Professor Warns of Risks in Integrating Cryptocurrency into U.S. Government Systems

{ “title”: “Professor Sounds Alarm on Cryptocurrency Risks in Government Systems”, “description”: “A finance regulation expert warned Michigan lawmakers about potential cybersecurity vulnerabilities if cryptocurrency technology is integrated into U.S. government operations.”, “tags”: “cryptocurrency, government, cybersecurity, finance, regulation”, “rewritten_content”: “LANSING, MI – Integrating cryptocurrency technology into U.S. government systems poses ‘real dangers’ that could make Americans reliant on federal payments vulnerable to cyberattacks, a finance regulation professor warned Michigan lawmakers this week.nnHilary J. Allen, a securities and banking law professor at American University in Washington, D.C., testified before the Michigan Senate Oversight Committee on March 19, highlighting the risks involved. She stated that the public would be ‘exposed to significant operational risks’ if the Trump administration allowed the DOGE team, associated with Elon Musk, to use blockchain technology for federal payments. nnAllen explained that using blockchain, a decentralized digital ledger system often linked with cryptocurrencies like Bitcoin, as the ‘plumbing’ for government payments could make transactions visible and vulnerable to malicious actors. nn’DOGE employees’ access to the software systems used to affect federal government payments, as well as DOGE’s ambitions to substitute new blockchain-based systems as government infrastructure may leave American citizens who rely directly or indirectly on payments from the government more vulnerable to the effects of cyber-attacks and careless errors,’ Allen testified. nnnThis testimony came amid growing national concerns about DOGE staffers accessing government agencies that control payments and store the private data of millions of Americans. The goal was reportedly to seek out government waste. nnIn February, Musk’s team gained access to the Treasury Department’s payment systems, raising alarms about its access to the Bureau of Fiscal Service. The bureau manages over $5 trillion in disbursements for government programs, including Social Security, Medicare, tax refunds, and federal salaries. One DOGE staff member briefly had the ability to rewrite payment system code, an incident officials later admitted was an accident. Democrats have cited this situation as evidence of the hazards involved with the team’s efforts to modify government systems.nnThe DOGE initiatives themselves are facing increasing legal challenges. A federal judge blocked DOGE from accessing Social Security systems containing the personal data of millions of Americans this week, describing their work as a ‘fishing expedition’ and ordering the deletion of any personally identifiable information in their possession. nnA federal judge also ruled this week that DOGE’s actions involving the United States Agency for International Development (USAID) were likely unconstitutional. According to Wired Magazine, the Trump administration has since proposed renaming the agency and incorporating blockchain in its procurement processes. nnThe administration is also considering integrating blockchain at the U.S. Department of Housing and Urban Development (HUD) to monitor grants and issue payments in cryptocurrency, according to ProPublica.nnAllen, who previously studied the causes of the 2008 financial crisis for Congress, and who also teaches corporate law and financial regulation and has authored a book on the dangers that ‘fintech’ innovations pose to the financial system, told lawmakers that a failure in the government payment system could widely disrupt the economy and potentially cause a default on U.S. Treasury securities. nnAllen also raised concerns that DOGE staffers, focused on finding ‘inefficiencies,’ might not fully grasp the security redundancies in place and could inadvertently create vulnerabilities.nnAgencies like the Social Security Administration and the Internal Revenue Service, which directly issue payments to Americans, still rely heavily on the older COBOL programming language for core functions and legacy systems. However, COBOL has not been a subject in computer science programs since the 1990s, ‘so it would be unlikely that those young employees would know how to navigate a COBOL system carefully,’ Allen said. nnThe expert also warned that the risk extends to the private sector. The 2017 NotPetya cyberattack demonstrated that private defenses are only as robust as the weakest link in the interconnecting systems. nn’DOGE’s use of private sector IT systems creates risks through interoperability with government systems and this is something that private sector businesses should at least look into.’ Allen stated.nnRepublicans on the Senate committee expressed some skepticism. Sen. Jonathan Lindsey (R-Coldwater) suggested the concerns were speculative. nn’You’re talking about global financial meltdown based on DOGE looking for efficiencies in government,” Lindsey said. “Realistically, what are we looking at? Is this an exercise in trying to talk about how things could go wrong, or are we talking about actual negative feedback at this point?’ nnAllen responded that problems often take time to unfold, or ‘metastasize into consequences.’ She added that it’s possible that sensitive information may have already been accessed by bad actors who have yet to weaponize it.nn’One of the challenges with cyber-attacks, for example, is often they are low and slow, right? The groundwork is done. Systems start to be corrupted and you don’t notice for quite some time. So, it’s really impossible to say at this point whether any of the things I’m worried about have actually already started to happen.’nnAllen further noted that a system outage causing missed payments could quickly escalate and considerably impact GDP, even if temporary. She also highlighted the individual impact of such a failure. nn’If you have people who are dependent on Social Security payments, they may not be able to make it for another week or another month until they get their payments.’nnAllen suggested people should ‘amass savings and keep some cash set aside to tide them over any temporary disruptions. They should consider keeping screenshots of balances in government accounts. They should be alert to any signs of identity theft.’n