New, futuristic ‘blockchain cities’ are just castles in the air
New cities are cool. Blockchain is cool. Combining the two sounds very cool.
But while governments may have good intentions, ambiguous efforts to enable innovative blockchain solutions frequently miss the mark — leading to unintended consequences and attracting fraudulent actors.
Over the last five years, several governments around the world have announced the creation of “New Cities.” Many of these cities will supposedly feature blockchain; but for the most part, details remain vague.
The nonprofit Charter Cities Institute published a detailed map illustrating the proliferation of New Cities earlier this year. This map reveals that more than 45 New Cities are under construction, mostly in the Middle East, Africa, and Southeast Asia, with a total development budget hovering around $6 trillion.
There are definitely clear-cut cases where adopting blockchain technology would improve urbanization; property registries come to mind as the perfect example.
But many of these city development projects are using blockchain and cryptocurrencies as buzzwords rather than a solution to hype up and lure investors without needing to deliver anything.
Governments may harbor the belief that they can create fertile grounds for innovation by establishing blockchain spaces. But instead of fostering genuine progress, these initiatives often become hotspots for fraudsters wielding blockchain technology as their shield.
Aimlessly waving the blockchain flag
New cities in Saudi Arabia, Egypt and Indonesia highlight the inconsistencies of governments promising to deliver on blockchain and then failing to do so in any tangible way: Perhaps they don’t even know how.
NEOM in Saudi Arabia is the new city with probably the most global attention right now.
With massive funding — totaling $1 trillion from the country’s sovereign wealth fund and additional private capital — NEOM was touted as the next big thing in crypto. NFT websites widely reported on the announcement of NEOM’s $6.4 billion tech fund, stoking community hopes that it would invest in NFTs. Middle Eastern news outlets picked up on this, publishing headlines such as “Saudi Arabia to invest billions in metaverse, blockchain technology.” Arab News rhetorically asked “Will Saudi Arabia become a true trailblazer for blockchain innovation?” YouTubers began using this as evidence that Saudi Arabia, which outright banned cryptocurrencies from banks in 2018, was about to reverse its stance. My own conferences and events — which attract a crowd with a foot in both New Cities and crypto — began getting flooded with questions about NEOM’s use of these technologies.
Despite this, the city has only confirmed a single blockchain platform, cybersecurity platform Arqit, leaving much of its early expectations shrouded in mystery. NEOM has two dedicated tech venture capital funds, Neom Tech & Digital and Tonomus, but it has yet to disclose any investments related to blockchain as of July 2023, despite targeted investment sectors in virtual and augmented reality, robotics and data analytics.
The significant press attention has spawned dozens of scam-coins that attempted to use NEOM’s name to pump and dump worthless tokens.
NEOM’s official website has warned and emphasized that it has no association with third-party claims of a NEOM cryptocurrency, nor does it intend to offer any at this time. They also confusingly say that NEOM is currently investing in blockchain technology to “power the development of its city” — despite no sign of these investments.
This planning discrepancy between blockchain promises and realities is a recurring theme in these new cities.
Egypt’s “New Administrative Capital” (NAC) — about 45 kilometers east of Cairo — aims to be an environmentally friendly, high-tech smart city. And Egypt is a country that desperately needs blockchain and cryptocurrency.
For example, one of Egypt’s largest real estate developers told the press that Egypt’s lack of a clear property rights registry would be a major barrier to developing Egypt’s NAC, instead suggesting that the government create a blockchain-powered registry.
The government has responded by taking a schizophrenic stance on whether or not it will deploy blockchain for its new Administrative Capital.
The Egyptian Ministry of Communications and Information Technology announced vague plans explaining that the government will use technologies such as blockchain register property, track carbon, and digitize banking by 2030. Likewise, the US State Department confirmed that the Egyptian Financial Regulatory Authority will regulate how banks use blockchain.
In both instances, few other details have been revealed.
More significantly, the government has helped fund Nile University’s blockchain accelerator — the first blockchain tech accelerator in Egypt. This accelerator explicitly focuses on smart cities, supply chain, and Internet of Things applications, but will not fund any tokenized projects.
Paradoxically, Egypt’s top Islamic scholars have declared cryptocurrencies as “haram.” Since 2018, cryptocurrency has been mostly banned in Egypt. The Egyptian government again strengthened its prohibition in September 2022. This simultaneous push-and-pull approach is counterintuitive.
In Indonesia, Jakarta faces the risk of severe flooding due to climate change — so the government announced a plan to build a new capital city called Nusantara. Nusantara promotes itself as an eco-city, following the UN’s Sustainable Development Goals and plans to build much of its structure on the blockchain.
Read more from our opinion section: Fiat is worth saving
President Joko Widodo expressed interest in attracting digital nomads and millennials who would use cryptocurrency to purchase stylish apartments in the city, in addition to creating a parallel city in the metaverse which is to feature “land tokenization.” Several unofficial cryptocurrencies and blockchain projects have appeared to facilitate this transition, and at least one has genuine government support.
However, the Indonesian government’s historical inconsistency with blockchain is evident, with a ban on regulated financial firms trading cryptocurrencies, which was followed by state-owned enterprises pushing for the digitalization of banking services and the adoption of cryptocurrency.
This chaotic attitude is further highlighted when police in Bali arrested a small business owner for accepting cryptocurrencies, despite Indonesia having one of the highest cryptocurrency penetration rates in the world, with 17 million Indonesians owning cryptocurrencies.
Fostering genuine innovation
The surest indicator of a bad investment is hype. The more hyped-up a project is, the less likely it is to succeed. By contrast, the least hyped-up projects (or those most grounded in reality) often do the best in the long term.
Prioritizing buzzwords undermines the credibility of real-world applications of blockchain technology in urban development, of which there are many. From securing and decentralizing data sharing across sectors such as property, transport or energy; to facilitating blockchain to be used by local businesses and banking institutions.
It is crucial to prioritize practicality and tangible results over hype and vague promises.
Innovation arising from New Cities comes from the people within them; when the government accepts that they are merely a catalyst, and not the innovation itself.
Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.
Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.
Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.
