Blockchain and DLT offer immense possibilities for business, government, and consumers. These include the opportunity for extraordinary economic growth and cost efficiencies. Texas should encourage the growth of these industries to ensure its economy and consumers can benefit from this opportunity for growth.
Much legislative activity has occurred at the state and federal level inquiring into and supporting the benefits of blockchain technology. Some efforts, such as legislation coming from Wyoming, have been quite progressive. Others have been very well-intentioned, but could have benefitted from additional guidance from the industry. Overall, this level of interest shows that U.S. policymakers are starting to realize the importance of blockchain technology, the commercial potential it brings, and the need to support its responsible growth. Nevertheless, more needs to be done to support this industry. Countries around the world are taking this opportunity to pass legislation and develop regulatory frameworks to encourage blockchain-related companies to relocate to their jurisdictions. The United States, and Texas in particular, needs to foster that interest and energy to ensure that it remains a leader in technological advancement. This edition of the Legislator’s Toolkit is a resource for Texas legislators as they explore ways to encourage these industries to grow and bring economic benefits to states.
TECHNOLOGY JOB GROWTH AND NEW FRONTIER
The blockchain industry is seeing massive growth in technology job demand, having increased by a factor of 33 over the past year. Both startups and technology giants are hiring for blockchain talent including IBM, Ernst & Young, and Deloitte.4 While this growth has been nation-wide, several Texas cities have seen a jump in blockchain job offerings including Austin and Dallas-Fort Worth. Blockchain legislation can serve to foster this job growth further by encouraging businesses to locate more of their technology operations in Texas. The blockchain and virtual currency industry enable the creation of new financial markets that are more efficient and potentially easier to regulate. By reducing the cost of value transfers, blockchains enable financial services companies to create more competitive products.5 While regulatory uncertainty is currently the biggest barrier to adoption,6 Texas is well suited to be a leader in this space. By providing clear legal guidelines, Texas can give its blockchain industry a competitive advantage over those in other jurisdictions.
The transformative possibilities of blockchain and its tremendous positive impact for economic advancement have been recognized by policymakers on local, state, and federal levels. Its ability to improve business processes, increase efficiency, and promote transparency in numerous industries is reforming the ways in which companies conduct business. Its quick, secure, and immutable nature is helping retail giants such as Walmart, using IBM technology, trace produce back to its source within seconds, rather than days or weeks.2 Government agencies within the United States are exploring blockchain technology to streamline procurement. Additionally, the Texas Secretary of State is piloting a blockchain-based system for sharing e-Apostille documents.
THE TRANSFORMATIVE POWER OF BLOCKCHAIN
ECONOMIC GROWTH & JOB CREATION
Investment in blockchain companies and projects has skyrocketed from millions of dollars in 2014 to hundreds of billions of dollars in 2020. Demand for blockchain technology has created thousands of jobs, with IBM reporting that it increased the number of employees focused on blockchain projects from 400 to 1,500 in the span of a year. Hired, a global talent firm, notes that there was an increase of 517% in the demand for blockchain engineers in 2019. TechCrunch estimates that venture capital funds, and other private investors, invested $1.3 billion between January and May of 2018 into “blockchain and blockchain adjacent” early stage companies. According to the Bureau of Labor Statistics’ Occupational Outlook Handbook, “[e]mployment of computer and information technology occupations is projected to grow 13 percent from 2016 to 2026, faster than the average for all occupations. These occupations are projected to add about 557,100 new jobs.”11 The median salary for these jobs in May 2017 was $84,580.12 Blockchain is in its early stages and its development is often compared to the early days of the Internet. It is an essential piece in the Internet of Value, the next wave of technological development. Adopting blockchain-friendly policies could turn Texas into a FinTech hub, such as Arizona and Wyoming. Other states have created task forces and initiatives such as the Illinois Blockchain Initiative and the Illinois Blockchain Task Force; the Delaware Blockchain Initiative; the Wyoming Blockchain Task Force; North Carolina Blockchain Initiative; and Florida Blockchain Task Force. Twenty-nine (29) states also introduced legislation related to blockchain technology between the 2017 and 2018 legislative sessions.
While the United States is home to a mere 14% of global virtual currency mining, Texas is fast becoming a player in the space. Due to Texas's low energy costs and deregulated market, it will soon be home to the largest virtual currency mine in North America. Rockdale, TX provides a strong example of mining’s positive impact on local economies as it has seen millions of dollars in outside investment and the creation of hundreds of local, high paying jobs.6,7 Furthermore, through coordination with the Electric Reliability Council of Texas (ERCOT), virtual currency mining data centers are able to turn off during peak demand thereby preventing the need to turn on less efficient peak demand power plants. They can also allow ERCOT to stabilize and predict demand when it is low.