Delaware, in its bid to provide a good legal and regulatory environment for blockchain technology, has awarded a $738,000, single bid contract to IBM to build a prototype for a blockchain based corporate filing system for the state, according to delawareonline.com. Delaware’s corporate franchise business contributes more than 25% of the state’s revenue.
Blockchain advocates in Delaware claim the technology’s safety will enable the state to levy higher document filing fees, and that Delaware will surpass other states in business registration activity.
Former Gov. Jack Markell told startups and investors at a New York City conference in 2016 that blockchain could free up billions of dollars by speeding up asset exchange, removing technical procedures and curtailing business risks.
IBM To Build Prototype
With the $738,000 contract, IBM will test computer code for a blockchain prototype for a future contract of a full-scale system.
Kristopher Knight, the deputy secretary of state, likened IBM’s role to that of an architect creating a skyscraper design prior to construction. The state will use the prototype to determine how the technology can help businesses registered in Delaware.
Delaware was able to provide the contract without competitive bidding since it was part of an existing consulting contract, state officials noted. Knight said the contract is important to the state’s business and IMB is a blockchain technology leader.
Knight also said governments historically introduce technology projects that eventually incur double the estimated cost due to improper planning. He said Pennsylvania has experienced “a ton” of such projects for nearly 20 years.
Journey Has Faced Setbacks
Delaware’s blockchain project has faced some challenges. Earlier this year, the state paid IBM $49,000 for consulting on a project involving a blockchain startup called Symbiont that eventually fell apart.
Symbiont CEO Mark Smith said state officials played politics by raising concerns that the blockchain filing system could impede the activities of corporate attorneys and registered agents. He said the system, built for the state archives, never launched.
Smith said Gov. John Carney’s administration was concerned about how the project would affect jobs associated with company filings.
When asked why the state awarded IBM a contract after having worked with Symbiont, Knight acknowledged the state’s working relationship with Symbiont but said his agency did not have a contract with the startup.
Should a full-scale blockchain supported corporate filing system be built, IBM will not build it, Knight said.
Markell last year signed a bill that recognizes the trading of stocks on the blockchain after a state judge urged investors to use distributed ledger technology to protect their votes. In November, J. Travis Laster, vice chancellor, said the technology could help remove middlemen involved in shares and votes.
IBM Assumes Leadership Role
IBM recently won a $740 million contract to build blockchain and other digital technology initiatives for Australia’s government, in addition to existing contracts with four federal agencies. Australia hopes to be one of the top three digital governments by 2025.
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