[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
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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.
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\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).
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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\
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\6\NIST Blockchain Technology Overview, p. 2-3.
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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\
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\7\Id. at v.
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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\
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\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.
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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:
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\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
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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\
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\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).
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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.