A recently introduced Vermont Senate bill proposes action on blockchain, cryptocurrency, and other financial technology (FinTech) initiatives as recommended in a report produced by the Center for Legal Innovation (CLI) at Vermont Law School. The bill, S.269, sponsored by Sen. Alison Clarkson, D-Windsor District, aims to promote economic development and regulatory efficiency and to expand education and adoption of FinTech in the public and private sectors of Vermont.

Produced for the Vermont legislature during its 2017 session, the CLI report explores a number of considerations around the role of government in supporting and regulating FinTech.

“Developments in financial technology, and in particular the distributed ledger approach often referred to as blockchain, are rapidly changing the financial industry,” said Professor Oliver Goodenough, CLI co-director and a principal author of the report. “Old approaches to insurance, banking, trading, and even money itself are being upended and supplanted by technologically driven innovation. As this process goes forward, there is both the opportunity and the need for our legal institutions to keep up with these changes, both helping the growth of productive invention and protecting against the spread and consequences of destructive change.”

Areas for consideration by the Vermont legislature, detailed in Section IV of the report, include:

  • Regulatory Update and Efficiency
    • Review of Anti-Fraud Laws and Other Consumer Protections
    • RegTech Initiatives
  • Enabling Provisions for FinTech and Blockchain Applications Generally
    • Blockchain and Cryptocurrency Governance
    • Proof of Authority/Consensus
    • e-Residency
  • Enabling Provisions for Particular Activities and Business Areas
    • Identity Trust Companies
    • Insurance Products
    • e-Banking/FinTech Charters
    • Digital Property Transfers and Registries
    • Financial Trustee Safe Harbor
    • Autonomous Agent Corporations/LLCs
  • Adoption of Blockchain, Cryptocurrency, and FinTech in Vermont
    • Government Processes and Functions
    • Private Sector Adoption
    • Education

Among the report’s most notable provisions are formal structuring options for cryptocurrency limited liability companies (LLCs), personal data/identity trust companies, and autonomous agency corporations.

“Each of these fields is ready for greater legal clarity,” said Goodenough. “The ill-defined legal status of a cryptocurrency network such as Bitcoin, for instance, could give rise to unexpected liability among nodes and miners. The Vermont proposal, if enacted, would respond to that challenge, and could promote business in these fields within the state.”

If passed, S.269 or its successor will undoubtedly incorporate amendments and changes. “Nonetheless, the bill provides a starting point for a meaningful conversation on how law can provide opportunities for innovation while preserving the public good,” Goodenough said.

The report is available online at legislature.vermont.gov/assets/Legislative-Reports/Vermont-Report-Final-Version-December-7.pdf. For more information, email ogoodenough@vermontlaw.edu or call 802-831-1231.

For more information about the Center for Legal Innovation at VLS, visit vermontlaw.edu/cli.

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