Chicago Looks to Become Fintech Mecca As Lawmakers Show They Actually Understand Blockchain

Frustrated blockchain and fintech innovators in the United States are just about to rip their hair out as they watch the world move on without them.

Singapore and the United Kingdom are creating tech-savvy regulations, while the United Arab Emirates invests over $1 billion in building up a government-sponsored blockchain industry. Meanwhile, American lawmakers are barely recognizing the cryptocurrency boom at a glacial pace, even proposing bills that fundamentally misinterpret how blockchain technology works.

In response -- Illinois is crafting a state-run solution, arguably the nation’s most comprehensive blockchain initiative.

The Illinois Blockchain Initiative stretches across six agencies, everything from fintech regulation to Cook County records and land deeds. Jennifer O'Rourke, the blockchain business liaison of Illinois, told International Business Times this approach has attracted interest from federal agencies and diplomats in Australia and Hong Kong.

And with the state's budget under intense scrutiny amid massive financial shortfalls -- a business boom is long overdue. “What we’re doing at a state-level is showing we can actually affect change,” she said. “We’re starting to get attention from federal agencies," said O'Rourke.

Read: Blockchain Technology Regulations: What US Can Learn From Singapore

Private sector partnerships, including collaborations with the Enterprise Ethereum Alliance and the Blockchain Education network, provide most of the funding for resources like the Chicago Blockchain Center, a hub which opened on June 8. This sweeping initiative isn’t costing taxpayers a pretty penny so far.

Illinois's month-long hackathon in July, IBI Hack, will offer students and recent graduates worldwide a chance to beef up their blockchain skills and connect with tech companies searching for blockchain talent. And that’s only the beginning.

Meanwhile, O'Rourke’s initiative is running pilot programs to develop blockchain academic transcripts, land deeds and registries for both healthcare and personal identities. “We need to be comprehensive about this,” she said. “We need to modernize governance for a distributed economy. We need to think about that differently than we have in the past.”

Innovation Incentives In The Land Of Lincoln

Perhaps the greatest godsend in Illinois is a revamped approach to regulation, the crux of innovators’ legal woes. “We must have regulators at the table to be successful,” O'Rourke said. “We’re thinking about how to develop an ecosystem for growth and development. This is economic development at it’s core.” If you’re launching a blockchain or fintech startup for American markets, Chicago is now one of the best places to start.

Read: Nevada Just Became The First State To Squash Blockchain Taxes

American fintech laws are often outdated and unclear about emerging technologies. Even in the rare cases where lawmakers do take note and create new frameworks, innovators are forced to play a risky guessing game during the slow legislative process. Now Illinois is cutting through the red tape by collaborating directly with startups. Illinois is laying the groundwork for one of the nation’s first sandbox-style regulation models. Innovators can get waivers and government feedback while building new technologies that defy current categories.

“We’re trying to break down that barrier between innovators and government,” Bryan Schneider, Secretary of the Illinois Department of Financial and Professional Regulation, told IBT.

Starting in July, his team will host office hours at startup incubators and hubs. Fintech and blockchain technologists will engage directly with lawmakers, asking questions and developing ideas together. “We want to make sure we are doing no more than we have to, to make sure that consumers are safe and informed,” Schneider said. “Early, overregulation of a new, nascent technology is the surest way to do some really significant damage.”

Both the blockchain ecosystem and its cousin fintech, which includes tech industry rockstars like Venmo, SoFi and PayPal, are already pulling in huge profits. In 2016, the San Francisco-based market intelligence company VBProfile estimated the fintech market was worth almost $870 billion. Additionally, ensuring blockchain businesses want to work in the U.S. could impact all kinds of industries beyond finance. A report by Grand View Research projected the blockchain marketplace, which includes fintech like bitcoin but also encompasses things like high-tech healthcare records, will be worth nearly $8 billion by 2024.

If everything goes according to plan in Illinois, the IDFPR’s website will have an educational hub for niche fintech and cryptocurrency topics by the end of 2017, plus a contact page where people can communicate with regulators online. Schneider’s described his goal as “harmonized and uniform” regulation that provides innovators with both clear expectations and opportunities for direct collaboration with lawmakers. It’s a blockchain lovers dream come true.

And it gets even better. “We don’t believe that digital currency exchange is money transmission,” Schneider said. “So if that’s all you’re doing, you’re not regulated by us at all. We’ve provided some clarity there.” Basically, unless someone is paying for digital tokens with a fiat of currency like dollars, the IDFPR thinks businesses should be free to experiment. Bitcoin companies and Ethereum token offerings won’t crash head-first into restrictive licensing protocols like New York’s BitLicense. These government officials in Illinois actually understand how cryptocurrency works, and they aren’t limiting their approach by geography or any single-use case.

However, Illinois can't save Silicon Valley's fintech future on its own.

The American financial system includes both state and federal laws. So the Illinois blockchain approach keeps an international scope, since bitcoin and ether users transact globally, while focusing on tangible regional impact to bolster nationwide collaboration. “I’m trying to encourage a national discussion among all the states -- shouldn’t every state kind of have a sandbox?” Schneider asked. “Could we make those regulatory sandboxes as uniform from one state to another as possible?...It’s going to be something we’ll have to talk to our federal counterparts and see what can end up [with].”