Ukraine to use blockchain technology in curtailing corruption when selling government assets

The Minister of Finance for the Ukraine, Oleksandr Danilyuk, was a speaker at the sold-out ‘Blockchain Incredible Party’ conference (BIP001) which took place Thursday in Odessa, Ukraine. In his speech, Danilyuk gave his vision for Ukraine as the leading nation in blockchain technology use, showcasing it for public service management and improving government efficiency and transparency.

Danilyuk also announced plans for his Ministry to use Distributed Labs’ eAuction, a blockchain platform for transparent auction management, in order to sell government assets and curtail rampant corruption in the current system.

“We would like Ukraine to be the first country in the world that use the blockchain in selling state assets: to sell them transparently at the highest price and to make sure that there’s no place for corruption. And I believe that the blockchain offers such opportunities.”
— – Oleksandr Danilyuk, Finance Minister of the Ukraine

Besides the immutable nature of the public asset ledger, the Finance Minister pointed out that a major advantage of the blockchain-based system is that it completely eliminates the possibility of administrative interference during bidding.

Danilyuk announced that the first online auctions using the blockchain can be transferred to the state Deposit Guarantee Fund of Individuals (FGVFL), which currency manages about $450 billion UAH, or $18.1 billion USD at current rates. That is reportedly equal to two-thirds of the sum of the budget of the whole country. "New online auctions will be fully transparent and open,” Danyluk explained.

“This technology will help eliminate corruption in government sales, as well as save taxpayers billions of hryvnia. That’s my main goal.”

• Danilyuk

As a bonus, the Finance Minister mentioned that costs would be reduced from running the old, paperwork-based auction system. “Furthermore, the implementation and maintenance of the system does not require any financial or time resources.”

His presentation included a slideshow showing how the eAuction platform, Auction 3.0, will fit into the existing infrastructure and interface with existing government and banking systems. He revealed that even the largest banks are happy to integrate the new system.

A programmer from Auction 3.0’s developer Distributed Lab, Dr. Pavel Kravchenko, recently talked to IBTimes about the Ukraine’s need for the software. "Everybody knows that the state doesn’t run things efficiently,” he explained. “The government has to get rid of the land it owns to pay back its debts to the IMF, which also requires the state to reduce its control of assets.

"This project is helping to drive change in Ukraine. International investors have forced the Ukrainian government to fight corruption, so now the state can use this project as a sign to say: ‘Ok, we are fighting it’.”
— – Dr. Pavel Kravachenko, Distributed Lab

Kravachenko said that the business community in his country is already informed about, and excited by, the project. "We even have a billboard installed all around the capital that say the ‘first in the world blockchain auction – a cure to corruption’.”

The developer believes he has even spotted some positive change happening because of the program too. One of the incumbent banks that he sees as a likely party to the corruption of the old system has already embraced Auction 3.0. "Imagine, the biggest bank that is owned by the oligarch, actually doing this as well. They are doing a lot of open-source stuff as well as using the open auction.”

A few other top names in finance and banking were speakers at the BIP001 conference. Timur Khromaev, the Head of Ukraine National Securities and Stock Market Commission spoke about the ‘status quo’ usage of blockchain in the Ukraine, and Roman Sulzhik, the Chairman of the supervisory council of Ukrainian National Depository, spoke about the many different opportunities that blockchain offers his country. Many other blockchain experts from both inside the country and from other countries had speaking slots too.

Lasha Antadze, co-founder of the Foundation Innovations and Development, was another speaker. The founder of the eAuction project, Antadze was perhaps the man most responsible for bringing it to the finance minister. His foundation developed the already-proven ProZorro procurement system, which Auction 3.0 is replacing. Together with his partner, David Kiziria, Antadze has been working on Auction 3.0 since the previous BIP001 conference in September 2015. Testing began in February, and it’s now up to the Finance Minister to authorize full production. There is no word yet on a target date.

The Ukraine is one a black sea-bordering countries that has had an impressive amount of Bitcoin adoption and network integration already. There has been an ongoing legal effort to completely legalize bitcoin for use as money in the country. Even with its’ current, murky regulatory status, residents of the country enjoy some of the best access to buying bitcoins anywhere, with the ability to walk up to more than 10,000 public Kiosks that sell them for cash.