House Subcommittees Examine Emerging Applications for Blockchain Technology

The main focus of the February 14, 2018, House Subcommittee on Research and Technology and the Subcommittee on Oversight hearing, “Beyond Bitcoin: Emerging Applications for Blockchain Technology,” was to gather information and get a better understanding of bitcoin and blockchain. Specifically, lawmakers attempted to garner a better understanding of the high profile cases that have gained a great deal of media attention. One key theme of the hearing was learning more about what the U.S. government could potentially gain from utilizing this new technology in the future.

The witnesses strongly advocated for Congressional support of a type of legal framework that would promote and fund research into the uses of the technology within the public sector. Though mentioned in Chairman Ralph Abraham’s (R-LA) opening statement, the topic of regulation was mainly avoided throughout the hearing as there was a consensus on the desired focus of the hearing: to determine uses for the potentially transformative technology. To that end, the hearing called for examples of how the technology can be used, both in the private sector and by the federal government.

The witnesses had a great deal to say about the potential uses of blockchain. Frank Yiannis of Walmart Inc., for example, discussed the innovative and efficient way Walmart is using blockchain to track food shipments. He explained, “In 2017, Walmart and IBM decided to trial a blockchain to track mangos from source to store … at the end of the trial, we proved we could cut down the time to trace food from seven days to 2.2 seconds. That’s food traceability at the speed of thought.” Chris Jaikaran, from the Congressional Research Office, discussed the tech’s use in voting systems. “The blockchain doesn’t record the vote; it records the person, the identity, the voting. The vote itself is stored on another secure system.”

The other end of the debate also was discussed: security. Lawmakers aired their hesitations about using similar platforms to share government-related information. Representatives Clay Higgins (R-LA) and Ed Perlmutter (D-CO), in particular, asked for clarification on how distributed ledgers would be secured from potential attackers. In response, Charles Romine of NIST noted that an attack that compromised 51% of a network’s computers could both disrupt a blockchain, but that these types of attacks would be less dangerous for large, powerful networks. Representative Barbara Comstock (R.-VA) was excited about the prospects of increased data security. She noted that her personal information had likely been stolen or compromised by a data breach at the Office of Personnel Management. She believes any effort to create more secure identity management platforms should be supported and that if blockchain is the best way to encrypt data, so be it.

One thing that is seemingly certain is that immediate action is not likely. Prior to the hearing, aides to the committee downplayed the prospects of immediate action, although they floated the idea that the testimony on Wednesday could form the basis of work toward some kind of legislation around blockchain. That said, IBM’s Jerry Cuomo presented the lawmakers with a list of potential actions they could take in order to provide more support for blockchain research. His top recommendation was for the government to promote projects which would directly impact the U.S. “Perhaps most importantly,” Cuomo noted, “[Congress should] recognize the difference between blockchain’s use in new forms of currency from broader uses of blockchain when considering regulatory policy. Carefully evaluate policies established regarding cryptocurrencies to ensure that there will not be unintended consequences that stymie the innovation and development surrounding blockchain.”

With the current partisan gridlock, 2018 midterms, and an already hefty legislative load for the second session of the 115th Congress, however, action on blockchain legislation anytime soon is unlikely. That said, it is clear lawmakers are interested. Given the substantial amount of data that the federal, state, and even local governments consider and compile each day, blockchain technology is a very exciting option. From identity management, to supply chain management, patents, foreign aid delivery, and smart contracts, these are just a few ways the information overload that is governmental bureaucracy could be handled and mitigated. Even more importantly, while lawmakers are still learning about these issues, agencies and officials are already attempting to utilize the innovative technology. Last year, the Department of Homeland Security awarded a $199K contract to advance the security of digital identity for the Internet of Things (IoT) devices. As DHS Under Secretary for Science and Technology, Dr. Reginald Brothers noted, “IoT devices are embedded within our daily lives – from the vehicle, we drive to devices we wear – it’s critical to safeguard these devices from adversaries, said DHS Under Secretary for Science and Technology Dr. Reginald Brothers. “S&T is excited to engage our nation’s innovators, helping us to develop novel solutions for the Homeland Security Enterprise.” In addition, General Services Administration (GSA), the Centers for Disease Control, Department of Defense, Food and Drug Administration, General Services Administration, State of Illinois, Treasury Department, and many other public sector entities are already utilizing blockchain technology. That said, lawmakers are still reasonably cautious. We should expect continued hearings (with another one already scheduled for February 15, 2018) and additional experimental programs or proof of concept projects before any semblance of congressional legislation or endorsement. Until then, industry leaders from across the spectrum should remain keyed into different ways the public and private sectors can engage and coordinate joint ventures concerning potential uses of blockchain technology.

Prepared by Patrick Firth, Michael Best Strategies, Washington, D.C.

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