As fintech and blockchain transactions continue to grow in popularity, they are receiving increased attention at the state level, whether through fintech sandboxes, crypto-friendly legislation, or other initiatives aimed to encourage fintech innovation and economic development. Below is a roundup of just some of the recent fintech activity at the state level:
- This week, New York entered into a Memorandum of Understanding with Israel on fintech cooperation. The agreement is intended to encourage fintech innovation in both New York and Israel by providing support to fintech companies and promoting information sharing. According to a 2018 report by Cambridge Judge Business School, fintech implementation in Israel exceeds that of the United States and the United Kingdom.
- Last week, North Carolina's Lieutenant Governor announced the North Carolina Blockchain Initiative, a non-partisan initiative aimed at studying the uses of blockchain technology, virtual assets, smart contracts, and digital tokens. The press release for the initiative states that it will develop recommendations that promote opportunities for economic growth and cost efficiencies and "aims to strengthen North Carolina as a leader in technological innovation." The program is another example of the desire to advance fintech opportunities within North Carolina. In 2016, North Carolina enacted the North Carolina Money Transmitters Act, which updated the state's existing laws to incorporate "virtual currency" as a defined term and confirm certain exemptions for blockchain companies.
- In May, Florida's governor signed a law establishing the Florida Blockchain Task Force within Florida's Department of Financial Services, which will "study the ways in which state, county, and municipal governments can benefit from a transition to a blockchain-based system for recordkeeping, security, and service delivery."
- New York, New Jersey, Illinois and Wyoming have also established blockchain task forces aimed at studying its uses and benefits.
- Last month, Nevada's governor signed legislation creating a fintech sandbox program, under which approved applicants will be exempt from certain financial services statutory and regulatory requirements. Nevada also recently enacted several blockchain bills, which, among other things, exempts virtual currencies from personal property taxation, creates a definition for "public blockchain" under Nevada law, and authorizes businesses to store and maintain corporate records on a blockchain. Nevada's first major step into blockchain legislation was in 2017, when it enacted SB398, which was described by bitcoin.com as "an unprecedented step in a positive direction" for blockchain legislation.
- Utah also recently implemented a fintech regulatory sandbox, which allows financial technology companies to apply for an exemption from state licensing requirements and test new financial products or services on a trial basis. Arizona and Wyoming have also implemented fintech sandboxes, and on the federal level, both the OCC and the CFPB have put forth proposals for fintech sandboxes.
Blockchain activity at the state level will likely continue to grow as states compete for the attention of crypto companies. Results of the state regulatory sandboxes will be key to states' future attitudes towards these innovative companies and how the sector will be treated long-term.
As a member of the Financial Services Litigation Practice Group, Rachel Friedman defends financial institutions from alleged violations of state and federal consumer protection laws at both the trial and appellate levels.
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