Utah Bill Would Exempt Blockchain Firms from Money Transmitter Act
A lawmaker from the U.S. state of Utah has introduced a bill that would stop blockchain firms from being classed as money transmitters.
Republican senator Daniel Hemmert filed last week, proposing that any person who “facilitates the creation, exchange, or sale” of certain blockchain-related products should be exempted from the state’s .
The bill also aims to create a legislative group called the “Blockchain Pilot Project Evaluation Task Force” to study the potential of the technology in government services.
The 12-member task force would also recommend a pilot project using the technology in Utah at a state or municipal level and examine commercial applications of blockchain for “future economic development in Utah.”
Finally, it will prepare a report, including any proposed legislation, to the Business and Labor Interim Committee and the Legislative Management Committee, on or before Nov. 30.
In a similar move, Pennsylvania that crypto exchanges and service providers do not require a money transmission license to operate in the state in January.
However, North Carolina state took the opposite stance in 2016, an update to the state’s Money Transmitters Act that mandated that companies working with bitcoin and other cryptocurrencies obtain a money transmitter license.
Blockchain technology has morphed from a popular buzzword to a technology that is in the process of revamping a wide range of operational and business processes within the financial service industry. A segment of the financial industry that could benefit greatly from the implementation of the distributed ledger technology is the wealth and asset management sector.
The global accountancy firm published a report on the benefits of blockchain technology for the wealth and asset management industry titled ‘.’ The report states that the implementation of blockchain technology would likely result in reduced operational expenses, elimination of redundant yet time consuming functions and more opportunities to better the client experience. More specifically, using blockchain technology in important areas such as the client onboarding process, the creation of model portfolios, the settling and clearing of trades and compliance processes related to AML regulations can all be improved by implementing distributed ledger technology-based solutions in the wealth management industry.
Blockchain Use Cases in Wealth Management
In this report, Ernst & Young highlights two use cases as examples of the benefits of the blockchain.
Firstly, blockchain technology can be applied to digitize and streamline the customer onboarding and profiling process. Strict regulatory requirements require wealth managers to collect information such as proof of identification, marital status, residency, sources of wealth and political ties from new potential clients. This can be a cumbersome, long-winded and, therefore, costly process.
If, instead, high net-worth individuals’ data were to be stored on a distributed ledger to which permissioned parties could gain access with the individual’s approval, then this would greatly reduce the time and cost of onboarding a new customer. Furthermore, due to the immutability and auditability of the blockchain, an audit trail could easily be kept for each client.
Secondly, the blockchain could facilitate the creation of portfolios and the communication of portfolio changes to clients. Currently, wealth managers use a variety of different platforms to create and maintain portfolios and most of these platforms do not enable direct communication with the client.
Hence, by developing and implementing a blockchain solution that allows wealth managers to create and manage portfolios according to clients’ stored investment constraints that also allows for direct communication with regarding portfolio changes, the entire investment process would be made substantially more efficient and client relationships could be deepened due to an increase in direct communication between the wealth manager and its clients.
There Will Be Hurdles for Adoption but First-Movers Will Benefit
The report also highlights the challenges of adoption that the technology is likely to encounter. Scalability, interoperability with legacy systems, security and accordance with technology standards were the largest issues raised by the firms polled by Ernst & Young.
In addition, wealth and asset management funds do not exist in a bubble and are usually interconnected with other firms. Therefore, a wide-scale adoption would likely take a long time, considering there would have to be a consensus as to what type of blockchain solutions the whole financial industry chooses to adopt. Due to these factors, most firms are currently only willing to test blockchain technology on a small scale before considering a broader adoption of the tech.
Ernst & Young, however, believes that firms that are the first to adopt blockchain technology will reap the lion’s share of its benefits. As the success of financial blockchain solutions depends on its participants, E&Y encourages firms to begin the innovation process early as first-movers are likely to benefit the most.
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