Matthew Hale
Matthew Hale

Matthew Hale

11.03.2021. in Thought Leadership, Solutions, Fitech, Regtech

Submission to Senate Select Committee on Fintech and Regtech - Part 3

Part Three: Opportunities

Block8 recently provided a submission to the Australian Senate’s Select Committee on Financial Technology and Regulatory Technology. We focused our discussion on the use of distributed ledger technology (DLT) and its relevance to the Committee’s two public consultation papers that were released during 2020, as well as the Committee’s terms of reference in general.

The perspective we provided was one not just as technologists, or as blockchain specialists, but as a holistic product development company. Block8 not only provides professional services, but also co-ventures with subject matter experts to design, build and commercialise full-stack and production-grade software solutions. We understand the importance of discussing these topics with a practical lens. In isolation, DLT presents several novel characteristics when designing a new software application, but we must look to integrate a number of related technologies and considerations in order to realise its full potential. This includes things like scalability techniques, rules as code, privacy-preserving technologies such as zero-knowledge proofs and secure hardware, and digital identity.

This blog series mirrors our submission to the Committee, covering the following points of discussion:

  • [1] Introduction, providing the context and motivation for our submission from our CTO;
  • [2] Challenges, discussing blockchain awareness and innovation culture;
  • [3] Opportunities, discussing the scope of FinTech and RegTech opportunity for Australia;
  • [4] Regulation, with a focus on the Consumer Data Right;
  • [5] Technology, covering the characteristics of blockchain and misconceptions; and,
  • [6] Conclusions, which summarises our present challenges and imperatives.

If you’re in any way curious about the future of digital technology, particularly as it applies to Fintech, Regtech, or the future of the Australian digital economy, we hope you will find some value from this series.

As before, new blogs will be published each week, but if you want to read the full submission early, you can do so below.




In Government

Standards and International Leadership

Australia has a clear opportunity to demonstrate innovation leadership internationally by leveraging the (Australian-chaired) blockchain standards for use in digital innovation domestically.

Distributed ledger technology offers several desirable properties that are simply unavailable to centralised technologies. To not set a clear policy agenda to strategically leverage DLT for Government technology initiatives would not only be a disservice to our leadership on the development of the international standards, but also delay capitalising on the benefits it offers our economy. DLT has enormous potential in delivering policy digitally that natively supports interoperability with other Government functions as well as provides an infrastructure of programmable civic information able to be leveraged by novel FinTech and RegTech solutions. 

Public Data

It is difficult to overstate the economic benefits associated with using blockchain to deliver public sector data and information services.

Public record keeping is one of the simplest and most powerful applications of blockchain. With an appropriate solution design, blockchain technology can absolutely support strong privacy requirements, and while tremendously simplifying use cases designed to manage fully public information.

CSIRO has called this out before. In their response to the consultation on the revamped Digital Economy Strategy, they reiterate that "Australian governments need consistent registries. Consistent, reliable, accurate and secure registers of information about citizens, licences, businesses and entitlements is needed to improve the effectiveness of government service delivery. At the current time, registers are maintained by numerous agencies and there are substantial costs in ensuring consistency and lengthy remediation activities when this consistency is not successfully maintained."

Consistency of data held between multiple locations is precisely the functionality that a distributed ledger offers.

There are immediate opportunities for the Government to use distributed ledger technology to provide a superior means of delivering an infrastructure for public information with upgraded public registers. With blockchain,  such information develops a ‘single key view’ to integrate all Government and other public information, such as:

  • Incorporation, licencing, and public notices for corporations;
  • Emissions trading schemes such as carbon and salinity; and,
  • Other civic affairs, such as land titles, births, deaths and marriages, licencing and electoral rolls.

A distributed  ‘single key view’ allows everyone from individuals, companies and Government agencies to agree on a single source of truth for the particular data in question, completely eliminating redundant, erroneous, and incomplete data across fragmented centralised databases.

Treasury’s recent Review into Open Banking also highlights this opportunity. Recommendation 2.9 explicitly captures the need for a universal system for managing addressable entities, known as the “Address Book.” This is again another ideal use case for a distributed ledger system as it ensures that all connected systems refer to the same system of record; centralised API-based systems copy information, ultimately leading to the propagation of errors and omissions.

For financial and regulatory innovation, the application space to leverage such a public data infrastructure is immense.. There are thousands of public registers that are legislated into existence at all levels of Government, and the ability to access them ranges from well-maintained APIs to physical paper forms to access paper copies processed by under-resourced staff and weeks of wait time.

Infrastructure for the Digital Government

There are a range of benefits in employing blockchain technology to deliver digital public services, however there are two at the core:

  • The total elimination of duplication of information for downstream systems that point to the blockchain as the authoritative source of truth.
  • The ability to program the information natively, without the need for a separate API, which is often incomplete or awkward to implement for use cases that were not anticipated. The innovation gains from this would dwarf those gained from deduplication.

Blockchain has very real potential to form the centrepiece of digital government infrastructure, service delivery, and policy, both here and abroad. Regardless of our Government’s technology strategy, we expect to see numerous international examples in this area in the coming years.

In Enterprise

Financial products that are deployed on distributed ledger technology are natively digital. This is in contrast with traditional methods, where the source of truth for a financial product is often a paper document.

DLT provides an opportunity to standardise common elements of financial products, allowing participants on a network to leverage machine readability as well as the possibilities associated with financial product composability. This of course includes the consumer data that goes along with it. Standardisation efforts such as those conducted under Open Banking are a first step toward such a future.

While we recognise that licenced organisations must be sufficiently free to innovate in terms of financial services, standardised frameworks for consumer data, financial products and consent management will enable a highly consistent digital experience across multiple industries. And using distributed software instead of centralised software for the native digitisation of consumer rights and obligations, we can also expect superior end-user control, comprehension and competition in a way that was previously unobtainable.

Financial services will be the natural epicenter of blockchain innovation given that the nature of these assets is already non-physical, but not yet in the sense of a natively digital asset that only exists on a distributed system. Distributed ledgers converge financial products and financial technology into the one fabric, allowing the truth of an asset to be both securely shared and jointly programmable.

Blockchain and Regional Security

Of potential relevance to this question is Australia’s unique geography. The National Blockchain Roadmap identifies the Red Belly Blockchain (RBB) as developed by the University of Sydney in partnership with Data61/CSIRO, as an example of the potential for blockchains to scale.

Blockchain scalability has been a recurrent thematic concern. Questions on the ability for blockchains to scale were originally raised with first-generation technologies such as Bitcoin, however significant development over the past decade has yielded several scalable implementations such as RBB.

Beyond scalability, RBB in particular also enjoys a unique set of properties and features that are relevant to our isolated landmass in the region. Beyond its extreme throughput, RBB does not sacrifice security, and in fact, exhibits enhanced security properties in certain scenarios.

In addition to all major and otherwise interesting distributed ledger technologies, Block8 has also taken the time to understand what makes RBB unique, and would like to take this opportunity to highlight our findings.

RBB is designed for building ‘permissioned’ blockchains. Its novel consensus algorithm supports node counts up to 300 before network traffic saturation becomes a limiting factor on throughput. Other common blockchain technologies, such as Ethereum, Algorand, Tezos and Polkadot are designed to maximise decentralisation with node counts in the tens of thousands - this is done under the assumption that this improves security in massively open global public networks that are operated by completely untrusted, anonymous validating nodes. Porting these algorithms then to comparatively smaller permissioned networks brings their design constraints along with them, including favouring network availability over consistency (i.e. prioritises network up-time over the possibility of a double-spend in the presence of a ⅓ malicious coalition or network partition).

RBB does the opposite and prioritises the correctness of blockchain data over its ability to continue to add new data. This property alone means that blockchains built with Redbelly never “fork” (split into two divergent sources of truth, thereby corrupting the data), despite the comparatively small node count which would traditionally imply it has a reduced ability to protect against this scenario.

The secure-by-design approach taken by RBB makes it ideal for critical applications operated by enterprise consortia or Government which require very high guarantees of data and operational integrity. This also makes RBB immune to massive physical connectivity faults caused by natural disaster, as well as attacks sponsored by an adversary who can afford to ignore a financial penalty.

RBB is also scalable, maintaining approximately 80,000 transaction confirmations per second and a very prompt latency (block time) of 3 seconds. It’s the fastest blockchain in the world.

Programmable Assets: from Big Tech to “Open Tech”

Block8 recognises the initial steps that have been undertaken by the Government to seek to understand and provide regulatory clarity on a range of blockchain-related matters. We would however like to introduce some brief comments with respect to understanding the nature of ‘tokens’.

Open Finance

Perhaps the most exciting innovation to emerge from the Cambrian explosion of blockchain-related technologies is the property of programmability that can be applied to traditionally recognisable financial products. If there was previously any grey area in the creation of new financial products fitting into one or another definition for blockchain-based tokens, that grey area is now a colourful maelstrom of composable, and often time-dynamic, programmable financial instruments. 

“Initial Coin Offerings” (ICOs) are currently not as popular as they once were, however more recently in the public blockchain space is the emergence of “Decentralised Finance,” or “DeFi.” We note that these ‘protocols’ often also require a token to participate and/or incentivise the participants.

DeFi technology is extremely novel; the Ethereum blockchain which hosts the vast majority of such projects is a global test-bed for world-changing ideas. Currently, the value of these protocols is almost entirely speculative based on the potential value of their future network effects (the smart contract software that comprises both the protocol and any underlying token are open source, and so the value of any given protocol can only ultimately be derived from their user ‘stickiness’ to continue to drive demand).

It should be noted however that in 2020, leading public blockchains and Ethereum in particular have finalised their roadmaps to global and privacy-preserving scalability. Block8 expects that Ethereum will achieve these roadmap development milestones over the next 3 to 7 years, bringing significant disruptive forces along with it.

On “Utility” Tokens

The nature of how a smart contract is programmed (as well as offered) influences whether it is a security, a collectable, a non-cash payment facility, a redeemable coupon, or similarly, a means to pay for a set of blockchain network validators to operate a consensus protocol and thereby provide algorithmic security (trust) to any transaction or data that is submitted to the validators of the ledger.

Function over form is key to deciphering a token’s classification; wherever the representation of a conventional security is deployed, be it on a blockchain or on a spreadsheet, is irrelevant to its legal treatment.

But while part of the complexity of tokens is that they can take many forms, a significant confounding factor is that tokens can take on the properties and functions of more than one type of asset that has previously existed. For example, a tokenised share of mock private company “Broadcast Token Solutions Pty Ltd'' is an equity entitling the bearer the rights to future cash flows, where the source of truth for the company’s share register is located on a distributed ledger.

As we know, data that is held on a distributed ledger is able to be programmed according to the rules of the smart contract such that the data updates simultaneously in multiple locations. This of course means that the equity (data representing some unit of value) can now be programmed without the use of a third party to host the digital asset on a database. But because the equity is now natively digital, it can also be used within the software product that the company offers its customers. This may be done in order to accept the equity token as a means of payment for engaging with the company’s software product, thereby converging the value of the software (including the value of the network effect of the users) with the value of the company. 

These kinds of tokens have sometimes previously been referred to as ‘utility tokens’ and were the subject of much regulatory debate over the past few years. However while Australian regulators have sought to understand and provide regulatory clarity with respect to ICOs, this particular scenario has not been explicitly considered for its innovative potential. 

In our view, this kind of hybrid financial-software construction represents one of the most significant financial technology innovations in recent memory. These tokens may ultimately come to be recognised as an entirely new asset class given their unique compound of properties, being either managed under a not-for-profit or a profit-minimising public company in order to retain the value of the distributed software network as measured by the token required to participate in that network. The convergence of ownership and use appears to fundamentally maximise capital efficiency in such a way that the network effects they sustain would be practically permanent.

If we are correct in this, then due consideration to these kinds of financial asset-software networks is needed. We should seek to ensure that Australia is able to accommodate such initiatives domestically in order to ensure our participation in the creation of them.


Block8 would be happy to further discuss our thinking on any of the topics covered above, including specific detail on solution architectures and demonstrations of currently working distributed ledger systems developed to address the challenges and opportunities outlined in the Issues Paper and our Response.

Our experts are also available to assist with research mapping the value chains for centralised and decentralised approaches, the identification of the highest-value areas for a consumer-centric data infrastructure, or working with the Government and other members of industry in the development of pilot or production programs.



[1] By ‘blockchain’ here we refer to a traditional ‘broadcast’ blockchain network where public information is disseminated to all nodes equally to ensure they all hold the same source of truth. This is a specific, yet common, design of a more general point-to-point connection (‘mesh’) network architecture.

[2] CSIRO Response to the National Digital Economy Consultation Paper, The Digital Economy: Opening the Conversation, 2017

[3] Smart contracts are programs that operate on a distributed ledger system. A smart contract can be thought of as database control logic that is securely shared between participants in the distributed ledger network and therefore can be interacted with directly.

[4] It must be noted that while such radical thinking would require years of regulatory homework to ensure approval for use in Australia, such systems are already live on public blockchains, most notably Ethereum. Newly composed financial-like instruments are routinely created and launched within the span of a few weeks, often implementing the very latest research in both cryptography and economics.

[5] The RBB consensus algorithm was tested on standard cloud hardware. Performance improvements for a production deployment should be expected with both software optimisations and dedicated hardware.

[6] Blockchain Challenges for Australia: an ACS Technical Whitepaper, ACS

[7] A common failure mode, or “attack,” against forkable blockchains is a 51% attack, which attempts to create two simultaneous versions of truth so that the attacker can spend their assets twice before the fault is revealed - a “double-spend”.

[8] The emergent property of programmability for a (digital) asset on a distributed ledger system may sometimes be referred to as “tokenisation.” There is still a lack of convergence of terminology across the industry, however, the prevailing distinction tends to define “tokenisation” as a distributed-ledger based digital asset combined with the properties of a bearer instrument.

[9] It is worth highlighting that while ‘blockchain’ is typically used to refer to a broadcast network where all nodes share the same information, a ‘distributed ledger’ can be formed between two or more participants in any network configuration. The configurability of a distributed ledger network allows for legal relationships to be mirrored and superior privacy outcomes.

[10] The emergent property of programmability arises from the distributed nature of the asset (data on ledger). See:

About the Author: 


Samuel G Brooks is Block8's Chief Technology Officer.

He is an expert in developing decentralised software products and has designed numerous solutions for startups, enterprise, government and OpenTech since 2014.

Samuel regularly speaks at technology conferences, meetups and podcasts, and holds several advisory positions on technical industry boards and committees. He is a also a heavy contributor to blockchain and fintech-related public inquiry and writes about the nature and benefits of distributed ledger technology on our blog.

Samuel holds a degree in Electrical Engineering from UNSW, and has stayed close to both the code and the latest research ever since encountering Bitcoin in 2011.

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