Financial applications of blockchain have the potential to reduce costs and improve access to the financial system, but they also face multiple challenges. Cryptocurrencies, likely the most widely known application, are a digital representation of value protected through cryptographic mechanisms, which facilitates payments. Some are known for volatility (i.e., frequent or rapid changes in value), but a type known as stablecoins may help reduce this risk. Similarly, an emerging area known as decentralized finance offers services such as blockchain-based lending and borrowing, which also face several challenges. For example, blockchain-based financial applications can facilitate illicit activity, may reduce consumer and investor protections compared to traditional finance, and, in some cases, are subject to unclear and complex rules.
How Blockchain Could Help Emerging Markets Leap Ahead
GAO developed four policy options that could help enhance benefits or mitigate challenges of blockchain technologies. The policy options identify possible actions by policymakers, which may include Congress, federal agencies, state and local governments, academic and research institutions, and industry. In addition, policymakers could choose to maintain the status quo, whereby they would not take additional action beyond any current efforts. See below for details of the policy options and relevant opportunities and considerations.
GAO was asked to conduct a technology assessment on the use of blockchain, with an emphasis on foresight and policy implications. This report discusses (1) non-financial applications of blockchain, including potential benefits and challenges, (2) financial applications of blockchain, including potential benefits and challenges, and (3) policy options that could help enhance benefits or mitigate challenges of blockchain technologies. 2ff7e9595c
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