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Nebraska emerges as leader in authorizing banks to hold cryptocurrencies under the Nebraska Financial Innovation Act

28 Feb 2022 FinTech

With the passage of Legislative Bill 649—also known as the Nebraska Financial Innovation Act—on May 26, 2021, Nebraska became the second state to authorize digital asset (i.e., cryptocurrency) depository entities, or banks that trade cryptocurrency in the state. The Bill was introduced by Senator Mike Flood in January 2021 and was co-sponsored by Telcoin, a global money transfer provider of digital assets and instant transfers using blockchain and mobile money infrastructure. The Bill was further engineered by Mark Quandahl, former Director of the Nebraska Department of Banking and Finance, and his team at Dvorak Law Group, LLC, which serves as outside counsel for Telcoin and as Legalink’s Midwestern representative in the United States.


The Nebraska Financial Innovation Act expands Nebraska’s role in cryptocurrency in two key areas: (1) by creating a charter for digital asset depository institutions; and (2) permitting state-chartered banks to operate digital asset divisions. This expansion gives consumers and institutions places to custody their cryptocurrency. The new financial sector will be supervised by the Nebraska Department of Banking and Finance, and the regulation of these institutions or divisions grants the unique opportunity for Nebraska’s financial industry to evolve and embrace new technological advances.

Cryptocurrencies, like Bitcoin, Ethereum or Tether, for example, have grown in popularity since 2009. Cryptocurrency is a digital currency and is often known for its volatility. Now, institutions in Nebraska can open accounts for consumers who own cryptocurrencies so long as certain application processes are followed.

Businesses and state-chartered banks wanting to trade cryptocurrency must first submit the appropriate application with the state. Other requirements for becoming an authorized digital asset depository institution or a digital asset division of a state-chartered bank include a minimum capital reserve of $10 million, an application fee of $50,000, and a 100% backing of all digital assets in custody. Compliance with know-your-customer and anti-money laundering rules and the federal Bank Secrecy Act is also required. In addition to the monetary and compliance obligations, a digital asset depository must maintain its and its CEO’s primary office in Nebraska. Once authorized, digital asset depository institutions and the digital asset divisions of state-chartered banks cannot loan money to customers, but they can receive Federal Reserve funding and will be able to deal in gold and silver.

Initial fears surrounding the Nebraska Financial Innovation Act revolved around consumer safety. Senator Mike Flood and Telcoin recognized the risks of cryptocurrency and its largely de-regulated history. In this light, the Bill was drafted in a consumer-oriented manner. Some of the protections afforded to consumers are certain notice requirements, including a notice by the digital asset depository, as applicable, that deposits and accounts are not insured by the Federal Deposit Insurance Corporation, and a requirement that all U.S. dollars in custody must be held in an FDIC-approved account.

Upon addressing the financial industry’s concerns, the Bill passed 46-2 on final vote. Nebraska’s banking industry and young professionals nationwide believe that the Nebraska Financial Innovation Act, which became operative October 1, 2021, will bring ample investing opportunities to Nebraska and will present Nebraska as a national leader in cryptocurrency regulation.

Telcoin plans to establish the first authorized digital asset depository institution in Nebraska. Telcoin recently announced that its headquarters will be located in Norfolk, Nebraska, which will put Norfolk and northeast Nebraska at the forefront of the development and implementation of digital asset depository institutions in the state.