Ottawa’s blockchain-based travel ID is programming another crypto crash

by Arthur · October 5, 2022

The Known Traveler Digital Identity project had a funding gap of $40,908 for 2021

Blockchain, a type of database technology, enables the verification and storage of information without a central administrator. Photo by Getty Images/iStockphoto

The Known Traveler Digital Identity pilot project, a blockchain-based collaboration between Canada, the Netherlands and the World Economic Forum, has been put on hold indefinitely – another burgeoning cryptocurrency-adjacent program that started when bitcoin soared.

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

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

It is unclear whether a wider KTDI program from the WEF is still ongoing 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, Dutch government spokeswoman Charlotte Hees said this was due to the implementation of a separate EU digital identity program, the Entry/Exit System, and the suspension of a current biometric travel program that would have provided the hardware to KTDI. Transport Canada spokeswoman Sau Sau Liu said in a statement that the program had previously been paused due to air travel challenges resulting from the pandemic.

“KTDI Pilot Project partners have not started restarting pilot activities due to significant challenges in the airline industry,” Liu said.

“The project team continues to work now to assess the potential use of similar technology to improve air travel services in general.”

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

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

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

Among other problems identified were the inability to hold face-to-face meetings in the midst of 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 shortfall 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 after the crypto boom of 2017, when bitcoin went from US$1,000 to US$20,000, and groups not normally associated with the industry had begun to embrace it.

Blockchain, a type of database technology, enables the verification and storage of information without a central administrator – bitcoin, for example, runs on a blockchain without any party monitoring it.

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

However, it had attracted its own criticism. The initial point of blockchain was to facilitate a leaderless, decentralized project like bitcoin. Information and database management otherwise don’t require blockchain, making other use cases simply jumpstart, critics said.

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

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

Such projects are often shelved without fanfare when prices fall and mainstream attention turns away from crypto, and their advocates 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 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.