Nebraska’s Play for a Piece of the Digital Asset Pie

By Jeremy McLaughlin

On October 1st, Nebraska ingratiated itself to the digital asset industry when the Nebraska Financial Innovation Act (The Act) became effective. The Act offers two pathways for an entity wishing to offer certain digital asset services: a state-chartered bank may create a digital asset division or a digital asset depository may be created under a new charter.

With the charter, institutions can provide custody, asset servicing, and even facilitate customer interactions with decentralized finance platforms involving staking, lending, and borrowing.  Such institution, however, are prohibited from accepting deposits in fiat currency or making consumer loans in fiat currency.

This opportunity does not come without costly impediments, though. Requirements for becoming an authorized digital asset depository include a minimum capital requirement of $10 million and an application fee of $50,000. An entity operating under the law must “maintain unencumbered liquid assets denominated in United States dollars valued at not less than one hundred percent of the digital assets in custody.”  Compliance with know-your-customer and anti-money-laundering rules and the federal Bank Secrecy Act is also required. In addition to the monetary obligations, a digital asset depository must maintain its main office and the primary office of the CEO in Nebraska.

Despite these considerations, operating in Nebraska may still prove to be a bargain for institutions looking to offer digital asset services.  For example, this special charter may serve as a tool for digital asset businesses hoping to avoid rigorous and expensive state money transmitter licenses.  Many such laws exempt state-chartered banks and similarly chartered institutions, but the extent to which states will grant an exemption for entities chartered under the Nebraska law is an open question.  Like its neighbor Wyoming, it appears Nebraska is banking on the advantages offered by these digital asset-specific charters to help bring innovation to the state

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