The U.S. government and several of its agencies have been evaluating blockchain technology as a preventative measure against corruption that may distort the fair awarding of public procurement contracts, reduce the quality of basic public services, limit opportunities to develop a competitive private sector and undermine trust in public institutions.
A study by the RAND Corporation explains with data the reasons for the government’s long-standing decision to have a robust bid protest system to review of agencies’ procurement decisions. The U.S. government “is a powerful entity in the world economy,” and has a “moral duty to maintain fairness and transparency in how it awards large contracts.”
The U.S. government also needs to “deter and punish ineptitude, sloth, or corruption of public purchasing officials.” Contracts, transactions, and the records of intellectual property are among the defining structures of the U.S. economic, legal, and political system. And the U.S. 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 U.S. government agencies to improve transparency, efficiency and trust in information sharing:
- Financial management
- IT asset and supply chain management
- Smart contracts
- Patents, trademarks copyrights, rRoyalties
- 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’s Emerging Citizen Technology Office launched the U.S. Federal Blockchain program for federal agencies and U.S. businesses that are interested in exploring blockchain technology and its implementation within the U.S. government. So far, GSA has used blockchain to automate and speed up contracts review for its FAStLane 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, transparencies, and strengthened financial controls in the private sector.
The Treasury Department has undertaken initiatives to improve the “anti-money laundering/combating the financing of terrorism (AML/CFT)” laws for blockchain based cryptocurrencies and formed public-private-partnerships with financial institutions, to share information.
U.S. State Department. The U.S. State Department underscores the importance of innovation in world economic development, and encourages dialogue with the private sector partners currently using blockchain technology. “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.
Department of Defense As reflected in the 2018 National Defense Authorization Act (H.R. 2810) as signed into law on December 12, 2017, the U.S. federal government and its agencies are exploring 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 DoD IT environments.
Department of Homeland Security. DHS is awarding Small Business Innovation Research grants to develop a use case for blockchain technology’s role in border security.
Office of Personnel Management. OPM is utilizing blockchain technology to implement the Federal Employee Digital Record, which will contain all relevant employee data for the entire human capital lifecycle.
Blockchain is not a silver bullet for digital government, but as this technology is more widely implemented, it could allow for early corruption detection so that corrective and preventive measures may be taken. This technology may promote the U.S. government and its private partners to conduct themselves in a more transparent and streamlined manner.
Selva Ozelli, Esq., CPA, pictured above, 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.