Carson City, Nevada, was busy this month as Governor Sisolak signed four blockchain-related bills into law. SB 161, SB 162, SB 163, and SB 164 create a sophisticated and light-touch regulatory environment for individuals and the Nevada emerging technology ecosystem to leverage.
The state legislature passed this suite of legislation with strong bipartisan support from both houses. It accomplishes a range of policy goals that include establishing a regulatory FinTech sandbox, defining a public blockchain, exempting virtual currency from property taxes, and clarifying provisions related to the use of blockchain by government agencies and various businesses.
Innovators and enthusiasts within the emerging technology landscape will benefit immensely from the clarity and blockchain development opportunities provided by these laws. Passing these bills sends a clear message: Nevada understands and embraces blockchain technology and is ready to lead regulators, consumers, and businesses on a successful path toward the future.
All four bills build on the foundation laid in the 2017 legislative session when Nevada passed SB 398, the first piece of blockchain legislation in the state. It laid the groundwork for a light-touch legislative environment that has fostered a consumer- and business-friendly space for blockchain users.
Below is a breakdown of each bill:
SB161 – Regulatory Sandbox for Emerging Technologies
TL;DR: Creates a regulatory sandbox for emerging technology companies to test new tech products or services.
SB 161 creates the Regulatory Experimentation Program for Product Innovation by amending NRS Chapter 597 (Miscellaneous Trade Regulations and Prohibited Acts). This bill details how businesses may qualify for a temporary two-year exemption from certain licensing and regulatory requirements. The language is modeled after similar legislation recently passed in Arizona establishing a regulatory FinTech sandbox there.
Passing the Nevada “sandbox bill” is part of a broader initiative to create the opportunities and regulatory environment that will further attract FinTech innovators and blockchain businesses to our state. The regulatory sandbox provides a safe space for startups and existing companies to test new tech-based financial services without having to undergo a full licensing approval process – but only for a limited time. Additionally, SB 161 protects customers because regulators will actively oversee all transactions. Regulators will supervise participants in the program and be able to educate themselves firsthand on the novel applications of emerging technology in finance.
While it might be too early to quantify the impact of Arizona’s program, the state has received success stories from several consumers concerning the products and services within the sandbox. Innovation and consumer protections are not at odds with one another, which is why SB 161 represents how regulators, businesses, and consumers in Nevada can benefit from the oversight offered by a sandbox.
SB162 – Accepting Blockchain Records from Other State Agencies
TL;DR: Mandates that all state agencies accept blockchain records from other state agencies
SB 162 revises provisions in NRS Chapter 719 (Electronic Transactions [Uniform Act]) relating to electronic transactions. When SB 398 passed in 2017, it gave legal recognition to electronic records to include the use of a blockchain. SB 162 amends the electronic records definition of “blockchain” in NRS Chapter 719 to also include a “public blockchain” and define the “state of the public blockchain.” The bill adds sections clarifying that a person who uses a public blockchain to secure their information does not relinquish ownership of that information, unless they agree to do so.
Moreover, this bill amends existing electronic records law to prohibit government agencies in Nevada from refusing to accept an electronically certified record (including electronic records certified using blockchain) from another agency solely because the copy is in electronic form. Under current law, government agencies can decide whether they will accept electronic records. This bill mandates that agencies accept certified electronic records so long as (1) they do not have to upgrade their equipment and (2) the record can be printed. If an upgrade requirement is necessary for the receiving agency to accept a digitally certified document, then a paper-printed copy of the digital document must be provided.
Certain county recorders in Nevada are using public blockchain to store and maintain electronic marriage certificates and experiencing incredible gains in efficiency and reductions in processing costs. However, we soon learned that other state agencies were refusing to accept the electronic marriage certificates, which gave rise to the need for SB 162. SB 162 will create efficiencies for Nevadans by creating an interagency standard for accepting digital documents.
SB163 – Authorization for Private Businesses to Use Blockchain for Corporate Records
TL;DR: Companies can use blockchain records for internal business documents
SB 163 revises the definition of “electronic transmission” in NRS Chapter 75 (General Provisions of Title 7: Business Associations; Securities; Commodities) to allow a corporation or business to distribute internal communications using a blockchain or public blockchain if (1) the date of the transmission can be determined and (2) the delivery method was consented to by the recipient. Existing law authorizes businesses to keep records in the course of business on any information-processing system or other information storage device. This bill clarifies that a business may keep records on a blockchain or public blockchain so long as that record can be reproduced in a paper format within a reasonable amount of time.
This bill also clarifies that the Secretary of State may adopt regulations regarding the use of blockchain for carrying out the powers and duties in various business entities (NRS Chapters 78-89).
For example, a business may choose to use blockchain technology for shareholder voting or as a more integral part of its business practice, such as supply chain management. Since business is social by nature, a business’ choice to use blockchain technology will likely impact other persons. This bill provides the clarity companies and individuals need to succeed in a world rapidly changing due to innovative technologies in business and their implications in our daily lives.
SB164 – Virtual Currency Definition and Exemption of Personal Property Taxation
TL;DR: Provides virtual currency definition and ensures tax exemptions
SB 164 recognizes certain virtual currencies as a form of intangible personal property for purposes of taxation. Under existing law, shares of stock and certain other forms of intangible personal property, such as bonds, notes, and bank deposits, are exempt from property taxation. This bill amends NRS Chapter 361 (Property Tax) to list virtual currencies as intangible personal property. The bill provides further clarity by defining “virtual currency” to mean a digital representation of value created on a public blockchain that is not attached to a tangible asset or fiat currency, is accepted as a means of payment, and is only traded electronically.
While Nevada already has zero personal state income tax, this bill ensures virtual currencies are treated the same as shares of stock under state law and are exempt from personal property taxation. Federal tax laws still apply. Amending Nevada law to include a definition of virtual currency that classifies it similarly to other monetary instruments shows the level of sophistication and understanding Nevada lawmakers provide to both individuals and regulators.
These laws would not be a reality without the efforts of Governor Sisolak and Senator Kieckhefer. Also, thanks to the formation of the Nevada Tech Caucus, which enjoys bipartisan support in both houses, Nevadans will continue to see thoughtful and forward-thinking legislation regarding blockchain and emerging technology.
The quality of legislators’ deliberation and their serious discussion regarding blockchain technology shows they are capable and ready to lead Nevadans into a future full of technological innovation and financial inclusion. And with the creation of the Emerging Technologies Task Force, industry leaders and citizens alike will witness tremendous growth across the state.