Nebraska could let state banks offer cryptocurrency services

Nebraska: Banks in Nebraska want to start offering services to customers who own bitcoin and other digital assets as cash rises amid the cryptocurrency boom, with a bill gaining support from state lawmakers on Monday.

The Senate passed the measure by a 39-1 margin, using the first of the three votes in favor required by the Legislature.

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

Cryptocurrencies are a form of online money that can be stored and tracked using a decentralized network of independent computers, making transactions extremely secure and easy to verify. Unlike paper money, they are not issued by any central government, which has attracted some users who are concerned about inflation.

The technology has quickly gained popularity, generating astronomical gains for some investors, though critics say cryptocurrencies are extremely risky and volatile and most, if not all, are likely to fail.

Sen. Mike Flood of Norfolk said he proposed the bill after a conversation with an entrepreneur friend who recently decided to move a cryptocurrency company to Wyoming. Flood said Nebraska has an opportunity to be an early adopter of 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 region but for the state of Nebraska,” Flood said.

Some financial services companies, including PayPal, already offer services that allow customers to buy and sell cryptocurrencies. Matt Williams, chairman of the legislature's banking, finance and insurance committee, said the Nebraska bill would allow state banks to offer similar services by setting up separate divisions within the companies. Unlike cash deposits at banks, cryptocurrencies are not federally insured.

“It’s a new world and we are exploring that world with this legislation,” said Williams of Gothenburg.

But some lawmakers questioned the wisdom of the state's adoption of cryptocurrency and said they still don't know everything the measure will do.

"This bill is nowhere near in a form that can pass," said Sen. Sted Erdman of Bayard.

Lincoln state Sen. Adam Morfeld said he supports the general idea but objects to the portion of the bill that excludes credit unions. Their main competitor, the banking industry, worked extensively with lawmakers before the bill made it out of committee.

"I don't know what makes sense of it other than protectionism," Morfield said.