Treasury to Experiment with Blockchain for Grants Management 

The Treasury Department is turning to blockchain in a six-month project that ultimately intends to streamline agencies’ financial processes—and re-imagine how the government does business.

The new Blockchain for Grant Payments project—steered by the Bureau of the Fiscal Service’s Office of Financial Innovation and Transformation, or FIT, and unveiled Monday—will explore the operational and legal implications of leveraging blockchain to track grant payment-related activities. 

Often associated with cryptocurrencies it underpins, blockchain is a technological tool that provides a means to virtually record and validate the provenance of transactions and digital assets without a centralized authority.

“Through this effort we hope that we will be able to add additional clarity for, not only this use case, but for the broader federal community on whether or not blockchain technology is a tool that we can leverage to achieve mission goals,” Fiscal Service Public Affairs Specialist Bradley Benson told Nextgov via email Wednesday. “We hope our work helps to advance this issue forward and that others will be able to learn and build upon our work.” 

The new proof of concept follows a prior six-month effort that the FIT carried out in 2017, which looked into the use of blockchain technology to manage and track government equipment—and specifically, government-issued mobile phones. Benson said the work helped the agency’s officials gain “a better understanding of some of the basic functionality of blockchain,” and offered them hands-on experience with things like peer-to-peer asset transfers via “tokenization” (or digitally representing an asset on a blockchain), system resiliency, and close to real-time transparency when assets are transferred between parties. After that project, the office’s personnel followed up with another proof of concept, through which they aimed to better understand how blockchain can improve the tracing and management of software licenses. 

“While these initial projects didn’t proceed beyond the proof of concept phase, it did help us to better identify use cases that may benefit from blockchain technology, specifically core financial management use cases,” Benson noted. 

The National Science Foundation was tuned into the bureau’s blockchain-exploring work and reached out to see if insiders were interested in teaming up to explore whether the nascent technology might provide a solution for “reducing the amount of reporting burden that accompanies receiving grant funding,” Benson said, adding that FIT thought it made for a good use case to explore. 

Fast forward to 2020, and the latest proof of concept is considered a continuation that will build on all the previous-but-related work—through which officials honed in on how grant recipients could harness blockchain to digitally represent, transfer, and redeem grant payments—the bureau’s release states. 

"By tokenizing relevant grant award information and combining it with grant payment information on the blockchain, we attain a new payment transparency that we couldn’t reach previously without significant and burdensome reporting,” Fiscal Service Supervisory Program Manager Craig Fischer noted in the announcement.

Elaborating on the present proof of concept, Benson said it aims to advance the bureau’s grasp of legal and regulatory hurdles that might arise when implementing the digital record-related tech, and the functional value blockchain could potentially bring to tasks involved in grant payments. In particular, the project will likely explore the impact the technology “might have on the reporting burden that accompanies receiving federal grant funding,” especially at the subgrantee level. 

“The work mostly entails providing demos of the blockchain application we built to a broad range of stakeholders to learn whether or not blockchain will provide value for grant recipients and agencies alike,” Benson further explained. 

After garnering feedback, the team plans to enhance its blockchain-based grant payment application, and upon completion, they’ll make what Benson called “a go/no-go decision” on potentially moving on to the next phase.

“I think it’s important to note that this proof of concept remains in the exploration phase and we have a lot more to learn before we commit to using the technology,” Benson said. 

Deloitte will support the agency in this work, as well as in a separate automation-focused project Treasury is now embarking on, which the release also highlights.