As fintech and digital money markets grow globally, Delaware passes three bills that proponents call necessary to keep Delaware's position as a lead state in the financial sector.
The package broadens the scope of interstate mergers and conversions for trust companies in Delaware, along with out-of-state activity. It grants Delaware banks authority to hold and manage digital assets for clients. And it creates a licensing framework for stable coins.
Kristoph Kleiner, an associate finance professor at Indiana University’s Kelley School of Business, said because Delaware is a popular state for banks to charter and for incorporation, it makes sense that it’s an earlier adopter of digital banking rules.
"In terms of crypto assets and digital assets, there have been restrictions on what banks are allowed to do with them," Kleiner said. " …banks kind of want to get into the digital asset business, so that they can both monitor and administer these types of assets."
Banks can already do that at the federal level.
He said SB 16 allows Delaware licensed banks to do the same.
SB 16 applies Delaware law to money transmitters, like PayPal, and crypto-businesses. It applies consumer protections for users in Delaware, related to timeliness of transfers and refunds. Kleiner says this is an update to meet new federal restrictions.
Kleiner said of the three bills passed, SB 19, could be the most consequential for the First State. It sets up a state licensing framework for stable coin, to bring the First State in line with the Genius Act, which passed by Congress last year.
It makes the First State an early adopter. And while updates to old banking rules for a growing digital economy is necessary, he still considers it an untested area for states.
He doesn't anticipate large, well known stable coins bringing their businesses and licenses to Delaware.
"But if this works out really well for Delaware, you can imagine that's where the biggest impact of revenue is," he said. "But I think it's also probably the most uncertain."
Delaware’s stable coin framework caps issuers at $10 billion before needing a federal license. Kleiner said it means states will probably try to attract smaller issuers.
He anticipates most states will follow Delaware’s lead in this area over the next few years.
He added it’s still unclear how prevalent stable coin will be, given it functions similarly to a bank. And he doesn’t anticipate the new laws bringing a windfall in revenue for Delaware.
