Markell lays welcome mat for blockchain technology
Gov. Jack Markell last week announced an ambitious state initiative to embrace blockchain technology – the technology which undergirds bitcoin. He said the state’s legal community is exploring the need for any clarifications to state corporate law to enable the authorization of “distributed ledger shares” by Delaware corporations.
Blockchain is an automated record of a financial exchange with no middleman and nobody in charge. It’s an open-ledger technology that works when thousands of computers collaborate in an open network.
“Distributed ledger shares” could be traded in an entirely decentralized way without intermediaries.
The move assures Delaware’s regulatory environment will be welcoming to blockchain companies incorporating here. And, with major U.S. companies such as Barclay’s, USAA and PayPal exploring blockchain tech, the move could woo companies to Delaware.
Deputy Secretary of State Rick Geisenberger said an attorney from a New York City law firm that has been a leader in the blockchain arena originally approached Andrea Tinianow, the state’s director of corporate and international development, about the possibility of a move to blockchain tech.
Because 66 percent of Fortune 500 companies and half of all publicly traded companies call Delaware their legal home, the announcement was so important in fin-tech circles that the governor was given the opening keynote spot at the Consensus 2016 conference in New York City.
He led a speaker lineup that included former Treasury Secretary Lawrence Summers and Glenn Hutchins, who founded Silver Lake, the global tech investment firm.
“This will be a historic development in the course of blockchain technology,” said Marco Santori, a New York attorney who American Banker has dubbed “the dean of digital currency.” “We are thrilled to share the result of our many months of hard work to make it a reality in Delaware.”
Working with Symbiont, a New York startup that has created its own smart contract language built to be transferable to other blockchains, the state has already set up a pilot project transferring custody of archival Public Service Commission records from Delafile, the online system the commission uses to accept filings from investor-owned utilities, to the Delaware Public Archives.
Geisenberger and another speaker at Consensus 2016 said it was the governor’s idea to try a records transfer, and word of the move garnered much interest at this month’s New York conference.
Geisenberger said the challenge is to transfer records that exist entirely in digital form quickly and at a low cost. “I think there are some areas, particularly in the corporate area, where Delaware will have a niche into this particular industry,” he said. “And it makes sense, because a lot of this conference we’re at is focused on the movement of financial assets. I think there’s an opportunity here to try to build off some of the things we’ve been doing to make Delaware tech-friendly.”
Geinsenberger said he’s certain other states are exploring initiatives: “Illinois has someone at this conference.”
Matthew O’Toole, a partner at Potter, Anderson & Corroon and chairman of the Delaware Bar Association committee that will work with state officials to determine if legislation is necessary to effect the change, also spoke at Consensus. O’Toole said he hopes the committee will be to get through the process of evaluating the legal issues involved and deciding whether there is legislation they would recommend in time to have any legislation drafted by this time next year.
Tinianow will serve as the state’s ombudsperson to industry, inviting companies in the fin tech industry to Delaware.
“The Delaware Blockchain Initiative presents a practical opportunity for the state to demonstrate its leadership by unleashing the potential of blockchain technology and smart contracts across both the public and private sectors,” Mark Smith, CEO of Symbiont, said.
“We are honored to host Gov. Markell and all of his collaborators on the Delaware Blockchain Initiative, who have shown such foresight and leadership in embracing blockchain technology’s potential to simplify public and private record-keeping,” said Ryan Selkis of CoinDesk, a leading website focused on bitcoin and blockchain technology.
Network computers analyze past transactions on the blockchain. When computers receive their cryptographic and mathematical proof that a transaction is legitimate, they process it. The payment information is added to the database – adding another link or block of data to the chain – and that provides a permanent audit trail. Tampering with records would require coordinating many unconnected computers.
“Smart contracts offer a powerful and innovative way to streamline cumbersome back-office procedures, lower transactional costs for consumers and businesses, and manage and reduce risk,” Markell said. “We’re delighted that Delaware has this opportunity to help lead the way in promoting block chain technology and its growing role in digital commerce.”
Blockchain-based smart contracts will digitize records to autonomously update, delete, share or be acted upon when specific conditions are met, like expirations. Officials said they anticipate the technology will make commercial transactions faster and more efficient.
“Blockchain technology in general, and smart contracts in particular, have the potential to transform the way that business is done – in the capital markets and beyond,” Santori said.
The governor said the state will work with industry and consumer groups to determine best practices before enacting laws and regulations. He also said the state will work with the Delaware bar to create an appropriate legal infrastructure distributed ledger shares.