Politics

House Republicans directly criticize Biden administration for digital asset policies

“Because of actions taken by this Administration, the United States is at risk of pushing the digital asset ecosystem overseas,” said Republican Financial Services Committee members.

Statements from Republican lawmakers ahead of the inaugural hearing of the United States House of Representatives subcommittee focused on digital assets, financial technology and inclusion suggest partisan divides on crypto regulation.

In a March 6 memo, House Financial Services Committee Republicans said the first hearing of the Digital Assets, Financial Technology, and Inclusion Subcommittee would focus on the Biden administration’s “attack on the digital asset ecosystem.” The hearing is scheduled to take place on March 9 as one of the first since Representative Patrick McHenry became committee chair at the start of the 118th Congress.

“Over the last two years, the Biden Administration has issued statements and proposed rulemakings that have inappropriately impacted the digital asset ecosystem,” said the memo. “Many of these actions can be considered an overreach of jurisdictional authority. In addition, the consequences of these policies cannot be understated. Because of actions taken by this Administration, the United States is at risk of pushing the digital asset ecosystem overseas.”

Crypto industry representatives including BitGo co-founder and CEO Mike Belshe and Coinbase chief legal officer Paul Grewal are expected to testify at the hearing. In addition, the subcommittee has listed 5 pieces of crypto-related draft legislation under review, including McHenry’s Keep Innovation in America Act.

“Regulators can either declare that digital assets are regulated in the same way as other assets, and thereby apply the same rules, or regulators can say that they are different, and create new rules,” said Belshe in his prepared testimony. “But what regulators cannot be allowed to do is to claim that assets are different, and also claim that the rules are already understood.”

He added:

“I want to point out that this is not uniquely the fault of the current administration’s approach to guidance. We filed our letter to the SEC in 2018, under the prior administration’s oversight. The difficulty of keeping up with innovation is constant.”

In September 2022, the White House released a comprehensive framework for digital assets with six principal directions for crypto regulation in the U.S., following research from federal agencies. Tonya Evans, a professor at Penn State Dickinson Law who is also expected to appear as a witness at the hearing, said in prepared remarks that this framework had “yet to fulfill its promise”: 

“The Administration’s proffered framework [served] more as a report-out of initial agency findings and recommendations than a workable framework regulated parties could reasonably rely on to operate lawfully within clear rules of engagement for this novel, programmable, dynamic asset class.”

Related: US lawmakers planning to reintroduce bill aimed at fixing crypto reporting requirements: Report

The subcommittee hearing falls exactly one year after U.S. President Joe Biden signed an executive order aimed at establishing a regulatory framework for digital assets. The order has caused federal departments to move forward with studying the potential impact of cryptocurrencies on the U.S. financial system and, in some cases, develop policy recommendations.

Rep. Maxine Waters says all US regulators ‘better get together on crypto’

According to Representative Maxine Waters, the crypto market crash and bankruptcies gave U.S. lawmakers an opportunity of “getting accountability” in the space through legislation.

California Representative Maxine Waters, ranking member of the United States House Financial Services Committee, has called for coordination and cooperation between government agencies and lawmakers to address crypto regulation.

Speaking to Cointelegraph, Representative Waters suggested that recent enforcement actions on the crypto space from the U.S. Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission (CFTC) may have been to present the image of “doing something substantive and meaningful” following the collapse of major exchanges including FTX. According to Waters, the market crash and related bankruptcies of major firms gave U.S. lawmakers an opportunity of “getting accountability” in the crypto space.

“To the CFTC and to the SEC: I am not going to get in between any disagreement, any dislike, any of the approaches — the two of you had better come together so that we can deal with crypto,” said Waters. “I think it’s time for the Treasury, the Feds, the CFTC, the SEC, all of us better get together on crypto.”

When Waters chaired the House Financial Services Committee, she supported a bill to regulate stablecoins in cooperation with the Treasury Department, telling Cointelegraph she was “still optimistic” such legislation could pass under chair Patrick McHenry. She added that bringing regulatory clarity to the space — seemingly in an effort to bring additional guidance on enforcement actions — was one of her legislative priorities in the new Congress.

“The world is moving on crypto: different countries, different things we still have to think about,” said Waters. “I do believe that […] it has to be a priority of ours.”

Representative Maxine Waters addressing lawmakers on Feb. 6

The Congresswoman was one of the lawmakers who called on former FTX chief executive officer Sam Bankman-Fried to testify in a December 2022 hearing of the House Financial Services Committee. Authorities detained Bankman-Fried in the Bahamas before he could appear remotely before Congress. 

At the time of publication, the committee had not announced another hearing into the collapse of FTX or related events in the crypto space. However, Representative Waters said she was “confident” there would be more than one hearing exploring crypto regulation as part of the current congressional session.

“I have a lot of questions that I and members of my committee would want to ask [Bankman-Fried],” said Waters. “I want to go over the relationship between FTX and Alameda and exactly how much money they funneled into Alameda and what kind of investments were made and what was his relationship to those investments […] did he know and understand that he was committing fraud?”

Related: FTX hearing: US lawmakers criticize use of Quickbooks, creepy dough and ‘conscientious stupidity’

Many in the crypto space have criticized Waters for politically ‘cosying up’ to Bankman-Fried in a December 2021 hearing, later posing with the then FTX CEO in a now viral photo. The Congresswoman denied rumors she accepted campaign donations from FTX, saying she had “not received one dime, not one penny” and had no relationship on contributions from the exchange.

‘Privacy has become a taboo,’ says crypto-anarchist project DarkFi

A group of pseudonymous developers from DarkFi spoke with Cointelegraph about how crypto is evolving amid privacy challenges, bad actors and government oversight.

Pierre-Joseph Proudhon introduced one of the first critiques of centralized authority in 1848, a few years after publishing his now-classic book What is Property? and calling for the abolition of property and the state. As per Proudhon’s view, any political change would be limited without economic change. 

His work is at the heart of anarchism, “a political theory that is skeptical of the justification of authority and power,” according to the Stanford Encyclopedia of Philosophy. Almost two centuries later, Proudhon’s thoughts about economics and power still echo in society, with encryption tools paving the way for parts of the ideal society envisioned in his theory.

Crypto may be far from its original political principles, but projects reviving cypherpunk values are still thriving. One such project is DarkFi, a multichain layer-1 protocol for anonymous applications and smart contracts powered by zero-knowledge proofs.

DarkFi “is not a corporate startup. It’s a democratic economic experiment, an operating system for society,” claims its manifesto. Crypto anarchy, according to DarkFi, “is the tactic of using cryptography to create a space of freedom which cannot be penetrated by power and capital monopolies with coercive force.“

DarkFi’s manifesto also states that:

“The old model of technology is anti-political because it removes ownership from people and places it into the hands of monopoly. The old model encourages passivity and indifference by design, reducing people to consumers.“

Behind the project is a team of anarchist coders, including Amir Taak, an early Bitcoin developer who led the Dark Wallet project before it went dark in 2015 when he vanished from the crypto scene to fight in Syria against the Islamic State of Iraq and Syria (ISIS) while trying to introduce the local community to Bitcoin.

A group of pseudonymous DarkFi developers spoke with Cointelegraph in an interview about the project testnet and how the crypto industry is evolving among privacy challenges, bad actors, government oversight and politics. This interview has been edited and condensed for clarity.

Cointelegraph (CT): What is DarkFi and what problems does it address in the crypto space?

DarkFi (DF): DarkFi is a community and a movement trying to create user-empowering systems, enabling individuals to preserve fundamental human rights, like the right to privacy, freedom of speech, and the right to interact with each other without intermediaries. Some of those systems are a layer-1 blockchain with privacy by default, a peer-to-peer IRC messaging system with encrypted groups and DMs, and even decentralized collaboration tools for organization, task management, etc.

The crypto space has lost its original cypherpunk values, succumbing to state pressure by enforcing sanctions and/or implementing backdoors, so projects can survive. Privacy has become a taboo, which in current conditions often results in violent termination of development in the name of transparency and prevention of illicit activities. Crypto will split into two — RegFi, unusable and bolted down, and DarkFi, a truly free, decentralized and uncensored paradigm. That’s what we are trying to address, fight back, if you will, to retain the power to the minuteman, not serve individuals on a gold plate at states and mega corporations for fiat profit.

CT: What came first when developing DarkFi, the anarchist crypto vision, or the need of base layer solutions for multichain applications?

DF: With DarkFi, we want to build anonymous and secure crypto. Like what Monero and Zcash are for money, DarkFi is for apps/smart contracts. We felt there is a large market and need for being able to develop decentralized and anonymous financial applications. This has not been possible until now.

“The crypto space has lost its original cypherpunk values, succumbing to state pressure by enforcing sanctions and/or implementing backdoors, so projects can survive. Privacy has become a taboo.“

We believe with privacy by default and maximum anonymity, we will enable people to organize and act in much safer spaces and ecosystems. We are also very inspired by Richard Stallman and the free software movement, which is also why (unlike most other crypto things) DarkFi is fully licensed with the GNU AGPL license, and we follow the free software philosophy.

CT: How can encryption technologies contribute to a balanced environment between personal freedom and government oversight, and avoid bad actors at the same time?

DF: Encryption technologies’ purpose is to enable users to “hide stuff in plain sight.“ Oversight, government or otherwise, contradicts this, as it enables 3rd parties to “sniff” on what’s inside. Individuals shouldn’t give up control of their freedom, especially to a government, which supposedly should work for the individual, not the other way around. By using these technologies, users are able to protect themselves against bad actors trying to track them for exploiting them.

CT: What role does Web3 play in society’s future privacy and politics?

DF: What is currently being called the “Web3” is just becoming a surveillance tool which is getting abused by adversaries and officials more and more. If this continues, society’s “future privacy” will be close to non-existent, and politics will be dictatorships where every user and citizen will have to keep closely in line in order not to be considered unwanted by their oppressors.

CT: How can crypto remain aligned with its core principles as it becomes mainstream and, therefore, more political?

DF: It feels like the entire cypherpunk grassroots movement of the early Bitcoin days has been slowly lost. It’s becoming increasingly capitalist and might not be “more political.“ In fact, with most projects, it seems like they will do all in their power to be less political and more “diverse and inclusive.“ They do not have bite and simply succumb to the numbing agenda. There are too few projects in the crypto space which are political and caught my eye.

CT: Does crypto have a future without politics?

DF: Crypto isn’t a flamboyant tech. Ciphers started as a parallel language between generals and kings to deter enemies. They are only visible to senders and receivers. Ciphers were used in antiquity, middle ages, and breaking ciphers drove the development of computers in the last century. They have always been necessary.

In this era, communication, work and transactions are the basics of any society happening behind screens. At the other end of the channel lays monitoring and surveillance.

“What is currently being called the “Web3” is just becoming a surveillance tool which is getting abused by adversaries and officials more and more.“ 

The enemy of crypto before computers was in foreign territories. Now the enemy is near; crypto creates a parallel and secure space beyond the state’s regulation, sanctions and policies. Crypto is not against politics; it’s used to deter your enemy. The individual’s enemies crypto is concerned with are monitoring and surveillance, and crypto principles make no compromise in securing freedom.

CT: What are the next steps in DarkFi’s roadmap?

DF: We’ve just released our initial testnet, so we’re having the community try out the UX and find bugs that we’ve written, so we can iterate and improve. As for the future plans, we’re branching out in multiple directions when it comes to the blockchain. We hope we will also be able to educate people on the importance of free software and its philosophy. Just open-source does not cut it. Developers and founders have to quit submitting to Big Tech and use crypto mechanisms to capture value within their projects and stay sovereign.

Kansas state lawmakers look to cap crypto political donations at $100

Crypto campaign contributions less than $100 would be acceptable under the bill, provided the receiver immediately converts the funds to USD and does not hodl them.

Lawmakers in the Kansas House of Representatives have introduced a bill proposing to amend the legislature’s rules on political campaign donations.

According to the bill, no person would be allowed to make or accept crypto contributions of more than $100 for any political candidate in the state’s primary or general election. For donations under $100, the receiver would need to “immediately convert” the crypto to U.S. dollars, not use the crypto for expenditures, and not HODL the funds.

The proposed bill included provisions that seemed to be aimed at mitigating foreign contributions to elections in Kansas, by requiring personal information from those sending crypto — including “that they are not a foreign national”. Crypto campaign contributors would also have to send the funds through a U.S.-based exchange with certain Know Your Customer requirements.

The $100 cap would be based on the “fair market value” of the crypto at the time the contribution was received. Kansas lawmakers first introduced the bill to the House on Jan. 25, later referring the legislation to the Committee on Elections.

Kansas Governmental Ethics Commission said in 2017 that cryptocurrency contributions were “too secretive”, specifically referring to Bitcoin (BTC). The state of California imposed a ban on political campaign donations in 2018, but changed course in July — whilalso capping contributions at $100.

Related: FTX seeks to claw back political donations by the end of February

Though not a major election year in the United States, crypto continues to be an issue for lawmakers at the federal and state levels. In April, Ireland’s government issued a ban on crypto political donations, citing concerns about foreign interference in the country’s elections.

Crypto Council for Innovation lawyer to testify at US Senate ‘crypto crash’ hearing

Linda Jeng will appear as a witness alongside law professor Yesha Yadav and Duke Financial Economics Center policy director Lee Reiners.

United States lawmakers with the Senate Banking Committee have announced three witnesses scheduled to appear before a hearing on “crypto crashes” scheduled on Feb. 14.

At the time of publication, the U.S. Senate Banking Committee’s hearing titled “Crypto Crash: Why Financial System Safeguards are Needed for Digital Assets” had witnesses including Vanderbilt University law professor Yesha Yadav; Duke Financial Economics Center policy director Lee Reiners; and Linda Jeng, a lecturer at Georgetown University Law Center’s Institute for International Economic Law.

The hearing will be one of the first in the 118th session of the U.S. Congress exploring the regulation of cryptocurrencies following a 2022 market crash and the collapse of major exchanges including FTX.

The crypto advocacy group Crypto Council for Innovation, or CCI, announced Jeng would become its chief global regulatory officer and general counsel in July. She also previously worked in a similar role at the Circle- and Coinbase-founded Centre Consortium. According to a CCI spokesperson, Jeng will be testifying under her professorship rather than as a representative of the crypto advocacy group.

U.S. lawmakers will be gathering to discuss events in the crypto space and potential regulatory solutions for the first time in two months following a hearing exploring the collapse of FTX. That Dec. 14 hearing featured testimony from Hollywood star and outspoken crypto critic Ben McKenzie, law professor Hilary Allen, Shark Tank star Kevin O’Leary and the Cato Institute’s Jennifer Schulp.

Related: Senate Banking Committee’s priorities for new Congress include crypto: Report

Former FTX CEO Sam Bankman-Fried was originally scheduled to appear at a House Financial Services Committee on Dec. 13, but he was arrested in the Bahamas before he could fulfill that promise. The exchange’s current CEO, John Ray, was the sole witness at the hearing, and later testified under oath at an FTX bankruptcy hearing on Feb. 6.

The Crypto Council for Innovation and Jeng did not immediately respond to a request for comment by Cointelegraph.

US House Republicans plan to establish crypto-focused subcommittee: Report

Representatives French Hill and Warren Davidson will reportedly be the chair and vice chair of the subcommittee focused on issues related to crypto.

Republicans in the United States House of Representatives reportedly plan to step up their oversight of the crypto industry with the creation of a new subcommittee.

According to a Jan. 12 report from Politico, North Carolina Representative Patrick McHenry, chair of the House Financial Services Committee, said he planned to set up the subcommittee in part due to “a big hole” in how the committee is currently structured. The new panel will focus on issues related to digital assets, financial technology and financial inclusion, and be chaired by Arkansas Representative French Hill, with Ohio Representative Warren Davidson serving as vice chair.

“We’ve got to respond for oversight and policymaking on a new asset class,” McHenry reportedly said.

Cast your vote now!

The reported legislative decision represented one of the first moves by House Republicans in the 118th Congress since the political party took majority control of the chamber on Jan. 3. Lawmakers were left unable to adopt rules, determine committee assignments, and pass legislation for four days in the new session as Republicans were unable to elect a House Speaker. It took 15 rounds of voting before California Representative Kevin McCarthy could officially hold the gavel.

Related: Congress may be ‘ungovernable,’ but US could see crypto legislation in 2023

Under McHenry, the House Financial Services Committee is expected to convene another hearing to explore the collapse of cryptocurrency exchange FTX. The committee first held a hearing into the matter in December, with McHenry saying at the time lawmakers would gather again to discuss FTX sometime in 2023.

Who has returned donations or contributions from FTX amid the firm’s reputational risks?

Politicians and news organizations have reportedly planned to return roughly $6.6 million in donations from FTX — a mere fraction of the crypto exchange’s estimated contributions.

Before its downfall, crypto exchange FTX and its then-CEO Sam Bankman-Fried had been some of the most prolific spenders in the space, bailing out crypto firms and donating to political campaigns and media outlets. With more than 1 million FTX creditors looking to be made whole, what’s happening with these funds?

Bankman-Fried said in May he had been willing to donate between $100 million and $1 billion to lawmakers as part of elections in 2024. Bloomberg reported on Dec. 12 — hours before SBF’s arrest in the Bahamas — that his total donations could be at least $73 million, given directly to candidates or through political action committees (PACs).

Though many of Bankman-Fried’s and FTX’s donations to Democrats were noted with the Federal Election Commission as part of the public record, the former CEO implied in a December interview that Republicans had received roughly the same amount in “dark” donations. North Dakota Senator John Hoeven, a Republican, reportedly donated to the Salvation Army the $11,600 he received from SBF and former FTX Digital Markets co-CEO Ryan Salame.

The Democratic National Committee, Democratic Senatorial Campaign Committee and the Democratic Congressional Campaign Committee all reportedly pledged to return more than $1 million in donations from SBF they had collectively received since 2020. CNBC reported on Dec. 20 that the Senate Majority PAC — supporting Democratic candidates — planned to return the roughly $1 million received from Bankman-Fried and $2 million from former FTX engineer Nishad Singh.

U.S. President Joe Biden, whose 2020 presidential campaign accepted $5.2 million in donations from Bankman-Fried, has not commented on what he intends to do with the funds. Texas gubernatorial candidate Beto O’Rourke — a Democrat who lost his race against incumbent Greg Abbott — reportedly returned a $1 million donation from SBF prior to the 2022 election. New York Representative Hakeem Jeffries and Illinois Senator Dick Durbin have also reportedly donated funds they received to unnamed charities.

These estimates suggest roughly an additional $5 million available to creditors following bankruptcy proceedings, solely from FTX’s political contributions.

Along with lobbying politicians, FTX and SBF were directly responsible for loans and grants to news organizations in and out of the crypto space. On Dec. 9, the CEO of crypto news site The Block resigned after accepting and failing to disclose two loans totaling $27 million from Alameda Research, as well as a reported $16 million loan used to purchase property in the Bahamas.

It’s unclear whether The Block or its former CEO is willing to make some FTX investors whole by restructuring. However, Axios reported on Dec. 20 that nonprofit news organization ProPublica planned to return $1.6 million it had received from Bankman-Fried’s family foundation as part of a grant, with the funds sent to a separate account until authorities determine the best course of action.

Total estimated returns? $6.6 million.

On Dec. 19, FTX announced a “voluntary return” plan for recipients of contributions from the crypto exchange or its executives, hinting at legal action if the funds were not returned. It’s unclear whether all funds will be required to be returned to FTX debtors handling the bankruptcy and reimbursing creditors, or if third parties have the option of sending funds directly to the latter.

Related: FTX exec revealed as big donor to Oregon Democrats following misidentification

Bankman-Fried’s legal team reportedly said on Dec. 19 that the former CEO would not fight extradition proceedings to the United States, where he would face charges related to violations of campaign finance laws, wire fraud and securities fraud. He could be looking at a 115-year sentence if convicted.

Democrats to reportedly return over $1M of SBF’s funding to FTX victims

Three democratic committees, the DNC, the DSCC and the DCCC, pledged to return SBF’s political donations after the entrepreneur was charged with eight counts of financial crimes.

Following the arrest of former FTX CEO Sam Bankman-Fried (SBF), three prominent Democratic groups have reportedly decided to return over $1 million to investors that lost their funds due to misappropriation.

On Dec. 16, the Democratic National Committee (DNC), the Democratic Senatorial Campaign Committee (DSCC) and the Democratic Congressional Campaign Committee (DCCC) pledged to return SBF’s political donations after the entrepreneur was charged with eight counts of financial crimes.

A DNC spokesperson reportedly confirmed this decision when speaking to a media outlet, the Verge:

“Given the allegations around potential campaign finance violations by Bankman-Fried, we are setting aside funds in order to return the $815,000 in contributions since 2020. We will return as soon as we receive proper direction in the legal proceedings.”

The other two Committees, DSCC and DCCC, have also reportedly pledged to set aside $103,000 and $250,000, respectively, according to the Washington Post. SBF previously admitted to being a “significant donor” to both sides of the political spectrum.

Earlier this year, SBF had revealed in a podcast his plans to spend up to $1 billion to help influence the 2024 presidential election campaigns.

Related: White House silent on whether it will return $5.2M in donations from SBF

White House press secretary Karine Jean-Pierre refused to answer questions related to the return of SBF’s past donations to the party.

When asked, she responded by saying that “I’m covered here by the Hatch Act,” which prohibits civil service employees, especially from federal agencies, from engaging in some forms of political activity.

Bankman was the second-largest “CEO contributor” to Biden’s 2020 presidential campaign, with his $5.2 million in donations.

Dems and Reps join forces to pressure SBF to testify before Congress

“Your willingness to talk to the public will help the company’s customers, investors, and others,” said House Financial Services Committee chair Maxine Waters, addressing SBF.

The leadership with the United States House Financial Services Committee have separately called on former FTX CEO Sam Bankman-Fried to appear in an investigative hearing scheduled for Dec. 13.

In Dec. 2 posts on Twitter, House Financial Services Committee chair Maxine Waters, a Democrat, and ranking member Patrick McHenry, a Republican, requested SBF speak at a hearing aimed at investigating the events around the collapse of FTX. It’s unclear if the U.S. lawmakers intended the former FTX CEO to appear in person or remotely from the Bahamas.

“[Sam Bankman-Fried], we appreciate that you’ve been candid in your discussions about what happened at FTX,” said Waters. “Your willingness to talk to the public will help the company’s customers, investors, and others.”

“As you said, [Sam Bankman-Fried], you have a duty to ‘try to do what’s right’ and to ‘help customers out here,’” said McHenry. “If this is a true statement, testify before the House Financial Services Committee on 12/13.”

The House committee said in November it expected to hear from companies and individuals involved in the downfall of FTX, including Bankman-Fried, Alameda Research, and Binance. The major crypto exchange filed for Chapter 11 bankruptcy on Nov. 11, with subsequent filings revealing the firm could be accountable to more than 1 million creditors.

U.S. lawmakers in the Senate Agriculture Committee held a similar hearing on Dec. 1, questioning Commodity Futures Trading Commission chair Rostin Behnam on FTX’s downfall and the impact on traditional financial markets. Behnam pointed to “gaps in a federal regulatory framework” that could potentially lead to investors losing funds in another major exchange’s collapse without additional authority for the financial regulator.

Related: Is Bitcoin the only crypto that will survive FTX?

Some Crypto Twitter users pointed out that Bankman-Friend had donated millions of dollars to political candidates in the U.S. 2022 midterm elections. According to data reported by Opensecrets.org, these contributions included $5,000 donations to a political action committee supporting Iowa Representative Cindy Axne and New Jersey Representative Josh Gottheimer — both members of the House Financial Services Committee.

Since FTX’s bankruptcy, Bankman-Fried has stepped up his media appearances, repeatedly apologizing for mistakes leading to the exchange’s collapse. A Nov. 16 report suggested officials were considering extraditing the former CEO to the U.S. for questioning, but at the time of publication, Bankman-Friend was still in the Bahamas.

Election tally: Does blockchain beat the ballot box?

With election integrity under assault in the United States and elsewhere, is blockchain technology part of the solution? Greenland explores voting options.

In October, Greenland was reported to be exploring the feasibility of an online voting platform for its national elections. Among the options being considered is a blockchain-based system. 

That isn’t entirely surprising. Electronic voting, or e-voting, has long been viewed as a promising use case for blockchain technology. “It’s time for online voting,” wrote Alex Tapscott in a New York Times opinion piece in 2018. “Using blockchain technology, online voting could boost voter participation and help restore the public’s trust in the electoral process and democracy.”

It seems especially timely now as large swaths of the world’s population are raising questions about election integrity — most notably in the United States, but in other countries as well, such as Brazil.

Tim Goggin, CEO at Horizon State, for one, believes that blockchain-enabled elections represent a “significant improvement” over the way most elections are operated today. Voting machines break down, software fails and election irregularities often create uncertainty and doubt among the voting public.

With a public blockchain, by comparison, “it is much easier for voters to trace their vote,” Goggin told Cointelegraph, “and audit an election themselves.”

Moreover, if something untoward does occur in the voting process, it is easier to identify it on a decentralized ledger with thousands of nodes than on current tabulation systems “where counting is done behind closed doors,” says Goggin, whose company set up a public election for South Australia in 2019, the first time blockchain technology was used in the voting process for that Australian state.

Still, blockchain technology’s potential vis-a-vis public elections has been highlighted off and on for some time now. No country has yet to use blockchain technology in a national election.

Marta Piekarska, senior DAO strategist at ConsenSys, recalls working at Hyperledger in 2016, where blockchain voting was discussed as a promising use case. “Six years later, and we are still talking about this,” she told Cointelegraph. “We are still quite far from a situation where any kind of distributed ledger would be considered” — at least in a national election. 

A few countries, notably Estonia, have been experimenting with systems that allow people to vote online, she further explained. On the other hand, “Netherlands abandoned the idea of doing electronic voting due to some of the concerns around security and authenticity of the votes.”

Then, there’s sparsely populated Greenland, where the vast distances make it difficult for people to vote in person. A group of researchers from Concordium Blockchain, Aarhus University, the Alexandra Institute and the IT University will soon be investigating “whether a blockchain-based system will be a more trustworthy e-election on the world’s largest island,” according to the Concordium press release.

Ensuring trust is critical

Any voting system requires trust, and trust requires a number of properties — any one of which can be a challenge depending on the circumstances, Kåre Kjelstrøm, chief technology officer at Concordium, told Cointelegraph. For in-person voting, these include: whitelisting: ensuring only eligible voters take part; identification: voters need to prove their identity when casting a vote; anonymity: votes are cast in private and can’t be traced back to the voter; security: locations are secured by the government; and immutability: cast votes can’t be altered.

“Any digital system that replaces a manual voting system needs to address at least those same issues to ensure trust and this has proven to be rather tricky to pull off,” Kjelstrøm explained. “But blockchain may prove to be part of a solution.”

A public decentralized blockchain ensures immutability by default, after all, “in that any transaction written can never be deleted.” The system is secured by cryptography and “transactions are anonymous, but are open for inspection by anyone in the world,” said Kjelstrøm, adding:

“The trick is to maintain privacy and anonymity while ensuring any eligible voter can only cast their vote once. […] This is a current research topic at top institutions.”

Permissioned or public chains?

“The main problems I see for public elections as opposed to say corporate governance is that there cannot be a permissionless [blockchain] system because voter information is private and we cannot trust all third parties,” Amrita Dhillon, professor of economics in the department of political economy at King’s College London, told Cointelegraph.

“The second problem is that of inputting the vote at a location of the voters choice: We cannot prevent anyone coercing voters at the point at which they submit the e-vote,” she added.

Recent: Is DOGE really worth the hype even after Musk’s Twitter buyout?

Others say permissioned chains aren’t the answer because they are run by a single entity or a group of entities that exert complete control of the system. “Worst case this means that a private blockchain can be tampered with by those self-same guardians and elections rigged,” said Kjelstrøm. This isn’t much of a problem in Western countries, “but in large parts of the world this is not true.”

On the other hand, if one can “weave self-sovereign identity (SSI) into the core protocol,” as Concordium, a layer-1 public blockchain, aspires to do, that “may be just the right technology to power public elections,” said Kjelstrøm.

That said, Goggin noted that many governments will probably opt to use private blockchains in line with their own privacy/data laws, and there are many ways to set up permissioned blockchains. But, if they don’t at least offer the public an auditable trace of voting records, then they aren’t likely to boost the public’s belief in election integrity. He calls himself “a big fan” of public and distributed blockchains.

The privacy question is especially knotty when it comes to public elections. “You should not be able to tell which candidate some individual voted for, or even if they voted at all,” wrote Vitalik Buterin in a blog titled “Blockchain voting is overrated among uninformed people but underrated among informed people.” On the other hand, you want to ensure — and if necessary prove — that only eligible voters have voted, so some information like addresses and citizen status may need to be collected. Buterin viewed encryption as a way to get around the privacy conundrum.

Goggin suggests something similar. Horizon State might ask a client to “hash,” i.e., encrypt or scramble, eligible voter identities “before we are provided them, and we then hash those identities again.” This means that neither the client nor Horizon State can readily determine who voted or how they voted. He added:

“Voters will be able to see their vote on the chain, but there is no way for voters to prove that it is their vote, given they can see other votes on the blockchain also.”

Dhillon, for her part, proposes a compromise where “some parts of the process are centralized,” i.e., voters come to a booth where their identity is checked and they submit their vote, “but subsequent parts of the chain can be decentralized to make them more secure and tamper proof.”

Technical limitations?

In 2014, the city of Moscow’s Active Citizen e-voting platform was created to let Muscovites have a say in non-political municipal decisions, and in 2017 it used the Ethereum blockchain for a series of polls. The largest of these tapped 220,000 citizens and the voting results were publicly auditable. It revealed some scaling limitations.

“The platform based on proof-of-work reached a peak of approximately 1,000 transactions per minute [16.7 transactions per second]. This meant that it would not be easy for the platform to handle the volume if a higher proportion of Moscow’s 12 million citizens participated in the voting,” according to Nir Kshetri, a professor at the Bryan School of Business and Economics at the University of North Carolina at Greensboro. From this, Kshetri and others concluded that this PoW version of the Ethereum blockchain “was not sufficient to handle national elections.”

Things might be different in 2023, however, when Ethereum 2.0 implements sharding. This could boost the chain’s speed to as high as 100,000 TPS, which in turn “increases Ethereum blockchain’s attractiveness for voting,” he told Cointelegraph.

But blockchains probably still need to be more secure before they are ready for public elections, though this is manageable in Kshetri’s view. “Blockchains are likely to become more secure with increasing maturity.”

Buterin, too, said in 2021 that security was still an issue vis-a-vis elections. For that reason, “in the short term, any form of blockchain voting should certainly remain confined to small experiments. […] Security is at present definitely not good enough to rely on computers for everything.”

Online transactions, unlike manual systems, “can occur in the blink of an eye,” added Kjelstrøm, and software-driven attacks on an e-voting system can “potentially foil or damage the system or the vote.” Therefore, “any new system would have to be introduced slowly to ensure the voting system remains intact and fully functional.” Governments might begin at a small scale and conduct proof-of-concepts for select non-critical elections first, he said.

Usability is critical 

Technology isn’t the only obstacle that needs to be solved before blockchain voting attains wide adoption. There are political and social challenges, too.

“The technology is there,” said Piekarska. “We can do it right now. I mean, decentralized autonomous organizations are governed through online voting now, and they are managing trillions of dollars.” But national elections are a different beast, she suggested, because:

“On the government level, your problem is: how do you create a system that is usable by citizens?” 

One’s constituency is not tech-savvy members of a DAO, “but people like my mom, who is still struggling with online banking,” Piekarska added.

How long will it be, then, before the first national election with blockchain voting? “Hopefully not decades, but surely we’re not there yet,” said Kjelstrøm.

“It could be tomorrow or it could be in 50 or 60 years,” opined Piekarska, “because there are so many things that need to align.” In Europe, most people trust their governments and the quality of voting is not really an issue, so the push for encrypted auditable ledgers may not be so urgent. In nations with weaker governance where elections are often manipulated, conversely, why would the powers-that-be ever consent to tamper-free blockchain voting?

Greenland, which struggles with participation in its general elections primarily because of the great distances that its citizens must travel to vote, might prove an exception.

“Yes, some solid governments want to do the right thing but they struggle with the accessibility of in-person voting,” Piekarska acknowledged. “That’s probably where we might see the first movers because there is a very high incentive for them to do it. But these are unique situations.”

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All in all, it’s critical that people have trust in their voting system, whether manual, electronic or blockchain-based, and building trust can take time. But, as more people become used to accessing public services online, electronic voting should take greater hold in different parts of the world, and once that happens, blockchain voting could catch on, given its well-documented advantages, allowing individuals to audit their own votes.

Large-scale blockchain-enabled national elections are probably some years away still. Even so, Goggin has been engaging in discussions recently “about providing elections at that scale,” adding:

“While it isn’t the norm yet, governments are beginning to consider the value that online blockchain voting systems can offer in efficiency, accessibility, speed, security and transparency.”