US Government Implements Blockchain Programs to Improve Transparency and Efficiency: Expert Blog

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Cryptocurrencies and the Blockchain will be front and center at this year's World Economic Forum in Davos with several cryptocurrency and Blockchain-related panels on the agenda.

The US government has been evaluating Blockchain technology since they has funded, collaborated and partnered with business, other countries as well as educational institutions in fostering and continuously developing innovative technologies and science. Contracts, transactions and the records of intellectual property (IP) are among the defining structures of the US economic, legal and political system. And the government agencies formed to manage them need to keep up with the economy’s digital transformation. Accordingly, Blockchain technology is under evaluation or is being implemented by several US government agencies to improve transparency, efficiency and trust in information sharing in:

  •       Financial management
  •       Procurement
  •       IT asset and supply chain management
  •       Smart contracts
  •       Patents, Trademarks Copyrights, Royalties
  •       Government-issued credentials like visas, passports, SSN and birth certificates
  •       Federal personnel workforce data
  •       Appropriated funds
  •       Federal assistance and foreign aid delivery

The General Services Administration (GSA)

GSA’s Emerging Citizen Technology Office launched the US Federal Blockchain program for federal agencies and US businesses that are interested in exploring Blockchain technology and its implementation within the US government. So far, GSA has used Blockchain to automate and speed up contracts review for its FASt Lane program.

Department of Treasury

The Treasury Department is running a pilot program to determine whether Blockchain technology can be utilized for supply chain management, which has accelerated, processing times, created efficiencies and strengthened financial controls in the private sector.

The Treasury Secretary Steven Mnuchin, who sits on a Davos Blockchain panel, believes that forming public-private partnerships (PPP) with foreign investors to fund Trump’s public infrastructure plan without incurring additional debt will be key to fulfilling the promise to upgrade US roads, bridges, airports and other public works. It will stimulate the economic growth with the aim of passing on substantial risk of funding to the private sector.

PPPs typically involve a government agency identifying a potential project, determining that there is sufficient revenue potential from the project to attract investor interest, soliciting competitive bids, and then selecting one or more private sector entities to design, finance, build, operate and maintain the project. In a PPP, the government generally owns the project but grants the private sector significant authority over its development and operation.

“Working with foreign investors is going to be a critical part of any plan we put forward and public-private partnerships are crucial to ensuring that the American taxpayer does not bear the full cost of any proposed program," Mnuchin explained.

The Treasury Department has also undertaken initiatives to improve the "anti-money laundering/combating the financing of terrorism (AML/CFT)” laws for Blockchain based cryptocurrencies and formed PPPs with financial institutions, to share information.

US State Department

The US State Department underscores the importance of innovation in world economic development and encourages dialogue with the private sector partners currently using Blockchain technology.

“The State Department supports public-private-partnerships. For example, in maximizing the impact and accountability of foreign development/assistance, Blockchain technology by bringing transparency, may address corruption, fraud or misappropriation of funds and inefficiencies within the public procurement funding process itself,” explained Deputy Secretary John J. Sullivan.

Government procurement accounts for a substantial part of the global economy 20 percent of GDP or around $9.5 tln of public money. According to an OECD study, corruption drains off between 20 and 25 percent or around $2 tln annually.  It accounts for a substantial portion of the taxpayers’ money and remains the government activity most vulnerable to waste, fraud and corruption due to the size of the financial flows involved. Corruption distorts the fair awarding of contracts, reduces the quality of basic public services, limits opportunities to develop a competitive private sector and undermines trust in public institutions.

Countries around the world are putting technological innovation at the heart of public procurement, to reshape procurement into a strategic tool for income growth, national competitiveness and improvements in the health, economic well-being and overall quality of life.  More than four-dozen countries have created national innovation strategies and/or launched national innovation foundations. These countries are relaxing foreign direct investment constraints, providing funding, financing, using public-private collaborations, tax breaks and asking the private sector from outside their borders for commitments to their countries. In maximizing the impact and accountability of foreign development/assistance, Blockchain technology may address corruption, fraud or misappropriation of funds and inefficiencies within the funding process.

Department of Defense (DoD)

As reflected in the 2018 National Defense Authorization Act (H.R. 2810) as signed into law on Dec. 12, 2017, the US federal government and its agencies are exploring the adoption of Blockchain technology in various areas, after carefully studying the risks posed by this new distributed ledger technology. This evaluation will shed light on the Blockchain technology capabilities to both the Federal Government and Department of Defense IT environments.   

Department of Homeland Security (DHS)

DHS is awarding Small Business Innovation Research grants to develop a use case for Blockchain technology’s role in border security.

National Aeronautics and Space Administration (NASA)

Efficient communications systems and effective computing techniques are crucial to ensure the success of each NASA mission. Greater accessibility of digital information and cost-effective technologies of manned and unmanned space flights are expected to become much better integrated via Blockchain technology. A new grant from NASA to the University of Akron in Ohio will fund research to use deep-learning artificial intelligence that works over an Ethereum Blockchain network to develop a resilient networking and computing paradigm in various space communication environments.

Conclusion

Blockchain is not a silver bullet for digital government, but as this technology is more widely implemented, it could represent the future of smart, legal contracts and how entire industries in partnership with the US government conduct themselves in a transparent and streamlined manner.

Selva Ozelli, Esq., CPA is an international tax attorney and CPA who frequently writes about tax, legal and accounting issues for TaxNotes, Bloomberg BNA, other publications and the OECD.

Disclaimer. The views and interpretations in this article are those of the author and do not necessarily represent the views of Cointelegraph.