In a pair of priority open recommendations, the Government Accountability Office said the Federal Reserve and the Securities and Exchange Commission have succeeded in establishing coordination mechanisms with other federal regulators and financial working groups to identify the risks posed by blockchain-related products and services. But neither the Fed nor the SEC has “regularly” convened those bodies since the GAO delivered its recommendation in August 2023.

Lacking a cadence in convening these groups, the GAO said, means both agencies are unable “specifically to identify the full range of risks and regulatory challenges of existing and emerging blockchain products and services and provide a timely response to any unaddressed risks.”

The Fed, which neither agreed nor disagreed with the GAO’s recommendation, said it “routinely engages with the other federal financial regulators on emerging risks posed by blockchain-related products and services.” The banking regulator noted that it participates in information-sharing on identifying blockchain risks with other regulators in the Digital Asset Working Group, but the GAO is pushing for “planning processes for identifying and addressing such risks” within that group. 

“Fully implementing this priority recommendation would help the Federal Reserve and other financial regulators collectively identify risks posed by blockchain-related products and services and develop and implement a regulatory response in a timely manner,” the GAO stated.

The SEC, meanwhile, told the GAO that it works to identify crypto-related risks in the agency’s work with the Financial Stability Oversight Council, the President’s Working Group on Financial Markets and some international bodies. FSOC “established a coordination mechanism” through the Digital Asset Working Group, the SEC reported to the GAO, adding that the working group “meets regularly and has discussed a variety of topics, including regulatory developments, rulemakings, risks, data collection, and market developments.”

The GAO called the Digital Asset Working Group “a positive step,” but prodded the SEC to embrace planning documents.

“Such planning documents could include (1) objectives and meeting frequency; (2) processes for identifying the full range of risks and regulatory challenges concerning blockchain-related products and services (not only those related to financial stability); and (3) processes for responding to these risks and challenges within agreed-upon timeframes,” the GAO said.

Beyond blockchain, the GAO re-upped a second priority recommendation to the Federal Reserve, which was originally delivered in 2019. The watchdog wanted the Fed, along with other banking regulators and the Consumer Financial Protection Bureau, to finalize “written communication that gives banks specific direction on the appropriate use of alternative data in the underwriting process when partnering with fintech lenders.”

The Fed teamed with the Federal Deposit Insurance Corp. and the Office of the Comptroller of the Currency a year ago in issuing interagency guidance on third-party risk management, but the GAO said that the guidance falls short on specificity.

The guidance “does not include specific direction to banks that engage with fintech lenders on the appropriate use of alternative data in the underwriting process,” the GAO wrote. “Rather, the guidance broadly applies to all topics and third-party relationships. Accordingly, it does not address specific topics, such as the use of alternative data, or specific types of third-party relationships, such as relationships with fintech companies.”

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Speaking to FedScoop, Brian Whittaker said the Federal Deposit Insurance Corp. (FDIC) will reorient itself to become better prepared internally to supervise fintech companies, and other new tech entities in the financial services sector. The comments from the recently installed technology leader come as the agency moves ahead with the relaunch of its innovation lab.

“We now have less of an outward focus on policy and instead more about how do we modernize the FDIC to be prepared to receive crypto currency and adopt new technologies. We want to be familiar with the technologies so we’re not caught on the back foot when crypto and others hit in a bigger fashion,” Whittaker said during a Nava Public Benefit Corporation event on Thursday.

“Now our focus is on how do we improve CIOs capacity to deliver for business units. How do we test out blockchain ledger technology. How do we make sure FDIC is prepared for the direction that fintechs are going in financial services?” Whittaker added.

Whittaker, who is the former acting executive director of 18F, the digital services consulting group situated within the General Services Administration, took over as FDIC’s chief innovation officer in March.

Whittaker’s predecessor at the agency, Sultan Meghji resigned from the post earlier this year and dismissed the FDIC as “hesitant and hostile” to technological change in a blistering op-ed published by Bloomberg News in February.

According to Meghji, he received resistance from staff in response to basic modernization efforts such as ending the use of fax machines and physical mail. In the op-ed, Meghji also criticized the knowledge and open-mindedness of staff.

Whittaker added that he plans to take his time getting to know and gain the trust of staff within the agency before pushing for change in areas like robotic process automation (RPA) in order to increase capacity from manual processes. 

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NIST plans to refine its approach to the current and future states of artificial intelligence (AI), the Internet of Things (IoT), IoT in manufacturing, quantum computing, blockchain, new and advanced materials, unmanned delivery services, and 3D printing based on responses.

The American Competitiveness of a More Productive Emerging Tech Economy (COMPETE) Act of 2020 called for NIST to complete a “Study to Advance a More Productive Tech Economy,” which the agency plans to deliver by the end of 2022 based on responses to the request for information (RFI).

“NIST invites stakeholders throughout the scientific research, standards, advocacy, industry, and non-scientific communities, including the general public, to provide input for creating a forward-thinking approach that supports emerging technology to foster economic growth and competitiveness across the nation in ways that benefit all Americans,” reads the RFI posted to the Federal Register. “NIST will develop the report in a manner consistent with its mission to promote U.S. innovation and industrial competitiveness.”

With the exception of unmanned delivery systems, the emerging technology areas are ones where NIST has played a role advancing measurement science, standards and the technologies themselves. NIST does have expertise in autonomous systems, which should translate when addressing autonomous delivery.

Regarding technology development, NIST seeks information on the federal agencies with jurisdiction over each area and the industries they work with, as well as how they can expand economic opportunities and adoption. NIST also wants to know of existing standards and legislation, how they help or harm technology maturation, what new standards and legislation are needed, and how public-private partnerships can help.

On the applications and utilization side, NIST asks how prevalent each technology is among industry, how to strengthen regional U.S. innovation centers, how marketplaces are changing, what the risks of each technology are especially in supply chains, how supply chain risks are assessed, and the extent of the capabilities of our foreign competitors.

The deadline for responding to the RFI is 5 p.m. EST on January 31, 2022.

Aside from the required report, NIST will use responses from the RFI to inform its research program and standards activities.

“NIST uses multiple inputs to inform our scientists and engineers about technological trends and investments being made by the private sector,” an agency spokesperson told FedScoop. “This information helps us to make decisions on where and how best to deploy our resources so that we deliver the most impact to the taxpayer.”

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Through the pilot program, data on the award amount, key dates and recipient is scraped from National Science Foundation-issued grant letters and meshed with payment information inside a blockchain token for real-time, transactional transparency.

The Bureau of the Fiscal Service has spent the last two-and-a-half years working on the proof of concept, which continues a 2017 effort, in light of grant recipients reporting they submit about 400 reports to agencies annually and 350 quarterly.

“This is taking a tremendous amount of their time and resources to just tell us how they spent their money,” said Craig Fischer, program manager at BFS, speaking at the ACT-IAC Imagine Nation conference in Hershey, Penn., on Monday. “Well, we know at least part of the problem that is involved in reporting is that we can’t always see where the money is going.”

BFS pays grant recipients using their banking number, so it knows who was paid. But what happens to the money after is harder to track — increasing the reporting burden on NSF- and Department of Health and Human Services-funded researchers.

By tokenizing federal payments, BFS can not only audit everywhere that token has been but use it to pre-populate reports like the SF-425 Federal Financial Report. One of the more time-consuming reports, SF-425 takes eight employees five hours to collect 15-plus data elements. The token, on the other hand, populates it in seconds.

“The next step is making those tokens turn back into a payment,” Fischer said. “So we’re now looking at creating those [application programming interface]s in the agency financial management systems.”

BFS built its proof of concept off NSF’s Award Cash Management $ervice (ACM$), a grant payment drawdown system, and it hopes to expand to HHS given the volume of grants awarded by that agency, Fischer said.

His agency is already working with the grants quality services management office (QSMO) inside HHS, which is standing up a marketplace of cloud-based systems and services from federal shared service providers like BFS for customer agencies. The Federal Demonstration Partnership is another customer, as is the Department of Commerce in the past, and the National Institute of Standards and Technology is an “important” partner setting standards around blockchain, Fischer said.

BFS’s proof of concept still has challenges to address, like the fact systems it’s trying to connect to don’t all live in cloud solutions that are Federal Risk and Authorization Management Program certified.

While the proof of concept relies on a permission-based version of the Ethereum blockchain — grant recipients requiring BFS’s permission to join the network and download its digital wallet — the agency is still working through all the token’s privacy ramifications, Fischer said.

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Named Polaris after the “guiding star” in the night sky, the governmentwide acquisition contract (GWAC) is designed to increase competition at the task order level among three pools: small, women-owned and HUBZone businesses.

The multiple-award contract will help agencies buy emerging technologies like quantum computing, artificial intelligence and blockchain — as well as cybersecurity and cloud services — from the expanded pools.

GSA may eventually take Polaris contractors’ Cybersecurity Maturity Model Certification (CMMC) into account. The Department of Defense requirement to ensure proper supply chain risk management (SCRM) could be used in civilian acquisitions, and contractors would be wise to get certified, according to the RFP.

“GSA reserves the right to require CMMC Level 1 certification as mandatory to be considered for the Polaris option as well as for any general Open Season or targeted onboarding opportunities,” reads the document.

The agency will use Section 876 of the 2019 National Defense Authorization Act to award Polaris task orders without considering prices for services acquired on an hourly-rate basis. That allows for pricing competition at the task order level.

And GSA retains the right to hold future open season “on-ramps” to add businesses to pools or create new pools after initial awards.

Already the agency released a draft RFP for a tool to better gauge supply chain risks of vendors under Polaris earlier this month.

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CBP needs to analyze data earlier along the supply chain because currently, it’s getting involved too late after products have been manufactured and already begun international transit, Vincent Annunziato, director of the agency’s Business Transformation and Innovation Division, said during ACT-IAC’s Reimagine Nation ELC 2020 on Monday. The agency is responsible for ensuring importer and exporter compliance with laws and regulations that prevent harmful or counterfeit products from entering or exiting the U.S.

The volume of supply chain data CBP is dealing with has skyrocketed since the agency started piloting blockchain to secure various industries like steel and oil, and only AI and machine learning can make sense of it all.

“All of this now is starting to play into that AI and machine learning arena because, one, we’re getting data that we’ve never seen before,” Annunziato said. “Two … the government is going to look into designing a system that’s flexible for the data that’s coming in so that, even if you don’t have all the appropriate data at the time that you submit it, you can update it as you go along.”

CBP began piloting blockchain to validate mill certificates, which are documents detailing the chemical breakdown and grade of steel, as well as whether open-market oil is USMCA-certified. More recently the agency announced blockchain pilots that will enhance its visibility into the food, e-commerce shipment and natural gas supply chains while making validation paperless.

AI could help with the categorization of products based on photos or text descriptions while avoiding errors that currently require CBP personnel to delete entries and start from scratch when they’re made, Annunziato said.

Longer-term, smart AI devices could alert CBP to, say, a refrigerated container that has been tampered with.

“They’re starting to come online,” Annunziato said. “But they’re not mature enough yet,”

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The awards are specifically for projects on preventing forgery and counterfeiting of certificates and licenses. The department’s Silicon Valley Innovation Program (SVIP) issued the solicitation earlier this year as a followup to a five-year other transaction solicitation (OTS) first presented in 2018.

DHS says the contracts will support the missions of U.S. Customs and Border Protection (CBP), U.S. Citizenship and Immigration Services (USCIS) and the DHS Privacy Office.

Interest in providing blockchain technology to governments continues to grow as agencies sort through the hype and size up available technologies. Blockchains store digital information in a distributed way that allows for full transparency about changes. The idea is that if blockchain technology can support the security of a digital currency like bitcoin, it also can serve as the backbone for a system of licenses or certificates.

The selected companies will receive $50,000 to $200,000 for Phase 1, proof-of-concept demonstrations of the requested technologies:

• MATTR Limited, a startup based in Auckland, New Zealand, was awarded $200,000 to “help USCIS develop a capability to digitally issue and validate essential work and task licenses. The COVID-19 pandemic has amplified the need for this capability,” SVIP says.
  Mesur IO, Inc., based in Chapel Hill, North Carolina, was awarded $193,612 to develop a capability to enhance CBP’s visibility of food supply chains.
• Spherity GmbH, a Dortmund, Germany based startup, received $145,000 to develop a capability “to enhance CBP’s supply chain traceability of direct-to-consumer e-commerce shipments,” SVIP says.
• SecureKey Technologies, a business based in Toronto, Canada, was awarded $193,000 to develop “an alternative identifier to the Social Security Number” to support the Privacy Office’s SSN Collection and Use Reduction initiative.
• Mavennet Systems, Inc., also of Toronto, received $86,100 to support CBP by “improving the traceability of natural gas. Mavennet proposes to enhance their Neoflow platform to digitally trace natural gas supply chains between Canada and the U.S.,” SVIP says.

“The selected start-ups proposed innovative solutions to the problems, demonstrated a firm commitment to technical interoperability using global standards from the World Wide Web Consortium (W3C), and provided concrete plans to commercialize their final solutions,” said Anil John, the SVIP’s technical director, in a news release Oct. 9. “With this, we are demonstrating the clear intersection of DHS priorities, industry needs, and public interest.”

The department’s Science and Technology Directorate (S&T) runs the SVIP, which was founded in 2015.

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Named Polaris after the “guiding star” in the night sky, the contract will increase the pool of qualified small businesses that provide emerging technologies like artificial intelligence, blockchain and 5G gear, as well as areas such as robotic process automation, cybersecurity and cloud services.

GSA intends to use Section 876 of the 2019 National Defense Authorization Act to award task orders without considering prices for services acquired on an hourly rate basis, wrote Laura Stanton, assistant commissioner of the Office of IT Category, in a blog announcing Polaris earlier this month.

“As this would shift the focus to pricing competition at the task order level, it is important that we continue our efforts to increase competition in the marketplace by creating opportunities for qualified small businesses,” Stanton wrote.

That will include open season on-ramps to expand the number of small businesses — including underrepresented socioeconomic categories like HUBZone and women-owned businesses — on the GWAC after its initial award.

GSA is further considering an online proposal submission tool and solicitation self-scoring to expedite the process, and vendors are encouraged to join its Small Business GWAC Community of Interest to weigh in on potential features.

“We are in the very early stages of the process and are looking forward to continuing dialogue with our industry partners and agency customers,” Stanton wrote. “We’re working to release a request for information this month and we’re hopeful that we’ll be able to get a draft request for proposals out within the next few months.”

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Both projects are being run by the Bureau of Fiscal Service‘s Office of Financial Innovation and Transformation with support from Deloitte and are expected to save the government millions of dollars annually.

The first project, Digital End-to-End Efficiency (DEEE), is focused on digitizing and automating entire business processes, rather than using robotic process automation (RPA) or artificial intelligence to expedite parts.

“DEEE shifts away from the current trend in automating individual tasks with RPA and looks at the entire process,” said Cindy Good, program manager at BFS, in the announcement. “We want to identify improvements using a suite of automation choices, if needed, to support a
seamless process.”

Two unnamed agencies have partnered with Treasury to apply the repeatable, scalable DEEE framework to billing and travel processes.

A second project, Blockchain for Grant Payments, continues a 2017 effort to have grant recipients use the technology to digitally represent, or tokenize, payments, as well as redeem or transfer them. Treasury plans to evaluate the functional and legal implications of using blockchain for grant payments for six months but predicts the technology will reduce costs and labor while improving internal controls and trust.

“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,” said Craig Fischer, supervisory program manager at BFS.

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The new U.S. Space Force will work with Xage Security on prototyping a zero trust-style security system that is “rooted in tamperproof blockchain technology” to protect space systems in a new deal announced last week.

The Air Force and Space Force have recently been ramping up satellite protections, mainly through events like “Hack-A-Sat” and other bug bounty-type programs that enlist private researchers to disclose vulnerabilities. Xage told FedScoop its work will focus less on specific vulnerabilities and more on monitoring network activity to ensure a secure system.

“What Xage is doing is proving a much more fine-grained security solution,” Xage CEO Duncan Greatwood said in an interview. He added, “you can think of what Xage does as a means of blocking [attacks], it is very much zero trust architecture.”

A top concern for space leaders in the military is ensuring communications integrity and data protection. Everything from GPS to command and control systems relies on space operations, an arena that doesn’t yet have the cybersecurity maturity as those on the ground.

Greatwood said another critical part of the work Xage will be doing is preparing for “coordinating many different systems” in a secure way. With the number of satellites and other space systems growing, putting them under a common security architecture will be a challenge for the Space Force, he said.

“The connectivity environment is constantly changing,” he said.

Space Force will also have a large amount of data to work with. In April, the service inked a deal with the big data company Palantir to help use data from space. Now with Xage, it is working to secure that data and its integrity. Greatwood added that Xage will work on allowing “fine-grained access control” on data management to ensure its integrity.

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