Lawmakers Mull Blockchain Study As Way to Upgrade Public Data Systems

John Reitmeyer | November 29, 2018 | More Issues
Task force would explore how the technology behind Bitcoin could be tapped to upgrade New Jersey's notoriously out-of-date systems.

New Jersey could soon become the latest state to begin exploring the use of emerging digital technology known as a blockchain to improve government services and upgrade the security of interactions with the public.

Early next week, the Senate Budget and Appropriations Committee will consider legislation that would empanel a special task force charged with conducting an in-depth study of blockchain, the technology perhaps best known as the underpinnings of the digital currency Bitcoin.

The legislation is modeled after an effort already underway in Illinois, which established a blockchain task force in 2016. Nearby Delaware has also been pursuing ways to use blockchain, including as part of its business services.

In New Jersey, the proposed task force would be asked to issue a report detailing the feasibility of using blockchain technology to improve services offered by state government, as well as by county and local governments. Right now, many state and local government functions often get bogged down by outdated technology, but blockchain proponents say it could it could equip New Jersey with the newest and most efficient systems.

Since taking office at the beginning of the year, Gov. Phil Murphy has made innovation and technology, both in the private and the public sector, a key part of a broader push to boost economic growth across the state. He has created the position of chief innovation officer and suggested the state now has an opportunity to jump to the forefront by embracing the latest technology.

Chains of data

The upcoming vote on the blockchain task force will be held just days after federal authorities announced the charging of two Iranian men for carrying out a series of costly hacking incidents, including a 2017 ransomware attack on Newark’s city government. Such hacking incidents prey on governments and other entities that use conventional networks by exploiting weaknesses in systems like Microsoft Windows to penetrate them. The hackers then use encryption to prevent access to the network unless a payment is made to them to release it.

Proponents say blockchain technology is far more secure system because it relies on a complex, cryptography-based system in which a shared database links or “chains” data together across a large number of peers. That makes it virtually impossible to make any alterations without being discovered.

“The ledger is owned by all participating parties which means that in the event of failure everyone can keep their own copy of data and transactions,” according to a report issued by the Illinois Blockchain Task Force.

“This form of resilience and security provides the opportunity to create new identity systems where users own the data, which remains universally consistent and cannot be destroyed,” the report said.

The Illinois panel suggested the blockchain technology could eventually “reinvent public services” by better integrating government agencies and more effectively managing the exchange of digitized assets.

“Blockchain technology could simplify the management of trusted information, making it easier for government agencies to access and use critical public-sector data while maintaining the security of this information,” the report said.

Kean sponsors bill creating task force

The bill seeking to create a similar panel in New Jersey is being sponsored by Senate Minority Leader Tom Kean Jr. (R-Union). It envisions a task force comprising 15 members, with the governor and majority party leaders in the Assembly and Senate each selecting two members. The minority party leaders in each house would also have the authority the select one member of the task force. Both legislative houses in New Jersey are currently controlled by the Democrats.

The state’s chief technology officer and the commissioner of the Department of Banking and Insurance would automatically become members, as would the clerks of Bergen and Monmouth counties. The mayors of Camden, Jersey City, and Newark, or their designees, would also serve on the panel.

The task force would be charged with analyzing any “opportunities and risks associated with using blockchain and distributed-ledger technology.” It would also be asked to recommend ways that New Jersey law could be changed “to support secure, paperless recordkeeping.”

The task force would be given roughly six months from its initial meeting to issue a full report to committees in both the Assembly and Senate.

“The report shall include a general description of the costs and benefits of State and local government agencies utilizing blockchain technology; recommendations concerning the feasibility of implementing blockchain technology in the State and the best approach to finance the cost of implementation; any draft legislation the task force deems appropriate to implement blockchain technology; and any other information relevant to the subject of the report,” according to the bill.

Kean Jr. has said blockchain is already being used successfully in the private sector by large corporations and financial-services companies to improve security and efficiency. He said he envisions the technology possibly being used one day by residents to do things like submit a tax return to the state without having to be concerned about whether their sensitive information would be compromised.

“New Jersey must lean forward and look ahead when it comes to technology,” Kean Jr. said.