States Leading on Blockchain, But Is That the Best Route?

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Many states are seeking to adopt blockchain technology to create more secure transactions, but that may not be the optimal route for ensuring the technology is applicable across the nation, according to Tiffany Angulo, a staffer for Rep. David Schweikert, R-Ariz., who is the co-chair of the Congressional Blockchain Caucus.

Angulo said Friday at an Information Security and Privacy Advisory Board (ISPAB) meeting that while states are on the front foot in pioneering public implementation of distributed ledger technologies, allowing that trend to continue without Federal underpinnings could lead to a “patchwork system”–where transactions in one state aren’t able to carry over to another–making it difficult “to have businesses across state lines.”

Blockchain creates an unbroken record of transaction data, which is seen as permanent and tamper-proof. The transaction ledger is distributed through a network of computers, each one maintaining a record of transactions–updated and validated simultaneously–preventing any entity from altering the data at a single point.

That means that blockchain users can create secure, unbroken lines of payment records, titles, or supply chain data, which can be verified by any of the computers in the network, leading to more reliable information about the string of transactions.

But it also means that states will need to have a uniform understanding of the technology if it is to be applicable across state lines, Angulo said.

“The Federal government has sort of been slowly moving, trying to educate everybody sort of not familiar yet,” she said. “So, the states have started taking action and trying to lead on these issues, which is great, but that’s sort of the next concern that we’re seeing, we’re having a lot of states have sort of varying definitions on what is considered blockchain.”

The Congressional Blockchain Caucus held its third roundtable last Tuesday. Angulo said one of the chief concerns industry leaders flagged was the possibility of disparate definitions around blockchain.

She said states have shown particular interest in using blockchain for asset tracking, land titles, and smart contracts using eSign technology. But without Federal guidance or standardization, the use of the technology could become disjointed.

“If you’re an insurance broker and you have contracts in different states, you’re going to have different regulations in each state,” she said.

ISPAB chair Christopher Boyer, who is assistant vice president of global public policy at AT&T, reiterated those concerns, having seen state legislation emerging on the topic.

“It was more supporting the technology, allowing for it to be officially used,” he said. “So, it wasn’t like it was trying to hinder the technology in any way or regulate it. But, on the flip side, that does raise the issue of, we could have a patchwork of state laws that define blockchain in different ways.”

Angulo said the caucus has served as an “intermediary” between businesses looking to implement the technology and equally eager states. For example, she said the state of Ohio–which is looking to introduce blockchain legislation in the state legislature–came to the caucus for guidance on the topic. Federal standards could aid Ohio and bring every state into unity, but they don’t yet exist, she noted.

ISPAB members noted that the National Institute of Standards and Technology has released a draft publication on blockchain technology that could potentially aid states in defining it in legislation. Matthew Scholl, division chief of computer security at NIST, said the agency is looking to finalize the guidance this month.

Beyond mere definitions, that document could also be key to helping the Federal government standardize interoperability, cryptography, and other vital considerations that would enable the technology to be used effectively across the nation.

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