the LBA has placed an even stronger focus on the two major topic «sustainability» and «digitalisation». As a consequence, the LBA joined the following two initiatives in 2021, each of which is a leader in its field: firstly, it has become an offcial supporter of the UN Principles for Responsible Banking and the Net-Zero Banking Alliance and secondly, it has become an affiliate member of the Canada-based Blockchain Research Institute (BRI), an independent, global think-tank dedicated to inspiring and preparing private- and public-sector leaders to be the catalysts of the blockchain transformation.

About LBA’s Roadmap 2025, the strategy for the entire Liechtenstein banking cente The Roadmap2025 is the multi-year strategy of the Liechtenstein banking centre. It is all about “growth through sustainability and innovation”. Ongoing climate change is one of the greatest global challenges. We are the first generation to sustainably destroy our planet and probably the last to prevent it. The financing needed to achieve the Paris climate goals as well as the broader Sustainable Development Goals (SDGs) of the United Nations is enormous. According to PWC, the annual global investment required to achieve the SDGs amounts to 7 trillion US dollars. Currently, only one seventh of this is financed by the public sector. A substantial part must therefore come from the private sector. The financial sector, and banks in particular, can and must therefore play a central role in mobilising and channelling these financial resources. This means a great responsibility, but also brings with it a great opportunity. If we successfully accompany this transformation, we will create the necessary growth to continue to create prosperity. Increasing digitalisation has a huge potential to accelerate the needed transformation for the benefit of our future generations.