As payments professionals, when we hear the word “blockchain,” our minds instinctively go to digital currency, cryptocurrency, or even Bitcoin. While it is true that blockchain serves as the underlying technology supporting those channels, its use cases extend far beyond payments.
Blockchain, in its simplest form, is a series of blocks that store data. This means that the technology creates advantages in many different scenarios where record-keeping or data management come into play. Industries as diverse as healthcare, supply chain management, information technology, and government have been exploring blockchain’s merits to increase efficiency and strengthen data security.
In addition, the market has begun to mature in such a way that new blockchain applications are weaving into more mainstream offerings. As Galaxy Digital Research finds, “Pre-Seed deal counts continue to decline while Series A and later are growing, a sign that companies built in the 2018-2020 crypto bear market are maturing to later stages.” It’s likely that we’ll continue to see a rise in blockchain products and services across sectors.
In fact, in New England, several states have begun to investigate blockchain’s potential to support governmental needs. For example, Rhode Island is piloting blockchain for licensing credentials, and Massachusetts is looking at forming a special commission to study its potential.
“The number one question I’m asked is ‘What kind of legislation can be passed to allow for blockchain?’” shared Liz Tanner, Director, Department of Business Regulation, for the state of Rhode Island. “Honestly, there’s not a lot that needs to be done legislatively. States allow for it now in diverse ways. More governments simply need to complete blockchain projects to prove it’s good technology.”
Representative Kate Lipper-Garabedian of the Massachusetts House of Representatives pointed out that a better understanding of blockchain’s potential will be needed for a state to be able to act strategically in applying and utilizing the technology.
“I don’t have to understand how the internet works to know that it’s integral to functioning in today’s society, and blockchain technology has that level of implication,” she noted. “Digital money is one application of blockchain, but the technology has much more broad-reaching potential to explore. We want to be proactive in considering those implications.”
That’s why she introduced H4513 to the Massachusetts House of Representatives and founded and co-chairs the House’s Blockchain Technology Caucus. Lipper-Garabedian’s bill creates a concrete path toward a deeper, cross-disciplinary investigation of blockchain. Specifically, the bill would establish a special commission on blockchain and cryptocurrency. At press time, it had received a favorable review and advanced to the Committee on House Ways and Means.
“The bill proposes bringing together members in state government, academia, and private industry to study and engage with blockchain and cryptocurrency,” Lipper-Garabedian remarked. “This group will report into policymakers on ways we can appropriately integrate this technology into the way the Commonwealth does business and help identify ways to expand its use in the private sphere as well. The House Blockchain Technology Caucus already is studying blockchain technology. A statewide commission would further formalize that exploration while bringing additional perspectives to the table.”
For her part, Tanner also sees the potential for blockchain in supporting Rhode Island governmental needs. Already, the state is piloting a blockchain infrastructure by creating a digital identity for the credentialing of certified public accountants (CPAs). The initial work includes approximately 50 participants to create the proof of concept, and once complete, the goal is to work with the national accounting governing body—the National Association of State Boards of Accountancy—to try and roll it out across the U.S. The state also plans to explore how to apply this technology with other certifications, licensures, and areas of state need.
“Multiple times during their careers CPAs have to prove their status to do taxes out of other states. With this program, they can create one digital identity to confirm their status and receive the credential on their phone in an app,” said Tanner. “It’s a safe, simple way to start, and we’ll be the first state government in the nation to achieve this technology approach to credentialing. Then, we can grow once it’s proven to be safe and secure.”
So, with these developments, does the future look bright for cryptocurrency as a form of state payment?
“I am asked that question more and more,” said Tanner. “We’re waiting to see what the federal government does.”
But Tanner also encourages businesses who have an idea centered around blockchain to continue to explore it. Many states are looking for ways to help support this modern technology paradigm.
“Many in the industry think regulations prohibit blockchain’s use, but most of our meetings end up with us saying that we don’t see an impediment,” she concluded. “I encourage businesses to check with their regulators as opposed to saying ‘no’ to these ideas. Most often, we’re all trying to get to yes.”
AUTHOR: Joe Casali, AAP, NCP
Executive Vice President
As the EVP of Payments Innovation for NEACH, Joe focuses on exploring innovative solutions and technologies that will help position members for success, both now and in the future. Connect with Joe to read more of his blogs, articles, and posts.