Why It Took 10 Years For The Blockchain Enlightenment To Hit Europe

By Christophe De Courson, CEO of Olymp Capital

“Oui, c'est l'Europe, depuis l'Atlantique jusqu'à l'Oural, c'est l'Europe, c'est toute l'Europe, qui décidera du destin du monde!” 

Yes, it is Europe that will decide the fate of the world!’ French President Charles de Gaulle may have been right in the 1950’s, but when it comes to technological innovation today, Europe is now trailing behind not only the US and Japan, but also China. Recently, the Asian giant overtook the EU with R&D expenditure over 2.% of GDP in 2017. Today, not one of the world’s 15 largest digital firms is European. In Germany, cash is still the means of payment in some 80 percent of point-of-sale transactions.

Europe has even been slow to react to a significant global trend of recent years: the growth of blockchain technology. A distinct lack of funding, education and a conservative frame of mind have been causes for Europe’s slow start. Nevertheless, in 2018 the tide changed. The European blockchain boom finally kicked off. This is, in part, due to a concerted effort to educate consumers, general investor confidence, and a shift in mindset among Euopean business leaders. Although late to the party, it is estimated that Europe will increase its spending from around $400 million in 2018 to $3.5 billion in 2022, helping it to close the gap with the U.S., the biggest blockchain investor. 

Investors, where art thou?

While the US and parts of Asia quickly poured money into blockchain, Europe was left in the dust. Across the board in 2015, more than 20 times as much was spent in later-stage venture capital investments in the US compared to the EU. European projects have lacked access to the Silicon Valley capital pools, which have also started to bubble in China and other parts of Asia. In the US for the past twenty years, technological developments and investment in intellectual property have been the main drivers behind its economic growth. Emerging technologies, such as blockchain, offer potentially significant gains for society, but they will not be realized without substantial long-term investment in cutting-edge innovation. Europe is now waking up to this.

Through H2020 the European Commission is focusing on the development of blockchain technologies and its applications. The Commission is already funding a significant number of projects utilizing blockchain in areas such as managing and controlling access to medical and personal data and Internet of Things (IoT).

In order to compete, big money must come for European blockchain projects. Europe has always had an exceptional reputation when it comes to academics and research, but has at times lacked the funding necessary to take enterprises to a global level. If projects can effectively showcase the quality of their businesses and draw investors across the pond, capital flows will elevate blockchain to mainstream channels and help enterprises ride the blockchain wave that is crashing over Europe.

Shifting towards education

What has been a significant factor in the instigation of the blockchain enlightenment has been the establishment of initiatives backed by the EU aimed at promoting the technology. In Europe, two major initiatives have led the way —the European Blockchain Observatory and Forum and the European Blockchain Partnership (EBP). It’s worth noting both were only founded in 2018, ten years after the inception of Bitcoin.

In February 2018, the European Commission, in collaboration with the European Parliament, launched the European Blockchain Observatory and Forum. The Observatory and Forum acts as a stakeholder engagement platform, an initiative to accelerate blockchain innovation and uptake. Similarly, in April 2018, 21 member states and Norway agreed to sign a Declaration creating the European Blockchain Partnership (EBP) and cooperate in the establishment of a European Blockchain Services Infrastructure (EBSI) that will support the delivery of cross-border digital public services. 

Despite this good news, a recent report from the EU Blockchain Observatory and Forum correctly asserts that both the US and China have promised big on blockchain research, with the former even going so far as to include it as part of its USD 700 billion defence budget. The EU is playing catch-up in a competitive game.

Progressing perception

French billionaire businessman Xavier Neil said, "The real force of Silicon Valley is the mentality, the spirit. There's no reason at all that can't be replicated in Paris." Let’s hope he is right. Cognizant, one of the world’s leading professional services companies, conducted research titled "Blockchain in Europe: Closing the Strategy Gap." Their analysis found that while European companies have identified breakthrough ideas on how blockchain can solve some of the most pressing problems in business and society today, there is a huge gap in the progress of European companies toward turning those ideas into reality, particularly from a strategic viewpoint.

Europe's skeptical mindset towards innovation is nothing new, when compared to other jurisdictions.  A recent EIB Investment Report shows that EU firms are twice as likely to focus on adopting existing innovations, while only 8% can introduce new products to their markets. Consequently, many small firms relocate to the US, where established companies are more willing to innovate and experiment with new technologies. 

Europe is, however, seeing a shift in this mindset. In 2018, Europe produced three of the ten biggest VC-backed public listings, Spotify, Adyen and Farfetch. European blockchain technology companies had a record year in terms of VC investment too. Breaking through the mold of conservative attitudes towards emerging tech will be essential in the European blockchain enlightenment. 

Last year was a remarkable year for blockchain in Europe, and the enlightenment is only beginning. Europe was the second-largest ICO market in the world in 2018, both in terms of the number of deals and amount raised — a reassuring figure. By focusing on attracting inward investment, promoting education through the creation of initiatives at a high level, and changing mindsets, Europe’s blockchain domain can rival any other. We are witnessing an awakening across the continent - Allez, Allez!

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.