Summary

• New bill proposes to make Utah a Bitcoin Silicon Valley.
• Utah-based Overstock is a very active player in the Bitcoin space.
• The potential payoff of Overstock’s Bitcoin-based Medici crypto-stock exchange is huge.

Republican member of the Utah House of Representatives, Mark K. Roberts, has introduced a bill to create a Council on Payment Options for State Services to study whether and how the state could accept Bitcoin as a valid form of payment.

The bill, H.C.R. 6. encourages the adoption of Bitcoin for state business and notes that Utah could become a key player in promoting Bitcoin. The proposed Council would include representatives from the Office of the State Treasurer, the Division of Finance, the Governor’s Office of Management and Budget, the State Tax Commission (yes — instead of using Bitcoin to evade taxes, Utah residents would pay taxes in Bitcoin), Bitcoin advocacy groups, and companies active in the Bitcoin space.

A company based in Utah and very active in the Bitcoin space is Overstock (NASDAQ:OSTK ), which became the first large retailer to accept Bitcoin in January 2014. The H.C.R. 6 bill notes that the worldwide market capitalization of Bitcoin is valued at about $3.3 billion and mentions Overstock:

Many major companies now accept Bitcoin as a valid form of payment, including Utah-based Overstock.

It’s evident that Overstock, which sells consumer goods to online shoppers worldwide and accepts payments in Bitcoin, would profit from a Bitcoin-friendly regulatory climate in its home state. The bill goes even farther than that and proposes that Utah could become a Bitcoin Silicon Valley, a key player in promoting the use of Bitcoin.

Technology industries, including emerging technologies play a growing role in its economy and culture. The state must also remain open to new technologies and ideas to continue attracting talented and educated entrepreneurs. [Bitcoin] provides merchants with an attractive alternative mechanism for accepting payments, because transaction fees for Bitcoin are generally much lower than those imposed by other payment processors.

In fact, cheap money transfers are the main competitive advantage of Bitcoin, and that alone enables a wave of next-generation applications, for example to micro-payments and international remittances. The dollar exchange value of Bitcoin has fallen in 2014, but the total volume of transactions and the venture capital investments in the Bitcoin ecosystem have been on a sharp rise. Consumers spend Bitcoins online, and investors bet on the innovative potential of Bitcoin and its underlying blockchain technology.

Beyond retail, Overstock is working at a revolutionary new development: a new independent stock exchange operating in Bitcoin and powered by Bitcoin technology. The new stock exchange, codenamed Medici, could sidestep traditional stock exchanges such as NYSE and NASDAQ and issue corporate stock directly over the Internet. Overstock’s CEO Patrick Byrne told Wired :

There is an opportunity to recreate the financial world as we know it in the parallel universe that is the blockchain. We are writing rules for this whole new universe.

In October, I interviewed Robby Dermody, co-founder of Counterparty, the Bitcoin technology platform initially selected by Overstock for Medici. Dermody confirmed that Medici will broker legitimate shares in companies, on the [Bitcoin] blockchain, and that there will be no specific Bitcoin industry focus.

In recent developments, Dermody and other Counterparty co-founders left the Medici project. which will include a wider variety of Bitcoin technologies, protocols and blockchains. No further details have been released, but interesting high-profile innovations in the Bitcoin space include the programmable money technology of Ethereum and the sidechains of Blockstream. which recently received $21 million seed funding.

In a recent interview, Byrne said that Overstock is building the platform that will let companies issue a crypto-equity, which is a new frontier with many legal obstacles. The Utah bill seems a first step to overcome the legal obstacles that stand in the way.

Overstock has been criticized for spending money on Medici and Bitcoin development. But I think the company is taking sensible steps in the right direction, and the potential payoff is huge.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. (More. ) The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.