The Treasury Department is finishing up tests of a blockchain-based grants payment capability in its latest effort to discover how the technology can push more efficiencies into its operations.
The Treasury Department, said Craig Fischer, innovation program manager at the agency, is about to complete a proof of concept program for a blockchain-based letter of credit for federal grant recipients.
The program, Fischer said in a presentation at a recent conference on federal financial systems modernization, tokenizes electronic federal letters of credit sent out to grant recipients to help track the grant payments made to those recipients, as well as make the transaction more secure. The tokenization allows the agency to track the flow of grant money from federal coffers to grantees. Instead of an actual cash exchange, the token is a representation of the payment that can be tracked more efficiently, with associated data including recipient identification, grant amount and key dates like when it was awarded, he said.
The blockchain-based letter of credit provides peer-to-peer transfer to prime and sub-grantees, according to Fischer. Grant recipients would have to have an electronic wallet associated with a bank account to receive the tokenized letter, he said, and access to the letter can be role-based for security. “This isn’t the Bitcoin network, where everything is visible” to everyone, he said.
Fischer told FCW at the modernization event that his innovation group has been working with San Diego State University, Duke University and the National Science Foundation on the program since September. It is set to conclude at the end of January.
The department has been investigating ways to leverage blockchain for a couple of years. In 2018, it worked on a pilot project to develop a prototype blockchain to manage physical assets (such as computers and cell phones), noting the technology has “great potential for streamlining burdensome reconciliation operations that are involved in many financial transactions.”