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Commentary Working & the Economy

Peter Franchot: Opportunity Knocks with the Blockchain Industry

Illustration by fotomek/stock.adobe.com.

By Peter Franchot

The writer, a Democrat, is state comptroller and a 2022 candidate for governor. 

With multiple top-tier educational and medical institutions, Nobel prize-winning researchers working in federal labs, and a world-class cybersecurity community centered around Fort Meade, Maryland has many opportunities to become a top destination for young talent and cutting-edge businesses.

One particular area of innovation that deserves more attention and consideration is blockchain technology, which has the potential to save taxpayers money, promote efficiencies in government operations, and create thousands of jobs for Marylanders.

Many readers may associate blockchain technology with bitcoin, which has grabbed headlines in recent months due to dramatic swings in value. However, there’s far more to this dynamic $3 trillion dollar industry than one component.

Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack or cheat. In other words, blockchain is a means of using computing power to ensure financial transactions are secure, auditable and unalterable. Think of it as if a spreadsheet was built into each and every dollar bill in circulation.

Security in financial transactions like this is a dream come true for Maryland’s chief fiscal officer! An iron-clad — or perhaps silicon-clad — guarantee to ensure every payment goes exactly where it should.

As Maryland’s comptroller, I believe blockchain presents an opportunity to realize efficiencies in state government that are currently impossible with antiquated technology.

For example, one of the first opportunities that I thought of to save and secure taxpayer dollars via blockchain is something quite arcane and yet indispensable to my agency: tobacco tax stamps.

Every pack of cigarettes sold in Maryland has a small stamp adhered to it indicating that the seller has paid the appropriate taxes. For decades, these stamps have served an important purpose, but their biggest flaw in today’s environment is they are a low-tech solution to a high-tech problem.

Like any physical product, these stamps can be stolen and, like postage stamps, once stolen, they can neither be replaced nor tracked. By replacing those physical items with a digital code unique to each pack, we could guarantee that taxes have been paid and allow law enforcement to track when tobacco products are illegally possessed.

Delivering reliable tax revenue, thwarting criminals, and keeping harmful products away from our kids with one simple change to the current outdated approach is an obvious benefit.

Additionally, among the most alarming challenges faced by Maryland’s Department of Labor is the avalanche of fraudulent unemployment claims that were filed and paid out. My fraud experts estimate that over $2 billion in fraudulent unemployment payments were disbursed. One of the potential benefits of blockchain technology is preventing these types of fraud from occurring – whether it’s unemployment fraud or tax fraud – which remains a top priority for my agency.

Surely, there are many other ways that Maryland can lead with and learn from blockchain, and we should lean into the opportunity that this innovative technology presents.

As the state government continues to modernize its antiquated technologies and processes, blockchain technology should be strongly considered as a potential solution to the challenges we face. Such a broad commitment from the public sector will stimulate private sector growth in the local blockchain industry, thereby positioning Maryland as a leader.

We ought to bring together the brightest minds in this nascent field to share their perspectives on how blockchain technology can be used to improve the lives of Marylanders and help all levels of their government work better.

The opportunity to nurture this promising industry and make Maryland a bastion of innovation and long-term economic growth is there for the taking. We must seize it.