Delaware needs to capture blockchain companies or lose out

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For many years, companies have chosen the State of Delaware as the best jurisdiction in the USA for company registration. They range from S&P 500 companies to startups, because it offers so many advantages, such as “flexible corporate statutes, very well-developed business case law, and a highly sophisticated and experienced judiciary.”

Its business-friendly environment benefits from collecting corporate taxes, which are an important source of income for the small state that has a population of only around one million. Of course, other states have copied the Delaware model and pursued its clients, often to good effect, resulting in lost income for Delaware.

Now it faces a bigger threat: blockchain companies and their ICOs. The reason that this will have a major impact on Delaware is this, according to attorney David M Adlerstein and chief innovation officer, Andrea Tinianow: “The appeal of Delaware’s brand of expertise that focuses on shareholder rights in traditional business frameworks could wane, particularly as other states, such as Wyoming and Nevada, actively vie to become the go-to states for blockchain companies and technology.”

Adlerstein and Tinianow predict that as time goes on, blockchain-based businesses will seek out token-friendly jurisdictions that can provide clear regulatory guidance on the issuance of tokens and the rights of token holders and have built up a body of law on the subject.

To its credit, Delaware was the first state (in the USA and the world) to “enact legislation expressly authorizing corporations to maintain their corporate shares in a stock ledger on a blockchain.” However, Wyoming has copied it and taken it a step further by providing guidance on how token issuers can comply with State laws.

Delaware has cultivated its status as the ‘go-to’ state for business incorporation for over 100 years, but now it needs to prove itself all over again if it is to maintain its position. It has plenty of experience to leverage in order to achieve that, including a unique brand of expertise in governance that may prove a winning point in the developing blockchain sector; it is up to Delware to ensure it doesn’t lose out on what is likely to be a growth industry.

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