[Senate Report 116-177]
[From the U.S. Government Publishing Office]


                                                       Calendar No. 373
                                                       
116th Congress }                                             { Report
                     SENATE                         
 1st Session   }                                             { 116-177
_______________________________________________________________________


                    BLOCKCHAIN PROMOTION ACT OF 2019

                               __________

                              R E P O R T

                                 of the

           COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION

                                   on

                                 S. 553

               [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
            


               December 17, 2019.--Ordered to be printed
                               _________
                               
                 U.S. GOVERNMENT PUBLISHING OFFICE                           
                               
99-010                   WASHINGTON : 2019               
               
               
               
               
               
       SENATE COMMITTEE ON COMMERCE, SCIENCE, AND TRANSPORTATION
       
                     ONE HUNDRED SIXTEENTH CONGRESS
                     
                             FIRST SESSION

                 ROGER F. WICKER, Mississippi, Chairman
                 
JOHN THUNE, South Dakota             MARIA CANTWELL, Washington
ROY BLUNT, Missouri                  AMY KLOBUCHAR, Minnesota
TED CRUZ, Texas                      RICHARD BLUMENTHAL, Connecticut
DEB FISCHER, Nebraska                BRIAN SCHATZ, Hawaii
JERRY MORAN, Kansas                  EDWARD J. MARKEY, Massachusetts
DAN SULLIVAN, Alaska                 TOM UDALL, New Mexico
CORY GARDNER, Colorado               GARY C. PETERS, Michigan
MARSHA BLACKBURN, Tennessee          TAMMY BALDWIN, Wisconsin
SHELLEY MOORE CAPITO, West Virginia  TAMMY DUCKWORTH, Illinois
MIKE LEE, Utah                       JON TESTER, Montana
RON JOHNSON, Wisconsin               KYRSTEN SINEMA, Arizona
TODD C. YOUNG, Indiana               JACKY ROSEN, Nevada
RICK SCOTT, Florida
                       John Keast, Staff Director
               David Strickland, Minority Staff Director
               
               



                                                       Calendar No. 373
116th Congress }                                             { Report
                                 SENATE
 1st Session   }                                             { 116-177

======================================================================

 
                    BLOCKCHAIN PROMOTION ACT OF 2019

                                _______
                                

               December 17, 2019.--Ordered to be printed

                                _______
                                

       Mr. Wicker, from the Committee on Commerce, Science, and 
                Transportation, submitted the following

                              R E P O R T

                         [To accompany S. 553]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on Commerce, Science, and Transportation, to 
which was referred the bill (S. 553) to direct the Secretary of 
Commerce to establish a working group to recommend to Congress 
a definition of blockchain technology, and for other purposes, 
having considered the same, reports favorably thereon with 
amendments and recommends that the bill (as amended) do pass.

                          Purpose of the Bill

    The purpose of S. 553, the Blockchain Promotion Act of 
2019, is to direct the Secretary of Commerce to establish an 
interagency working group to recommend to Congress a definition 
of blockchain technology and to make recommendations for 
additional interagency studies related to blockchain 
technology.

                          Background and Needs

    Blockchain is a publicly accessible online record-keeping 
database that stores digital information--blocks--in multiple, 
decentralized locations.\1\ Blockchain is the technology 
underlying Bitcoin and applications tracking transactions and 
assets in crypto-
currency.\2\ Blockchain technology emerged in the late 1980s 
and early 1990s.\3\ The core ideas for the technology were 
derived from a combination of research focused on the 
following: (1) creating a consensus model so that a network of 
computers could reach an agreement on a given result even if 
the computers or the network itself were unreliable, and (2) 
creating an electronic ledger of digitally signed information 
that could easily show that no data in the ledger had been 
altered.\4\ In 2008, these core ideas were combined and applied 
to electronic cash in the paper Bitcoin: A Peer to Peer 
Electronic Cash System.\5\ This led to the creation of Bitcoin, 
the world's first cryptocurrency. Many people today conflate 
blockchain technology and Bitcoin, but in reality blockchain 
technology is the underlying platform upon which Bitcoin was 
built. Furthermore, blockchain technology has potential 
applications beyond just cryptocurrency.
---------------------------------------------------------------------------
    \1\See, e.g., Merriam-Webster, definition of blockchain 
(www.merriam-webster.com/dictionary/blockchain).
    \2\See Lexico, definition of blockchain (www.lexico.com/en/
definition/blockchain).
    \3\Dylan Yaga, Peter Mell, Nik Roby, Karen Scarfone, Blockchain 
Technology Overview, National Institute of Standards and Technology 
(October 2018) (https://nvlpubs.nist.gov/nistpubs/ir/2018/
NIST.IR.8202.pdf) (NIST Blockchain Technology Overview) p. 2.
    \4\See, generally, NIST Blockchain Technology Overview, p. 2 
(https://nvlpubs.nist.gov/nistpubs/ir/2018/NIST.IR.8202.pdf).
    \5\Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Cash System, (October 
31, 2018) (https://bitcoin.org/bitcoin.pdf).
---------------------------------------------------------------------------
    Blockchain technology uses transparency, security, and 
shared user access to create a trusted system where entities 
that are not familiar with one another can engage in 
transactions without a trusted third-party intermediary. 
Blockchain technology creates that trusted system through four 
key characteristics: (1) the technology uses ledgers that only 
allow data to be added, not overwritten, so that the ledger can 
provide a full transactional history; (2) blockchains are 
cryptographically secure such that the information therein is 
immune to tampering and the ledger is attestable; (3) the 
ledger is shared among multiple participants; and (4) the 
blockchain itself can be distributed throughout the network 
nodes, protecting against tampering.\6\
---------------------------------------------------------------------------
    \6\NIST Blockchain Technology Overview, p. 2-3.
---------------------------------------------------------------------------
    Despite the many variations of blockchain networks and the 
rapid development of new blockchain related technologies, most 
blockchain networks use common core concepts. Blockchains are a 
distributed ledger comprised of blocks. Each block is comprised 
of a block header containing metadata about the block, and 
block data containing a set of transactions and other related 
data. Every block header (except for the very first block of 
the blockchain) contains a cryptographic link to the previous 
block's header. Each transaction involves one or more 
blockchain network users and a recording of what happened, and 
it is digitally signed by the user who submitted the 
transaction.\7\
---------------------------------------------------------------------------
    \7\Id. at v.
---------------------------------------------------------------------------
    Blockchain technology has been forecasted to have a 
business-value-add impact of $176 billion by 2025, which is 
projected to increase to $3.1 trillion by 2030.\8\ Blockchain 
technology's ability to cut out the middleman in a transaction 
is driving innovation throughout many industry sectors. In 
2016, Barclays processed an international transaction in 4 
hours using blockchain technology, far shorter than the 10 days 
it would have taken without blockchain technology.\9\ During a 
test of new blockchain technology in 2018, Walmart realized a 
decrease in the time spent tracing a package of produce back to 
its source from 7 days to 2.2 seconds.\10\ Blockchain's ability 
to trace the source of food could help prevent some 48 million 
foodborne illnesses every year that affect Americans.\11\ 
Walmart has required its leafy green vegetable suppliers to 
upload their data to a blockchain platform created by IBM to 
digitize its food supply chain by September 2019.\12\
---------------------------------------------------------------------------
    \8\Katie Costello, ``Gartner Predicts 90% of Current Enterprise 
Blockchain Platform Implementations Will Require Replacement by 2021'', 
(June 3, 2019) (https://www.gartner.com/en/
newsroom/press-releases/2019-07-03-gartner-predicts-90-of-current-
enterprise-blockchain).
    \9\Jemima Kelly, ``Barclays Says Conducts First Blockchain-Based 
Trade-Finance Deal'' (September 7, 2016) (https://www.reuters.com/
article/us-banks-barclays-blockchain/barclays-says-conducts-first-
blockchain-based-trade-finance-deal-idUSKCN11D23B).
    \10\Jenna Dobkin, ``9 Blockchains Transforming the Way We Pay, 
Play, and Work'', ReadWriteWeb (Aug. 15 2019) (https://readwrite.com/
2019/08/14/9-blockchains-transforming-the-way-we-pay-play-and-work/).
    \11\Id.
    \12\Id.
---------------------------------------------------------------------------
    Blockchain technologies may provide similar benefits for 
Federal and State agencies. According to the National 
Conference of State Legislatures (NCSL), 28 States have 
introduced legislation related to blockchain in 2019.\13\ 
Twenty-seven bills and one resolution have been enacted or 
adopted. NCSL noted the following:
---------------------------------------------------------------------------
    \13\Heather Morton, Blockchain 2019 Legislation (http://
www.ncsl.org/research/financial-
services-and-commerce/blockchain-2019-legislation.aspx).

    Digital currencies are only one way to use blockchain. 
Other evolving applications can include online voting, medical 
records, insurance policies, property and real estate records, 
copyrights and licenses and supply chain tracking. They can 
also include smart contracts, where payouts between the 
contracted parties are embedded in the blockchain and 
automatically execute when contractual conditions have been 
---------------------------------------------------------------------------
met.

    Some observers are concerned, however, that the Federal 
Government may lag behind the private sector in its adoption of 
blockchain because there is no one accepted legal definition of 
blockchain (even though the technological elements of 
blockchain are well known, as described above), and because 
there has not been a systematic examination of how Federal 
agencies could use blockchain technologies and networks. S. 553 
is intended to address these concerns by helping Congress 
better understand the capabilities of blockchain technology and 
further informing decisions by the Federal Government to 
efficiently leverage the capabilities of blockchain technology.

                          Legislative History

    S. 553, the Blockchain Promotion Act of 2019, was 
introduced on February 26, 2019, by Senator Young (for himself 
and Senator Markey) and was referred to the Committee on 
Commerce, Science, and Transportation of the Senate. On July 
10, 2019, the Committee met in open Executive Session and, by 
voice vote, ordered S. 553 reported favorably with amendments 
offered by Senator Lee to improve the bill by clarifying that 
members of the Blockchain Working Group serve without pay and 
that the working group itself terminates when it submits the 
report required by the bill.
    Similar legislation, H.R. 1361, the Blockchain Promotion 
Act of 2019, was introduced on February 26, 2019, by 
Representative Matsui [D-HI] (for herself and Representative 
Guthrie [R-KY-2]) and was referred to the Committee on Energy 
and Commerce of the House of Representatives. On February 27, 
2019, that bill was referred to that Committee's Subcommittee 
on Communications and Technology.

                            Estimated Costs

    In accordance with paragraph 11(a) of rule XXVI of the 
Standing Rules of the Senate and section 403 of the 
Congressional Budget Act of 1974, the Committee provides the 
following cost estimate, prepared by the Congressional Budget 
Office:

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    S. 553 would require the Department of Commerce to 
establish a blockchain working group with governmental and 
nongovernmental members. Within one year of enactment, the bill 
would require the group to recommend a working definition of 
blockchain technology, research topics, and opportunities for 
federal agencies to use blockchain.
    Because there is already a blockchain working group with 
the department, and based on information from the National 
Institute of Standards and Technology (NIST), CBO estimates 
that implementing S. 553 would cost less than $500,000 in 
fiscal year 2020; any spending would be subject to the 
availability of appropriated funds. CBO expects that the group 
would primarily rely on a report that NIST published in October 
2018.\1\
---------------------------------------------------------------------------
    \1\According to NIST, ``blockchains are tamper evident and tamper 
resistant digital ledgers implemented in a distributed fashion (i.e., 
without a central repository) and usually without a central authority 
(i.e., a bank, company, or government). At their basic level, they 
enable a community of users to record transactions in a shared ledger 
within that community, such that under normal operation of the 
blockchain network no transaction can be changed once published.'' See 
Dylan Yaga and others, Blockchain Technology Overview, NISTIR 8202 
(National Institute of Standards and Technology, October 2018), p. ii, 
https://doi.org/10.6028/NIST.IR.8202 (PDF, 755 KB).
---------------------------------------------------------------------------
    The CBO staff contact for this estimate is David Hughes. 
The estimate was reviewed by H. Samuel Papenfuss, Deputy 
Assistant Director for Budget Analysis.

                      Regulatory Impact Statement

    In accordance with paragraph 11(b) of rule XXVI of the 
Standing Rules of the Senate, the Committee provides the 
following evaluation of the regulatory impact of the 
legislation, as reported:

                       NUMBER OF PERSONS COVERED

    S. 553, as reported, would have no effect on the number or 
types of individuals and businesses regulated.

                            ECONOMIC IMPACT

    S. 553, as reported, would have no economic impact.

                                PRIVACY

    S. 553, as reported, would have no effect on the personal 
privacy of affected individuals.

                               PAPERWORK

    S. 553, as reported, would direct a Department of Commerce 
working group to prepare and submit a report to Congress on its 
work within 1 year of enactment of the bill.

                   Congressionally Directed Spending

    In compliance with paragraph 4(b) of rule XLIV of the 
Standing Rules of the Senate, the Committee provides that no 
provisions contained in the bill, as reported, meet the 
definition of congressionally directed spending items under the 
rule.

                      Section-by-Section Analysis


Section 1. Short title

    This section would provide that the bill may be cited as 
the ``Blockchain Promotion Act of 2019''.

Section 2. Working group to recommend definition of blockchain 
        technology

    Subsection (a) of this section would establish definitions 
for two terms used throughout the bill.
    Subsection (b) of this section would require the Secretary 
of Commerce, within 90 days of enactment, to establish within 
the Department of Commerce a working group referred to as the 
``Blockchain Working Group''.
    Subsection (c) of this section would establish the 
membership of the Blockchain Working Group. The Secretary of 
Commerce would designate a cross-section of Federal agencies 
that could use, or benefit from, blockchain technology to be 
represented on the Blockchain Working Group. The head of each 
Federal agency so designated would then be required to appoint 
an officer or employee to serve as a member of the Blockchain 
Working Group. In addition, the Secretary of Commerce would 
appoint nongovernmental stakeholders with respect to blockchain 
technology to serve on the Blockchain Working Group. Subsection 
(c) further identifies certain nongovernmental stakeholder 
groups that must be represented, including: (1) information and 
communications technology manufacturers, suppliers, software 
providers, service providers, and vendors; (2) subject matter 
experts representing industrial sectors, other than the 
technology sector, that the Secretary determines could use, or 
benefit from blockchain technology; (3) small, medium, and 
large businesses; (4) individuals and institutions engaged in 
academic research relating to blockchain technology; (5) 
nonprofit organizations and consumer advocacy groups engaged in 
activities relating to blockchain technology; and (6) rural and 
urban stakeholders. Finally, subsection (c) would provide that 
members of the Blockchain Working Group shall serve without 
pay.
    Subsection (d) of this section would require the Blockchain 
Working Group to provide a report to Congress within 1 year of 
the bill's enactment. This report would need to include the 
following:
           A recommended definition of blockchain 
        technology;
           Recommendations for a study to be conducted 
        by the Assistant Secretary of Commerce for 
        Communications and Information, in coordination with 
        the Federal Communications Commission, on the impact of 
        blockchain technology on electromagnetic spectrum 
        policy;
           Recommendations for a study to examine a 
        range of potential applications, including nonfinancial 
        applications, for blockchain technology; and
           Recommendations for opportunities for 
        Federal agencies to use blockchain technology.
    Subsection (d) also would permit the Blockchain Working 
Group to consider any recommendations contained in the National 
Institute of Standards and Technology Internal Report 8202 
entitled, ``Blockchain Technology Overview,'' in preparing the 
report under section 2(d).
    The Committee is aware that various States have adopted or 
are working to adopt their own definition for blockchain 
technology. The Committee also understands that various other 
public and private sector groups are working to craft a common, 
standard definition of blockchain technology. The Committee 
intends for the Blockchain Working Group to fully consider 
these ongoing efforts to create a standard definition for 
blockchain technology, for it to consult with stakeholders that 
have worked on these efforts, and for it to recommend a 
definition that is consistent with such efforts. In addition, 
the Committee does not intend for the work of the Blockchain 
Working Group to supplant definitions adopted at the State 
level.
    Subsection (e) of this section would provide that the 
Blockchain Working Group shall terminate on the date on which 
it submits the report to Congress under section 2(d).

                        Changes in Existing Law

    In compliance with paragraph 12 of rule XXVI of the 
Standing Rules of the Senate, the Committee states that the 
bill as reported would make no change to existing law.