Nebraska Legislature considers bills on blockchain, cryptocurrency for first time
The future of blockchain and bitcoin
LINCOLN — The legislative hearing had been peppered with terms like cryptocurrency, blockchain and smart contract.
Proponents and opponents had testified about bitcoins and distributed ledgers, tokens and digital wallets.
Now the last speaker was wrapping up, and State Sen. Burke Harr of Omaha raised a plaintive question.
“So it is possible to understand this?” he asked.
Nebraska lawmakers, for the first time ever, are confronting bills about an emerging technology that is commonly known as blockchain. The bills also deal with two blockchain uses: virtual currencies, such as bitcoin, and smart contracts.
Four measures, introduced by two senators, are being considered by three committees.
Sen. Carol Blood of Bellevue, who offered three bills, said she sees them as a way to nurture a fledgling digital industry with huge potential.
“We want to have it in state statute that we embrace this technology,” she said. “We can start a boom here in Nebraska without a tax credit, without tax-increment financing, without a grant.”
Sen. Paul Schumacher of Columbus offered the remaining bill. He said he did so largely to get lawmakers thinking and learning about the technology.
“It is a fascinating subject and just maybe an opportunity for the state to be at the leading edge, instead of where we usually are and that’s at the tail’s end,” he said.
Blockchain technology, more properly called distributed ledger technology, allows users to securely transfer value or assets without an intermediary such as a bank or credit card company. The technology also can be used to store information that needs to be protected from hackers.
Distributed ledger technology uses a decentralized network of computers, which are continually updated and synchronized, to record encrypted transactions.
The encrypted records are stored as blocks of data. Each block is connected with the one before and after, such that tampering with one would be immediately evident.
Security also comes from users’ ability to view all transactions and from the lack of a central target for hackers.
Distributed ledger technology is the foundation underlying bitcoin and other virtual, or crypto, currencies. The currencies can make peer-to-peer business deals possible around the world.
The technology also is the foundation of smart contracts, which are digital contracts that are programmed to operate automatically.
Nebraskans involved with the new technology make comparisons to the early years of the Internet, predicting that blockchain and its uses will prove equally as revolutionary.
It’s “a growth industry that has broad implications for trade, agriculture, technology development, government and more,” said Mike Echternacht, an attorney who works with the tech startup Embermine of Lincoln.
Embermine is developing a way for artists and other creative people to collaborate and distribute their work using smart contracts.
It’s one of a handful of Nebraska ventures launched in recent years that seek to put the new ideas to work.
Industry members and tech geeks are hardly the only ones excited by the prospects.
John Hansen, president of the Nebraska Farmers Union, called blockchain technology the “biggest new marketplace idea to come along in a very long time.”
Mutual of Omaha and Cargill are among well-established businesses that have started exploring blockchain technology. Cargill has used it in a pilot project to track Honeysuckle White brand turkeys from the farm to the store.
But for most lawmakers — and members of the public — the biggest hurdle is wrapping their minds around the unfamiliar concepts.
A survey of government executives by the Governing Institute and KPMG found that 48 percent reported being “very unfamiliar” with the concept of blockchain.
Sen. Laura Ebke of Crete, who chairs the Judiciary Committee, said she doesn’t know what committee members might do with the two bills that went to that committee “because I don’t think most people understand it.”
The Judiciary Committee heard Legislative Bill 695, which Blood plans to make her priority for the session.
The measure would give legal recognition to distributed ledger technology and to smart contracts. It also would recognize electronic signatures and records secured through distributed ledger technology.
The committee also heard Blood’s LB 691, which would set up a regulatory structure for virtual currencies. Blood said she does not want to pursue the bill.
Schumacher proposed a different regulatory structure in LB 987. The bill, which went to the Banking, Commerce and Insurance Committee, uses language developed by the Uniform Law Commission.
It is not expected to get out of committee.
Blood’s final proposal, LB 694, is slated for a public hearing before the Government, Military and Veteran’s Affairs Committee on Wednesday. The bill would prohibit cities and counties from taxing or regulating distributed ledger technology or its uses.
Industry members oppose both regulatory proposals, LB 691 and LB 987, saying they would drive innovators and entrepreneurs out of Nebraska. They point to the exodus of business from New York after its 2015 virtual currency regulations.
Those involved with the technology split over Blood’s other bills.
Embermine representatives said the proposals would help the new technology flourish by giving it legal recognition.
But Kyle Tautenhan, co-founder of BlockEra in Omaha, who goes by Kyle Tut, argued that it is too early in the technology’s evolution to fix definitions in state law.
“Even if we have good intentions right now, we could accidentally box ourselves in,” he said.