Delaware Senate Passes Modern Banking Legislation Updating Digital Definitions

In a significant move to align with the evolving financial landscape, the Delaware Senate has passed two bills aimed at modernizing the state’s banking laws. The legislation, which received strong bipartisan support, focuses on updating regulations to address the growing role of digital assets and financial technology in today’s economy.

A Modern Framework for Digital Assets

Senate Bill 16 (SB 16), also known as the Delaware Banking Modernization Act, marks the first major update to Title 5 of the Delaware Code since the passage of the Financial Center Development Act (FCDA) in 1981. This landmark legislation previously catalyzed significant growth in Delaware’s financial sector, creating thousands of jobs and attracting major banking and credit card companies to the state.

With this new legislation, Delaware seeks to maintain its leadership in the financial services industry. SB 16 introduces modern definitions for digital assets, expands the authority of the State Bank Commissioner, and updates corporate governance requirements for state-chartered banks and trust companies. Additionally, it facilitates interstate trust company operations, allows out-of-state financial institutions to act as fiduciaries in Delaware, and modernizes organizational and operational requirements.

"It’s been more than four decades since we’ve made any meaningful updates to our state’s banking laws, and in that time, the way people bank and conduct transactions has changed significantly", said Rep. Bill Bush, a prime sponsor of both bills. "We need to make sure our laws are keeping up with those changes. These bills help us do just that by modernizing our system while reinforcing strong protections for consumers."

A substitute bill for SB 16 includes a two-thirds vote requirement and clarifies the timeframe for implementation.

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Regulating Stablecoins and Digital Asset Services

The second piece of legislation, Senate Bill 19 (SB 19), introduces the Delaware Payment Stablecoin Act, which creates a licensing framework for payment stablecoin issuers and digital asset service providers. Stablecoins, a form of digital currency pegged to traditional money like the US dollar or euro, are a growing part of the financial sector.

SB 19 adopts federal definitions, incorporating guidance from the U.S. Treasury issued on April 8. The bill sets forth reserve requirements, anti-money laundering obligations, data privacy standards, and custody safeguards, among other measures, to establish a clear and responsible framework for stablecoin regulation. The legislation also includes provisions for federal-to-state charter conversions and ensures alignment with evolving federal standards.

"Delaware has long been a leader in the financial services industry, but we can’t take that position for granted", said Senate Minority Whip Brian Pettyjohn, one of the bill’s sponsors. "These updates reflect the realities of today’s economy, especially the growing role of digital assets and emerging financial technologies. By modernizing our laws and establishing clear, responsible frameworks, we’re reinforcing Delaware’s competitiveness while maintaining strong safeguards for consumers and investors."

Strengthening Delaware’s Financial Legacy

The banking modernization package reflects Delaware’s commitment to its financial sector. "We’re recommitting ourselves to Delaware’s legacy of financial sector excellence with the advancement of this banking modernization package", said Sen. Spiros Mantzavinos, the prime sponsor of SB 16, SB 18, and SB 19. "I’m proud to have worked in lockstep with banking and fintech leaders, State Bank Commissioner Lisa Collison and her office, and other members of Governor Meyer’s Administration."

SB 19 also addresses a spectrum of regulatory concerns, including reserve shortfall remediation, mandatory redemption timing standards, and capital requirements. If adopted, the legislation will direct the State Bank Commissioner to issue regulations within specified timeframes to keep Delaware’s framework in step with federal policies.

Rep. Jeff Spiegelman, another sponsor of both bills, emphasized the importance of staying ahead in the financial sector: "This package will make needed changes to our banking laws, keeping pace with new technologies and the evolving way wealth is handled and transactions are made."

Next Steps

Both SB 16 and SB 19 will now move to the House Economic Development/Banking/Insurance & Commerce Committee for further consideration. Meanwhile, a third piece of legislation, Senate Bill 18, which addresses money transmission and virtual currency, remains under review and is expected to be considered later this spring. Together, these bills aim to position Delaware as a state prepared for the future of banking and financial technology.

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