Blockchain: Replacing, Eliminating and Creating Trade in Services

Abstract

Blockchain is a distributed or decentralised ledger technology that uses cryptographic algorithms to verify the creation and transfer of digitally represented assets or information over a peer-to-peer network. It eliminates the need for a central authority to keep, update and verify data. Traditionally, services provided by these central authorities constitute a significant part of the services industry. This paper argues that Distributed Ledger Technology (DLT) is changing the services industry in three ways. First, services previously provided by central authorities are now being replaced and supplied jointly by some or all participants on the distributed ledger. Second, with the elimination of central authorities, auxiliary services used to support the operation of these central authorities are being eliminated. Third, services trade may be expanded and become more inclusive by engaging previously disadvantaged or marginalised individuals. This paper further argues that the General Agreement on Trade in Services (GATS), as the first and the only multilateral trade agreement on services, is highly relevant for the development and regulation of DLT-based applications. This relevance is unpacked by: (i) identifying the services relevant in the context of DLT-based applications; and, (ii) exploring whether a WTO Member, in adopting regulations affecting DLT-based applications, needs to consider its obligations under the GATS. The paper arrives at the conclusion that the GATS can be an effective instrument in expanding trade in DLT-replaced or enabled services.