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Ethan Lou: Ottawa's blockchain-based traveller ID program another casualty of crypto winter

Cryptocurrency Bitcoin symbol crypto binary virtual data blockchain tech glowing background
Cryptocurrency Bitcoin symbol crypto binary virtual data blockchain tech glowing background

The Known Traveller Digital Identity pilot project, a blockchain-based collaboration between Canada, the Netherlands and the World Economic Forum, has been paused indefinitely — another fizzled cryptocurrency-adjacent program that started when bitcoin was sharply rising.

The KTDI project was announced in early 2018. It sought to use blockchain, biometrics and artificial intelligence to speed up the process of screening travellers to a country.

The Dutch side attributed the decision to pause the project to “changed priorities,” though Canada, which has earmarked $105 million, seems to remain enthusiastic about restarting it.

It is unclear if a wider KTDI program by the WEF is still going on in some form. The WEF did not respond to a request for comment.

In September, the Dutch government was asked about the digital identity program in the legislature, and Migration Minister Eric van der Burg said: “There are currently no concrete plans to implement the KTDI pilot.”

In a brief statement to the Financial Post, a Dutch government spokeswoman, Charlotte Hees, said that was due to the implementation of a separate European Union digital identity program, the Entry/Exit System, and the suspension of a current biometric travel program that would have provided the hardware for KTDI.  Transport Canada spokeswoman Sau Sau Liu said in a statement that the program had earlier been paused due to air travel challenges arising from the pandemic.

“KTDI Pilot Project partners have not initiated the restart of pilot activities due to significant challenges in the air travel industry,” Liu said.

“The project team is continuing to work now on assessing potential use of similar technology for improving air travel services overall.”

Liu said the project has spent $430,000 over four years, with other partners making “significant” contributions.

When asked how specifically the $105 million earmarked for the KTDI, announced in the recent federal budget, would be spent, Liu said: “Budget 2021 identified $10.2 million per year ongoing to Transport Canada to collaborate with international partners to advance the digital identity pilot project and other similar initiatives, testing innovative technologies with industry partners to facilitate touchless and secure air travel… Transport Canada is in the early stages of planning for this project.”

An internal Transport Canada assessment from 2021, seen by the Financial Post through an access-to-information request, shows that top risks to the success of the project included bureaucratic issues of aligning legal frameworks between various parties and a technical issue of setting up cloud connectivity.

Among other issues identified were the inability to hold face-to-face meetings amid the pandemic and the lack of a mechanism governing the sharing of intellectual property between governments.

According to the internal assessment, the KTDI project had a funding deficit of $40,908 for that fiscal year.

While only part of the project involves blockchain, it had come amid a wave of such projects announced following the 2017 crypto boom, when bitcoin went from US$1,000 to US$20,000, and groups not normally associated with the industry had started embracing it.

Blockchain, a sort of database technology, enables verification and storage of information without a central administrator — bitcoin, for example, runs on a blockchain without any one party overseeing it.

A “blockchain, not bitcoin” movement emerged amid the 2017 bitcoin boom. More mainstream players disliked what they saw as the volatility and hype of crypto but saw value in the underling technology and sought to apply it elsewhere.

That, however, had attracted its own criticism. The initial point of blockchain was to facilitate a leaderless, decentralized project like bitcoin. Information and database management do not otherwise require blockchain, rendering other uses cases mere bandwagon hopping, critics said.

Regardless of the specific application, the KTDI was not alone in the waves of outside interest of crypto or blockchain following the 2017 bitcoin boom.

Long Island Iced Tea infamously changed its named to Long Blockchain Corp. Eastman Kodak Co., known for photography, turned to crypto mining. In Canada, Yum! Brands Inc.’s KFC started accepting only bitcoin for a certain bucket of chicken. The government of Venezuela launched a cryptocurrency called Petro.

Such projects often end up shelved without fanfare when prices fall and mainstream attention turns away from crypto, and their proponents have often been burned. Long Blockchain Corp., for example, ended up delisted from the Nasdaq stock exchange.

The EU’s Entry/Exit System, which the Dutch government’s Hees said was partly why the KTDI was sidelined, does not involve blockchain. Transport Canada’s Liu did not mention blockchain when outlining the future of digital identity programs.

Ethan Lou is a journalist and author of Once a Bitcoin Miner: Scandal and Turmoil in the Cryptocurrency Wild West.