Legislature Looks at Blockchain Technology, Lacking Master Plan

Awaiting action in the Connecticut State Senate is a proposal that would have state government dip its toe in the water of blockchain technology.  The bill requires the Office of Policy and Management (OPM) secretary to develop a plan to incorporate blockchain technology to “make a state administrative function more efficient.”

That must be accomplished not this year but next - by October 1, 2020, and in consultation with the Department of Administrative Service’s Division of Information Technology’s chief information officer.  A year later, by October 1, 2021, the OPM secretary must submit the plan to the Commerce and Government Administration and Elections committees of the legislature.  That’s 30 months from now.

The timetable was unanimously approved earlier this year by the legislature’s Commerce Committee. It defines “blockchain technology” as “distributed ledger technology” that uses a distributed, decentralized, shared, and replicated ledger that may (1) be public or private, (2) be permissioned or permissionless, and (3) include electronic currencies or tokens as an electronic exchange medium.

The bill was among a handful that came out of deliberations that ended last November by the state’s Blockchain Working Group, a 12 member group established in 2018 (Special Act 18-8).  It’s charge:  “develop a master plan for fostering the expansion of the blockchain industry in the state and recommend policies and state investments to make Connecticut a leader in blockchain technology.”

The master plan was to identify economic growth and development opportunities, assess the existing blockchain industry in Connecticut, review workforce needs and academic programs, and make legislative recommendations.   

The Working Group met three times -  in June, September and November – for a total of about 6 ½ hours.  It did not issue a final report.  Instead, it suggested four legislative proposals, including an exemption from the sales and use tax for fees associated with blockchain-based transactions.

Two legislative proposals are awaiting debate in the House and Senate.

Recently confirmed DAS Commissioner Josh Geballe told the legislature’s Commerce Committee in March that “DAS agrees that blockchain technology (also known as “distributed ledger technology”) have the potential for unlocking efficiencies and improving practices; however, they cannot be evaluated in a vacuum. Rather, it is necessary to first identify a business case or specific problem to be solved for which such technology may be appropriate; develop a RFP based upon that specific business case or problem, including the criteria by which responses would be evaluated and only then issue such RFP.”

Working Group member Bryant Eisenbach, in testimony submitted to the Commerce Committee, said in support of what he described as a “pilot program for DAS” that “innovation in governmental services will be a strong driver of the adoption of these technologies, and Connecticut’s unique business culture and history of public-private partnerships will attract others to the state. If handled correctly, we can also use this as an opportunity to reduce costs for our government and help educate our students on new and groundbreaking technologies.”

Blockchain Working Group member Emily Goodman Binick of Riverside said “Connecticut has a great opportunity to be an innovation-friendly state, especially for blockchain companies.”  The proposed legislation, she explained, signals “proactively and effectively, that Connecticut is a blockchain friendly state and will foster innovation in our state.”  She said the state’s “true north – a regulatory and policy environment that protects Connecticut consumers and businesses while fostering innovation, encouraging competition and creating jobs.”

Another bill suggested by the Working Group back in November, authorizing the use of electronic and remote notaries, to include blockchain technology, is embodied in House Bill 7309, currently awaiting action on the House calendar.  If approved, it would next go to the Senate for consideration.

Not making it out of committee were two other proposals: concerning noncompete agreements in the blockchain technology industry (SB 1033) and authorizing the use of smart contracts (HB 7310). A third, to establish a task force to study the use of blockchain technology to manage elector information, did not emerge from the Government Administrations and Elections Committee this year.