Nebraska's BTC Banking Charter Advances

Nebraska could become the second U.S. state to introduce a crypto banking charter. State senators voted Monday for a bill that would allow firms to register as digital asset depositaries, and offer services allowing their customers to buy and sell BTC and other cryptocurrencies.

The Nebraska Financial Innovation Act sailed through the vote to adopt the legislation, with near-unanimous approval—39 lawmakers voted to advance the bill to enrollment and initial review, with only one in disagreement.

Following in Wyoming’s footsteps

The move follows similar legislation enacted by the state of Wyoming, which chartered its first crypto bank, Kraken in September 2020, and another, Avanti, soon after that. The new crypto banks can hold digital assets, take deposits, and maintain digital payment systems.

In January, underscoring the new interest among lawmakers, regulators, and industry leaders in the intersection between crypto and traditional finance, crypto company Anchorage became the first digital asset bank with a federal charter.

The Nebraska bill was introduced by Republican Senator Mike Flood. It would allow firms to register as cryptocurrency depositories as long as they maintain an office in the state and have at least one Nebraska resident on their board. “This is a once in a lifetime opportunity not only for my district but the state of Nebraska,” he said

He had originally introduced two new bills focused on crypto banking. The second, Legislative Bill 648, contains the “Transactions in Digital Assets Act,” which proposes a set of rules for Nebraskan banks looking to hold cryptocurrencies, and has not yet been adopted.

And while Wyoming’s advances have been enthusiastically greeted by the cryptocurrency industry, there could still be some rocky times ahead before the new crypto banks gain access to a coveted Federal Reserve account, for instance. 

Treating payment tech companies like full-fledged banks can endanger customer deposits.

The business model of Payward Inc’s Kraken Financial, part of a US-based cryptocurrency exchange that WY bank authorities just approved for a special-purpose bank charter, shows just that.

— Bank Policy Institute (@bankpolicy) October 21, 2020

Last October, BPI, a policy, and advocacy group which represents leading banks in the U.S. described Kraken as “an accident waiting to happen,” and likened the crypto bank to the shadow banks accused of setting off the 2008 financial crisis. 

However, others, including monetary economists George Selgin and John Paul Koning, disagree. They argue that the restrictions placed on the new banks are more likely to make them “ultra-safe.”

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