Andrea Tinianow is director of corporate and international development for the State of Delaware. There, she works alongside Mark Smith and Caitlin Long, the CEO and president of Symbiont, respectively, and Cooley LLP FinTech lead Marco Santori, on the Delaware Blockchain Initiative.
In this CoinDesk 2016 in Review special feature, Tinianow and her team provide an overview of the work ongoing in Delaware to migrate government services to distributed ledger tech.
If 2016 marked the year that Delaware became the first US state to implement blockchain technology, 2017 will mark another first.
This year, we expect companies will be able to file documents on our distributed ledger, in addition to current filing procedures.
But while we’re just one state in one country, this move is no small feat – a large majority of the “foundational” documents of finance including incorporation documents (that form the foundation of securities markets) and UCC filings (that form the foundation of secured lending) – are filed here.
Delaware is home to more than 66% of Fortune 500 companies and 85% of initial public offerings, and many private companies and startups choose to incorporate in Delaware.
We anticipate that in 2017, filers will have the opportunity to use smart-contract versions of UCC documents on a distributed ledger, a move that helps us keep our historic first-mover status.
Work underway
For those who haven’t been following, Symbiont engineers have been working closely with state officials since Delaware Governor Jack Markell launched the initiative in May.
In addition to ensuring that Delaware’s regulatory environment is “welcoming and enabling”, the Governor appointed an Ombudsperson (Andrea Tinianow) and a blockchain legal ambassador (Marco Santori). He committed the state government to using the technology (beginning with the Delaware Public Archives project), and asked the Delaware State Bar Association’s Corporation Law Council to consider clarifying corporate law to authorize distributed ledger shares.
The Public Archives project is now in production, and it uses smart records to automate compliance with the state’s document retention and destruction laws and create a means by which the Delaware Public Archives can generate new revenue streams.
Key allies have also emerged to support the Delaware Blockchain Initiative’s vision.
For example, Vice Chancellor J Travis Laster of the Delaware Court of Chancery, the Delaware court that handles disputes involving Delaware corporate law, has written that blockchain technology offers a solution to problems stemming from the complexity of the securities ownership structure in the US.
Other allies include the Delaware Division of Corporations (which has been an important partner in the Delaware Blockchain Initiative from the start), and the Global Delaware Team (from the Division of Corporate and International Development, resident in the Delaware Department of State).
Path forward
In 2017, we expect more updates.
The Delaware Blockchain Initiative’s roadmap includes the issuance of legally-enforceable smart UCC filings, followed by the possible enactment of enabling and conforming legislation authorizing distributed-ledger shares and the offering of new registry services not presently offered by Delaware.
Smart UCC filings are next up for rollout, following completion of the Delaware Public Archives project.
While this may seem a smaller step forward, few may understand how critical a UCC filing is to the banking industry.
When a person or business takes out a loan using personal or business property (other than real estate) as collateral, the lender attaches a lien to the collateral to “perfect” its security interest by filing a UCC-1 Financing Statement with the Secretary of State.
Overall, the UCC process is still surprisingly paper-based, and therefore takes time and is subject to both errors and fraud.
We believe UCC filings on a distributed ledger will (1) automate the release or renewal of UCC filings and related collateral, (2) increase the speed of searching UCC records, (3) reduce mistakes and fraud and (4) cut cost.
By offering distributed ledger options, we’re enabling significant improvements to the financial industry’s workflows.
Indeed, in this way, we believe Delaware is poised yet again to become the “First State!”
Resolution image via Shutterstock