LANSING, MI — Integrating cryptocurrency technology into U.S. government systems has “real dangers” that could leave Americans who rely on federal payments vulnerable to cyber-attack, a finance regulation professor told Michigan lawmakers.
Hilary J. Allen, a securities and banking law professor at American University in Washington, D.C., told state senators this week the public would be “exposed to significant operational risks” if the Trump administration let Elon Musk’s DOGE team use blockchain technology for federal payments.
Using blockchain, a decentralized digital ledger system associated with cryptocurrencies like Bitcoin, as the “plumbing” for government payments would make those transactions visible and vulnerable to bad actors, Allen said.
“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.
Allen testified Wednesday, March 19 before the Michigan Senate Oversight Committee, which Democrats began using this month to spotlight Trump administration impacts. A March 5 meeting focused on a federal grants and loan payment freeze harming nonprofit programs like Head Start.
Her testimony follows weeks of escalating nationwide concern about DOGE staffers burrowing into agencies that control payments and house private data and information on millions of Americans in a purported search for government waste.
Musk’s team gained access to the Treasury Department’s payment systems in February, sparking alarm over its access to the department’s Bureau of Fiscal Service, which controls more than $5 trillion in disbursements for government programs like Social Security and Medicare, tax refunds and federal salaries.
One DOGE staffer briefly gained the ability to rewrite payment system code, which Trump officials later admitted was an accident. Democrats have seized on the incident as emblematic of the risks posed by a young team’s aggressive efforts to tinker with government computer systems.
The DOGE initiatives have faced increasing legal setbacks. This week, a federal judge blocked DOGE from accessing Social Security systems that hold personal data on millions of Americans, calling their work a “fishing expedition” and ordering deletion of any personally identifiable data in their possession.
A federal judge also ruled this week that DOGE’s dismantling of the United States Agency for International Development (USAID) was likely unconstitutional. The Trump administration has since proposed renaming the agency and using blockchain in its procurement process, according to Wired Magazine.
The administration is also considering integrating blockchain at the U.S. Department of Housing and Urban Development (HUD) to monitor grants and issue some payments in cryptocurrency, according to ProPublica.
Allen, who was appointed by Congress to study the causes of the 2008 financial crisis, teaches corporate law and financial regulation in addition to authoring a book on threats that “fintech” innovations pose to the financial system. She told lawmakers that an unintended failure of the government payment system would be widely disruptive to the economy and could cause a default on U.S. Treasury securities.
She warned that DOGE staffers eager to root out “inefficiencies” may not fully understand redundancies created for system security reasons and could unintentionally create vulnerabilities exploitable through complex networked systems.
Agencies like the Social Security Administration and Internal Revenue Service, both of which send direct payments to Americans, still rely heavily on the aged COBOL programming language for core functions and legacy systems. But COBOL hasn’t been taught 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.
The risk extends to the private sector, she warned. The 2017 NotPetya cyper attack showed that private defenses are only as strong as the weakest link in the systems they are interoperable with, Allen said.
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.”
Republicans, in the minority on the on the Senate committee, offered muted pushback. Sen. Jonathan Lindsey, R-Coldwater, suggested the concerns were speculative.
“You’re talking about global financial meltdown based on DOGE looking for efficiencies in government,” Lindsay 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?”
Allen responded that it often takes a while for problems to “metastasize into consequences” and said it’s possible that sensitive information may have already been accessed by bad actors who just have yet to weaponize it.
“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.”
The stakes necessitate heightened concern, she continued. Problems caused by missed payments via a system outage could escalate quickly through the economic ladder and have a noticeable impact on GDP even if the issue were short-lived.
There are also individual concerns.
“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,” she said.
There are “very limited” steps an individual could take to protect themselves proactively, said Allen.
She suggested people “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.”
Related stories:
Doctors say Medicaid cuts would threaten Michigan
Slotkin: Michigan farmers face huge loss in trade war
