Nebraska Could Let Banks Offer Cryptocurrency Services

Digital currencies Ethereum, Dogecoin and Bitcoin are depicted by actual physical coins in this photo illustration. (STFR/STAR MAX/IPx via AP)
Grant Schulte
The Associated Press

Banks that want to cash in on the cryptocurrency tech craze could start offering services to customers who own Bitcoin and other digital assets under a bill backed by Monday state lawmakers.

Senators voted 39-1 to advance Legislative Bill 649 through the first of three required votes in the Legislature.

The measure would make Nebraska the second state to create a formal charter for “cryptobanks,” allowing them to help facilitate transactions. The first state was Wyoming, which chartered its first institution in September.

Cryptocurrencies are an online form of money that are stored and tracked using a decentralized network of independent computers, which make transactions extremely secure and easy to verify. Unlike paper cash, they aren’t issued by any central government, which appeals to some users who are worried about inflation.

The technology has surged in popularity, resulting in astronomical gains for some investors, although critics say cryptocurrencies are extremely risky and unstable and most if not all are likely to fail.

Sen. Mike Flood of Norfolk said he introduced the bill after talking with an entrepreneur friend who recently decided to move in cryptocurrency company to Wyoming. Flood said Nebraska has a chance to become an early embracer of cryptocurrencies with the measure, which could help bring high-paying technology and finance jobs to the state.

“This is a once in a lifetime opportunity not only for my district, but the state of Nebraska,” Flood said.

Some financial service companies, including PayPal, have started offering services that allow customers to buy and sell cryptocurrencies. The Nebraska bill would allow state-chartered banks to offer similar services by creating a separate division within their companies, said Gothenburg Sen. Matt Williams, chairman of the Legislature’s Banking, Finance and Insurance Committee. Unlike cash deposits in banks, cryptocurrencies aren’t federally insured.

“It’s a new world, and we’re exploring that world together with this legislation,” said Williams.

But some lawmakers questioned whether it was smart for the state to embrace cryptocurrencies and said they were still unclear about everything the measure would do.

“This bill is not anywhere close to being in a form where it could pass,” said Sen. Steve Erdman of Bayard.

Sen. Adam Morfeld of Lincoln said he supported the general idea but opposed parts of the bill that would exclude credit unions from participating. Their main competitor, the banking industry, worked extensively with lawmakers on the bill before it advanced out of committee.

“I don’t know what the rationale is aside from protectionism,” Morfeld said.

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