May 2 — Delaware-incorporated companies, with the assent of the state's Legislature, will soon have the option to issue paperless equity shares using blockchain technology.
Allowing Delaware-registered companies' shares to be issued and traded using blockchain technology is one of four elements of Delaware's blockchain initiative, which was introduced May 2 by Delaware Gov. Jack Markell at a technology conference in New York.
The initiative, whose overarching aim is to help companies lower transaction costs while speeding up transaction consummation, automating data processes and reducing fraud, aims to make Delaware an attractive domicile for blockchain companies and will make the state a user of blockchain technology in order to share data (see related story in this issue).
The initiative also pledges that the state will not create new regulations or laws in the foreseeable future affecting the use of blockchain technology, which allows individuals and companies to effectuate and verify transactions and then share or distribute the transaction ledger to a self-selected group of entities or the general public.
Markell told Bloomberg BNA that changes to state corporation laws—needed to permit existing publicly traded firms to shift to the technology and companies effectuating an initial public offering in Delaware to use it—“could be done in a year.”
The governor's office will likely suggest the changes to the state Legislature in the first half of 2017, Markell said.
In the meantime, the state is working with New York-based Symbiont.io Inc. to move state internal recordkeeping and other data to the blockchain. Shorter-term uses include registry services such as land titles, auto titles and professional licences while longer-term uses may include incorporation documents and uniform commercial code filings.
While the equity-market project is in the “planning stages,” work on a state blockchain is more immediate: the first records to be placed on the state's blockchain will be orders, agendas and meeting minutes of the state's public service commission.
A Pillsbury Winthrop Shaw Pittman LLP legal team led by partner Marco Santori is advising Delaware on its blockchain initiative.
Other states have elected to deal with the blockchain and digital currencies in myriad ways. New York, for instance, issued in 2015 a regulatory requirement commonly known as the BitLicense, a license that companies operating in New York or possessing New York clients are required to possess. Circle, a mobile payments service, is the lone company that to date has acquired a BitLicense, though two dozen applications are pending.
Some states including Kansas, Tennessee, Texas and Washington have issued guidance that enfolds virtual-currency businesses within their existing regulatory framework, much like the current rules in Delaware. Washington includes third-party exchanges of virtual currencies in its money transfer rules; Kansas, Tennessee and Texas do not on the theory that virtual currencies aren't money.
And while several state legislators have introduced laws involving digital currencies, only statehouses in Connecticut and New Hampshire have approved them, according to the regulations tracker of Coin Center, a nonprofit organization in Washington, D.C., that promotes innovation in virtual currencies and the blockchain databases that underlie them.
To contact the editor responsible for this story: Yin Wilczek at firstname.lastname@example.org
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