Delaware to ‘embrace the emerging blockchain and smart contract technology industry,’ with distributed ledger shares

The state of Delaware is perhaps the most friendly jurisdictions for Bitcoin and blockchain technology in the U.S. Delaware Governor, Jack Markell, recently announced the details of a new initiative to “embrace the emerging blockchain and smart contract technology industry.”

The Governor unveiled the plan during a keynote address at Consensus 2016, a technology conference in New York focused on blockchain innovation. The sell out event was attended by a variety of leaders from across the blockchain industry, as well as Delaware’s Deputy Secretary of State, Rick Geisenberger, and Corporation Law Section Chair of the Delaware State Bar Association (DSBA), Matt O’Toole.

"Delaware has long been the jurisdiction of choice for the most innovative companies in the world. The Delaware Blockchain Initiative demonstrates the state’s commitment to ensuring this remains the case for the growing blockchain technology sector.”
— – Gov. Jack Markell

Although Delaware is the second smallest state in the U.S., it has become the premier location for a variety of business entities, both domestic and international. Delaware is the legal home of 66% of Fortune 500 companies, 85% of U.S. initial public offerings, and many startup and venture capital backed businesses around the world.

“Today, more than one million business entities have made Delaware their legal home.” claims the official state website. “But organization in Delaware is not only for U.S. entities – companies around the world can take advantage of Delaware’s benefits.”

“The Delaware Blockchain Initiative is a comprehensive program to provide an enabling regulatory and legal environment for the development of blockchain technology and to welcome blockchain companies to locate in the state.”
— – State of Delaware

The main highlight of Markell’s presentation was the announcement of pending authorization for a new class of state-recognized blockchain asset, that can use smart contracts called "distributed ledger shares."

“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,” Governor Markell stated. “We’re delighted that Delaware has this opportunity to help lead the way in promoting blockchain technology and its growing role in digital commerce.”

Although it was not mentioned if cryptocurrencies, such as bitcoin, would fall into the new asset class, Markell made it clear that distributed ledger shares could be a way for Delaware corporations to issue shares on a blockchain, where they can be traded almost instantly. “T+3 settlement delays need no longer exist,” he explained during his speech, referring to the time it takes for settlement to occur in today’s market.

“By creating the opportunity for a broad range of corporations – from Fortune 500 companies to startups – to take advantage of distributed ledger and smart contract applications, we are laying the groundwork for a more modern, secure and transparent business environment for years to come."
— – Gov. Markell

The Governor’s announcement highlighted four major “pushes,” or official efforts to legitimize blockchain technology across Delaware. The first is to create the appropriate legal infrastructure needed for distributed ledger shares to exist.

The second push is for a general overhaul of state regulation, in order to ensure that there is a welcoming environment for blockchain companies, which may include licensing.

A third push promotes Ombudsperson Andrea Tinianow, to the position of State Director of Corporate and International Development, so that she can welcome blockchain companies to Delaware officially and be a point of contact for those seeking to do business using blockchain technology in the state.

The last push commits Delaware to using the technology, wherever it can be of use. The Governor announced that the State has already begun exploring use cases, Symbiont is working with the Delaware Public Archives to store state archival records on a distributed ledger.

Symbiont is a distributed ledger and smart securities startup that focuses on smart contracts, and exploring how to archive, catalog and cryptographically secure government records that are held by scores of state and local agencies, and that were produced and exist only in digital form.

"It is our mission at Symbiont to work with market-leading institutions and we are delighted to work with The State of Delaware. Given its leadership position in incorporation services, it’s an ideal proving ground for smart contracts."
— – Mark Smith, Symbiont CEO

“Autonomous record-keeping is an important use case for how smart contracts can deliver a more transparent, efficient and level playing field to the public and private sectors,” Symbiont CEO Mark Smith added to the announcement. “In a few years’ time, we’ll look back and see this as an historic moment in the adoption of distributed ledger technology.”

Before the overarching initiative can be completed, Markell needs the cooperation of Delaware’s State Bar Association Corporate Law Council. Pillsbury Winthrop Shaw Pittman LLP, a leading blockchain technology legal team, is developing the legal infrastructure. The firm has been delegated as Delaware’s “Legal Ambassador’” for the blockchain industry.

“Among other things, the Initiative pertains to the creation of a new type of share registration for Delaware corporations: distributed ledger shares,” the firm said on their corporate blog yesterday. “Pillsbury’s Blockchain Technology focus team has played a leading role in this effort.”

Marco Santori, Leader of the Blockchain Technology legal team at Pillsbury law, voiced his opinion that 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.

“This is a significant development in the course of corporate affairs and, we believe, marks the beginning of an inexorable transition to blockchain-based share registration.”
— – Pillsbury Law

The only U.S. state that has concrete regulations for blockchain technology is New York state. The infamous Bitlicense went into effect in June 2015. There is only one company, Circle Inc., that has made it through their gauntlet of paperwork and fees. The majority of the other bitcoin-using companies in the state embarked on a mass exodus last year.

Just weeks later, California chose a freer path forward for digital currency in The Golden State. A proposal to mimic the regulation was quickly defeated within the state’s legislature.

Vermont’s congress recently considered and denied funding for using a blockchain for their public records, based on costs. New Hampshire, home of the growing Free State Project, has a House bill in the works that requires the state treasurer to develop an implementation plan for the state to accept Bitcoin as payment for taxes and fees, which has yet to pass.