Delaware Blockchain Move Drawing in Private Companies, Law Firms

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By Sara Merken

Delaware earlier this month became the first state in the nation to allow companies to use blockchain technology to issue and track stocks. Private companies, and law firms, are lining up.

Legislative amendments became effective in August that will allow the more than 1 million public and private entities incorporated in Delaware to maintain corporate records on a blockchain. Companies using the technology will be able to issue, trade and keep track of their stocks more cheaply and efficiently.

Medici Ventures Inc.—a venture capital arm of online retailer Inc. that invests in blockchain companies—plans to become one of the early adopters.

“Medici Ventures is very excited about the possibilities this forward-thinking legislation from Delaware affords corporations, and plans to offer its shares and begin managing its shareholder records on the blockchain as soon as possible,” Medici Ventures President and board member Jonathan Johnson told Bloomberg BNA in an Aug. 10 statement.

Medici Ventures is an investor in Symbiont Inc., a New York-based financial services firm that is working with Delaware on the infrastructure to support corporate record keeping on a blockchain throughout the company’s life.

The subsidiary is one of about two dozen private companies that have expressed interest in using Delaware’s blockchain technology, Symbiont Chief Executive Officer Mark Smith told Bloomberg BNA.

Surprisingly, the sector that has expressed the most interest is law firms, Smith said. He added that three large firms have reached out to Symbiont, but declined to disclose their names.

Road Forward Uncertain

Blockchain is a type of electronic distributed ledger, similar to a stock ledger, that is maintained by a number of participants in a network of computers.

Former Delaware Gov. Jack Markell asked the state bar’s Corporation Law Council to consider amending the law to expressly authorize the issuance of shares on distributed ledgers as part of the Delaware Blockchain Initiative, a project launched in May 2016 to improve blockchain efficiencies in the government.

While the new initiative is off to a promising start, there are still questions about how quickly the transition will happen, to what extent companies will use the technology, and what kind of companies may adopt the practices, said Matthew O’Toole, chair of the Corporation Law Council and a partner at Delaware-based firm Potter Anderson & Corroon LLP.

“I don’t think there are insurmountable barriers, but there are still a lot of uncertainties,” O’Toole said.

Issuing and transferring stocks on a distributed ledger will initially be difficult for public companies, said John Mark Zeberkiewicz, a partner at Delaware-based law firm Richards, Layton & Finger PA who is a supporter of the blockchain initiative.

Companies likely will make the switch once they see proof of concept from early adopters, such as startups and tech-minded mid-stage companies, Zeberkiewicz said. And once a company begins using blockchain technology, they will “see the advantages quickly,” he said.

Blockchain’s main benefits include saving companies money, increasing efficiency and transparency, and minimizing mistakes, its supporters say.

`Incredibly Powerful’

“The technology is potentially incredibly powerful, in the sense that it can be used to create an immutable record of any number of transactions, not limited to the issue and transfer of shares, but theoretically any transaction that implicates or touches upon in any way the internal affairs of the corporation,” Zeberkiewicz said.

Implementing the technology “could result in tremendous cost savings down the road. You could do everything pretty much electronically,” and cut out the cost of intermediaries, he said. In addition, blockchain “could essentially prevent mistakes from happening before they occur.”

Another advantage of the platform is that every stockholder could eventually be directly registered on the blockchain, instead of being beneficial owners through brokers. The blockchain’s immutable record will allow companies to “reconstruct who owns what at any point in history,” Zeberkiewicz said.

Costly and time-consuming disputes over company ownership, shareholders and governing documents will “literally just go away” when a company starts using blockchain, said Andrea Tinianow, Delaware’s director of corporate development and director of the Delaware Blockchain Initiative. Formation documents put directly on the ledger will be “undisputable, because the ledger will be immutable,” she said.

Additional benefits include enhanced communication between corporations and their owners, as well as eliminating the risk of not being in compliance with state laws, she said.


State officials say they hope blockchain will help make business-friendly Delaware even more attractive to companies.

“Delaware has always kept ahead of the curve,” said Charles Elson, director of the University of Delaware’s John L. Weinberg Center for Corporate Governance. The amendments are “aligning Delaware law with what is becoming a trend,” of considering different uses of technology, he said.

Kris Knight, deputy secretary of state and director of Delaware’s Division of Corporations, told Bloomberg BNA that he hopes outside organizations are encouraged to initially form in Delaware or come to the state once they see the innovative environment.

Knight also said the state wants its corporations to prosper and innovate by taking advantage of new technology offerings.

Similar amendments embracing new technology can also be replicated in other states, Tinianow said. Additionally, the system would be “even more powerful” if other states chose to work with the Symbiont distributed ledger to make an efficient, streamlined process, she said.

To contact the reporter on this story: Sara Merken in Washington at

To contact the editor responsible for this story: Yin Wilczek at

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