Association for Public Policy Analysis & Management

Blockchain is a recent technological concept of distributed ledger systems. It has been applied to many domains including crypto-finance, healthcare, internet of things, and public services. Blockchain is considered as one of the fundamental, disruptive technologies like Internet that has potential to transform the world’s digital economy and transform the public sector. The blockchain enthusiasts highlight the positive aspects of blockchain, such as high degree of security, immutability of records, information transparency, and the consensus mechanism of algorithms. Blockchain critics, however, argue that there are limits to the technology. For example, cryptocurrencies are not backed by tangible assets or government agency and they could be attractive vehicles for money laundering, fraud and manipulation.

The prospects and problems of blockchain projects have prompted debates on how to regulate blockchain. In the U.S., the Federal government has not yet formulated a unified policy explicitly focusing on blockchain. But since 2015, state governments have begun to pass blockchain legislations. By 2018, 37 states had considered legislative bills regulating blockchain, and 21 states had enacted such legislations.

In this paper, we make an early examination of the blockchain policies in the U.S. state governments. The paper has two major purposes: (1) to describe the scope and substantive areas of state blockchain legislations; and (2) to explain the determinants of blockchain legislations. We compiled the state legislations from the National Conference of State Legislatures (NCSL) reports and Sagewise.

We conducted content analysis of the state government legislations to identify their main regulatory themes. A list of legislative questions will be generated to show their main themes. In general, many states in the initial stages have passed laws for legalizing blockchain financial transactions and most of the regulations are considered restrictive, except Wyoming which has exempted certain cryptocurrencies from state taxation, money transmission, and security laws. Some states have gone further to enact blockchain legislations for enabling smart contracts and record-keeping such as Arizona, Vermont, Tennessee, and Wyoming.

Furthermore, we undertook both logit regression and survival analyses to identify the determinants of blockchain legislations. We incorporate a policy innovation model to identify the factors. Preliminary results show that the political motivation to cryptocurrency legislation is different from the political motivation to the non-cryptocurrency blockchain legislation, which focuses on record-keeping, smart-contract, and blockchain research. State government revenue, digital government professionalism and percentage of higher education population are also the significant factors.

Our paper is significant since this is the first comprehensive analysis of blockchain legislations in the U.S. state governments. It contributes to the scholarship on the regulating the rapidly evolving world of blockchain technology. Policymakers can also benefit from understanding the broad swathe of major concerns for U.S. state governments. State governments compete to attract firms that use blockchain technology, but also need to curb the downsides attendant with the technology. Laws should provide fundamental legal support to facilitate blockchain firms in their functioning and their transactions, while also enabling the innovative potential of the technology.