States turn to blockchain technology for growth, efficiency

The emerging blockchain industry has recently caught the attention of some state political leaders and economic development officials as a potential driver of economic growth as well as a potential solution to improve government services. To support economic growth, states are working on creating flexible regulatory sandboxes to allow blockchain-based startups to test their products. The states also hope to position themselves as destinations for startup growth in the nascent industry. Other states have started to adopt blockchain technologies to assist in the provision of services to their citizens.

Blockchain regulatory sandboxes

Due to the emergent nature of blockchain technology and its potential impact on the financial, insurance, and legal services industries, several states are working to develop the regulatory framework to protect consumers while allowing the industry to grow. Recent announcements include:

• Colorado Gov. Hickenlooper appointed a 12-member blockchain council in June. The intent of the council is to develop a legal framework for blockchain technology that will “allow for the natural evolution of this young and promising technology."
• Connecticut Gov. Dannel Malloy signed legislation creating a working group to explore the potential economic development opportunities for the blockchain technology industry including proposed regulatory changes.
• Delaware Gov. John Carney signed a package of bills intend to provide clarity regarding the usage of blockchain technology as a legal instrument for business transactions. The new laws make it clear that records created/stored on a blockchain platform are legally binding. This addresses one of the concerns that business have about adopting blockchain technology: uncertainty regarding the legal protections of blockchain-based agreements.
• Vermont Gov. Phil Scott signed legislation that will allow for the creation of "blockchain-based limited liability companies” to allow companies that leverage blockchain-based technologies to do business in the state. In addition, the Vermont Department of Financial Regulation will review the potential application of blockchain technology to the provision of insurance and banking as well as consider any necessary regulatory changes to support the growth of the industry.
• Wyoming Gov. Matt Mead signed a package of bills that would create a regulatory sandbox for blockchain startups, specifically targeted at supporting companies that apply blockchain technologies to the financial and insurance industries.

Blockchain for government

In a November 2016 article, SSTI highlighted the provision of government services as a potential area of growth for blockchain technology. Over the last several months, an increasing number of states are looking to develop strategies for integrating blockchain into their services including:

• In May, Colorado Gov. Hickenlooper signed into law a bill that will require the state to evaluate the costs and benefits of using distributed ledgers in various government systems with a specific focus on improve the state’s cybersecurity efforts and protecting the private information of its citizens.
• Delaware will test a blockchain-based business filing system that will allow corporations to take advantage of smart contract technology to automatically track stocks and collateral assets in real time. The intent of the pilot program is to give lenders and borrowers a more efficient and accurate record of business transactions as well as ensure that those transactions meet state and federal regulations.
• Government officials in Arkansas are considering a statewide initiative that would leverage blockchain technologies to improve food safety.