Rhode Island is ready to take risks with blockchain

On Wednesday, the Rhode Island Department of Commerce completed a request for proposals seeking a partner to help bring business registration services from paper-based systems onto the blockchain.

Rhode Island Commerce Secretary Elizabeth Tanner told StateScoop that when she began looking for ways to streamline the registration service and the state’s records management system a few years ago, she came across the potential of blockchain’s distributed ledger technology. The choice of technology and RFP is the result of years of research, a successful pilot program and an unsuspecting source of inspiration abroad.

While blockchain is not new in government, it has a shaky reputation. In Illinois, a 2016 initiative found that blockchain showed promise for several potential public applications, from waste management to social welfare distribution. Several other states also explored pilot projects, but enthusiasm waned in recent years. And Sam Bankman-Fried’s mishandling of client funds, which led to the collapse last year of his crypto exchange and hedge fund FTX, further dampened enthusiasm.

Blockchain’s backlash led some government officials to push for more regulation, hoping to boost the technology’s reputation as a trusted platform. A New Hampshire commission on crypto and blockchain organized by Gov. Chris Sununu recommended earlier this year that state lawmakers take a proactive stance on regulation since blockchain typically falls outside the state’s current legal framework.

The New Hampshire commission also said blockchain brings unique economic opportunities to the state. Rhode Island’s Tanner agreed. As an attorney who has helped create hundreds of LLCs and corporations, Tanner told StateScoop she was familiar with the problems with the current, paper-based system.

“I was very familiar with how to open a business, and I thought there had to be a better way,” Tanner said. “So I looked at every other state in the country and found that they all do it the exact same way that Rhode Island does — you go to certain websites to fill out certain parts of the paperwork, and sometimes, again, it can be paper-based systems.”

But another problem was synchronizing registration names for businesses and individuals across the record-keeping systems used by government agencies. She said in one system, for example, one business might be called “ABC Restaurant” and “ABC” in another, leading to inconsistency and confusion.

“So I started looking internationally when I discovered Estonia and realized they had a centralized place for you to enter that information once and only once, and I knew I needed to learn more,” she said.

Answer abroad

Estonia is an international leader in digitizing public processes, and its blockchain-based e-residency program particularly intrigued Tanner, she said. E-residency is a digital business program and environment for entrepreneurs to start and run businesses within the EU from anywhere in the world. When she learned about the program and became an e-resident herself, Tanner said she spent a lot of time playing around with the system to see if Rhode Island could create something similar.

At the time of her research, Tanner said she was unaware that Estonia was using blockchain.

“So it wasn’t like I went into it and looked at blockchain. But at the time, blockchain was new and people were talking about it and people wanted to explore it. And then when we put out the original RFP to do a pilot back in 2019, we asked to introduce blockchain technology, so that’s when it took us on this journey to be able to simplify our state administrative processes,” she said.

Rhode Island’s pilot program used blockchain for one public service: creating credentials for certified public accountants. Tanner said the service was chosen because it is not risky and “very boring.”

“It also didn’t help that blockchain at the time and continues to have a bad reputation just by words. So we often don’t use the word blockchain and instead focus on the fact that it’s distributed ledger technology, that it’s just one part of the process,” Tanner said.

But now, based on the success of the pilot program, Tanner said, the state is ready to take some risks. Rhode Island released its official RFP, which closed on Wednesday, and Tanner said the state is now vetting vendors.

“What I’m most interested in is a supplier who has done this before, which could mean internationally,” she said. “There may be some projects done in the state, but for us, we’re ready to take a little more risk in trying to do something new and innovative in the state.”

While the main focus of Rhode Island’s project is streamlining business registration, Tanner said blockchain’s future with state services is limitless.

“I like to call it a wheel, you know. So when you go to a single website, you’re putting your most basic information into what we call a data lake,” she said. “And then there’s just loads of spokes that you can put on the wheel to do more and more good work. And that is what we want to do.”