The National Mining Agency (ANM) is the highest authority for mining matters in Colombia – but for many years the agency has been seen as somewhat old-fashioned. Over the past two years, however, ANM has moved boldly to the forefront of technology adoption. Most notably, it is now implementing blockchain technology to track mining concession contracts.
Through this implementation, the agency records each mining concession contract as a non-fungible token (NFT), making it a unique, encrypted digital asset. As a bit of background, fungible tokens can be exchanged for each other. An example is the dollar bill; all bills are equal in value and any dollar bill can be exchanged for any other dollar bill. Each non-fungible token, on the other hand, is unique. Colombia’s NFT mining concession contracts are unique, encrypted digital assets.
According to the agency’s announcements, the ultimate goal is to register all mining titles and contracts on the blockchain. But for now, priority is given to legal activities linked to strategic mining areas. For example, the strategic mining area contract between ANM and Carbomás regarding the mining round for copper has been registered on the public blockchain GoChain.
Many people wonder why ANM chose to implement this digital technology for mining contracts? What benefits did it see in this implementation?
A key advantage is that this technology allows the tracking of any modifications to the concession contracts, which means that ANM can know the history of the contract’s content and any changes to it. Because of this, ANM monitoring of past and future changes in the scope of the contracts is easier to achieve, which is essential for documents containing a significant number of pages that are subject to long periods of negotiation by various parties.
Blockchain technology for mining concession contracts is also changing how these documents are secured. Since every node in the blockchain network has a copy of the papers, there is no way to change them in secret – any changes will be visible to the entire network of nodes. In addition, the stored documents may be encrypted or coded.
In the past year, mining operations have experienced financial challenges; any positive change in the conditions under which this business competes is helpful. Blockchain technology enables ANM to monitor the authenticity of mining concession contracts, which also upgrades the agency’s documentary legality level. Changes like this, which enable ANM to better fulfill its role thanks to technological document authentication, will make the mining business much more attractive to investors.
While the agency has acknowledged the benefits of blockchain implementation for mining concession contracts, it has said little or nothing about the challenges it may face. First, it is important to remember that blockchain technology has not been regulated in Colombia (as in many countries around the world[1]), which is the reason why the adoption involves submitting to the challenges that regulatory failure or a forthcoming regulation may entail, including unfavorable or legal situations.
Further challenges may arise in the context of cyber security. Protection of the personal data of contracting parties stored on a public blockchain, as well as the content of such agreements and the traceability of contracts under development, is a serious concern. Phishing, ransomware attacks, and other forms of cyberattacks all pose a risk to the information stored on public blockchains.
Yet, despite such risks, Colombia’s implementation of blockchain technology to store and track mining titles is being watched by other Latin American countries with interests in extractive mining processes. This avant-garde action has differentiated Colombia from other countries in the world, where most of them have invested in implementing this technology for land titles,[2] or simply to research the extent of the implementation of blockchain technology in the day-to-day operations of their administrations.[3]
Moreover, Colombia’s experience is a positive message for those in the mining sector who are reluctant to innovate and modernize. The message is not that the mining sector as a whole should rush blindly to adopt digital technologies. It’s that, done carefully, such new technologies can be transformative – improving information security, protecting the supply chain and even attracting more investment.
In sum, for both the agency and other Latin American countries, the ideal goal would be to study how Colombia implements these new technologies and assess both the benefits and risks of implementing such changes. For those who continue to care, there is much to learn and gain from Colombia’s example.
