Blockchain Tracker: Governments Inching Toward Blockchain Implementation

Blockchain technology is one of the unique ways in which efficient and reliable transactions can occur with true security and transparency.

A technology that allows all records entered in to be visible to all network members for easy monitoring, like blockchain technology, may be the best direction for the U.S. government to take, given the controversy with the last presidential election.

From digital voting and electronic healthcare records to digital property records, there are a myriad of government applications that blockchain technology would be well suited for. With all pieces of private information secure via a peer-to-peer encryption system, the likelihood of a cyberattack on government documents by foreign or domestic entities would see a decline.

Similar to the concept that academia is behind industry, some have found government to be in a similar boat to education in terms of technological advancements. In a recent Deloitte study, Deloitte Blockchain Survey 2017: Blockchain Reaching Far Beyond Financial Services, the research giant found that 40 percent of private sector senior executives were aware of blockchain technology. As such, this means that government executives likely have less insight into the technology, which may result in a slower adoption of it into policy and practice.

Although this may not bode well for immediate blockchain technology implementation into government activities, Deloitte’s research reached a similar conclusion to IBM’s survey, Building Trust in Government: Exploring the Potential of Blockchains. Both of these pieces of research concluded that there are plans for building out blockchain uses from those government and business leaders currently aware of the technology. Of note, according to IBM’s research, 96 percent of those government executives in the U.S. who showed knowledge of blockchain technology say they plan to use it for financial transaction management by 2018.

As far back as October 2016, we heard South Carolina Republican Representative Mick Mulvaney discuss blockchain technology with Bloomberg News. He shared details about how there is actually a bipartisan caucus that was formed to help educate other members of the U.S. Congress on the bitcoin-backed technology and how it can help advance government initiatives. Mulvaney also emphasized several times that it’s likely government will be one of the last industries to adopt blockchain technology, due to various red tape.

To get a deeper dive into how blockchain technology may impact government, we sat down with sales tax management company Avalara’s EVP of Engineering and CTO, Peter Horadan. Here’s an excerpt from our conversation:

PYMNTS: How is blockchain currently being used in government?

PH: Blockchain adoption in government is proceeding very slowly, but there are some starting signs. One of the most interesting developments was when Delaware, the incorporation state of many U.S. corporations, announced a pilot program that would allow companies to track the ownership of their stock using blockchain. It allows a company to manage the ownership of their shares themselves through a blockchain, disintermediating Wall Street.

PYMNTS: How is blockchain impacting the government?

PH: So far, not much at all. Government doesn’t tend to be early adopters. It remains to be seen what “killer app” will emerge that leads to widespread acceptance and adoption of blockchain by governments.

PYMNTS: How is blockchain changing the way government entities do business?

PH: Primarily through blockchain’s current most widely used application, bitcoin. Governments are trying to figure out how to make sure people transacting using bitcoin still pay taxes. A very interesting example of this happened in Avalara’s home state of Washington. The state has legalized marijuana, but most banks will not accept deposits from marijuana businesses, making it a mostly cash business. As a result, marijuana retailers started to look to bitcoin and asking their customers to pay via bitcoin, to reduce the need to handle so much cash.

Earlier this year, State Senator Ann Rivers introduced Senate Bill 5264, which would outlaw the usage of bitcoin to purchase marijuana. The putative purpose behind the bill was to say that bitcoin is untraceable and should not be used for business transactions. This argument is a real head scratcher though, since the cash that was otherwise used to buy marijuana is far less traceable than bitcoin.

Needless to say, governments are still figuring out how bitcoin affects their ability to tax and regulate business transactions.

PYMNTS: What do you believe the future for blockchain is in government?

PH: It will be interesting to see. All government blockchains would be private blockchains, with the government providing the means to achieve consensus. The issue of blockchain and government runs into the standard issue with private blockchains: There is no technological innovation in a private blockchain that could not otherwise be achieved with a database and web app. So, will governments adopt actual blockchain solutions, or will they just build new applications with traditional web technology? We’ll have to watch to find out…


New PYMNTS Report: Preventing Financial Crimes Playbook – July 2020 

Call it the great tug-of-war. Fraudsters are teaming up to form elaborate rings that work in sync to launch account takeovers. Chris Tremont, EVP at Radius Bank, tells PYMNTS that financial institutions (FIs) can beat such highly organized fraudsters at their own game. In the July 2020 Preventing Financial Crimes Playbook, Tremont lays out how.

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