Delaware to test blockchain for corporate filings
With over a million companies incorporated in Delaware, the Department of State’s Division of Corporations earns $1.3 billion a year processing corporate transactions. To make the process more efficient, Delaware officials are exploring incorporating blockchain into different components of corporate filing processes.
One proof of concept will be creating a system for notifications of changes to unified commercial code filings. A second will explore streamlining management of records related to company incorporations and stock ownership. The projects are the result of enabling legislation passed in 2017 that promoted the use of distributed-ledger technology to improve government efficiency and a workshop with IBM that collected ideas from relevant stakeholders.
The UCC filings prototype will examine whether blockchain can improve the notification process when files are changed or deadlines come due and allow ways to query UCCs in real-time as information is added. The prototype also will feature some type of dashboard or user interface to allow the Department of State to get a better view of the various UCC transactions.
“The question with UCC prototype is whether it will add enough value to the state since the filings are not a big revenue driver from a transactional standpoint,” Delaware Deputy Secretary of State Kristopher Knight told GCN. “We bring in $1.3 billion a year into the general fund for the state of Delaware, and only $20 million is related to UCC filings.”
Knight said if the proof of concept can show the UCC filings can be improved through the blockchain at a “reasonable implementation cost,” then the state might be interested in moving beyond the initial phase.
The stock ledger proof of concept would create a new system in which state employees, company representatives, registered agents and attorneys could all contribute to a distributed ledger holding data related to incorporating a company in Delaware.
“Today, each member of the business network has part of the picture when it comes to getting incorporated,” Mark Fisk, IBM’s Public Sector Blockchain lead, told GCN. “We are looking at these distributed systems where none of this information has [been] kept together and seeking to create a permissioned blockchain where we can selectively share information.”
“We have been working to see what we can do … related to blockchain that will add value to the community and create an ecosystem that is related to corporate governance,” Knight said. “We are taking a progressive step-by-step approach to develop these proofs of concept and determine whether it is worth developing them into full-blown applications down the road.”
IBM was awarded a $738,000 contract to develop the two proofs of concept for the state. Fisk said IBM hopes to be able to having a working proof of concept ready to show the corporate community by the end of October.
Delaware and Illinois are the states furthest along in developing blockchain applications for government processes. The Illinois Blockchain Initiative has five pilots in some stage of completion, and the state senate is considering currently legislation to provide limits on the use of blockchain technology.
Sara Friedman is a reporter/producer for GCN, covering cloud, cybersecurity and a wide range of other public-sector IT topics.
Before joining GCN, Friedman was a reporter for Gambling Compliance, where she covered state issues related to casinos, lotteries and fantasy sports. She has also written for Communications Daily and Washington Internet Daily on state telecom and cloud computing. Friedman is a graduate of Ithaca College, where she studied journalism, politics and international communications.
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