Legislative Confusion on Blockchain
Illinois joined a growing chorus of states with legislatures proudly declaring that blockchain technology is indeed a thing, but they don’t exactly know what to do about it. The Blockchain Technology Act, which went into effect on January 1, 2020, provides that the legal effect or enforceability of a contract, record, or signature may not be denied solely because blockchain technology was used to create or store it.
For the uninitiated, blockchain is a decentralized, distributed electronic record created and managed across many computers by multiple parties. Once recorded, data cannot be altered without the consensus of the majority of the network participants. Blockchain, because the data is inherently resistant to modification, is having a bit of a moment in the sun. Proposed use cases range from the financial services to supply chain and food safety. In response, many state legislatures have felt the need to chime in—even if what they have to say is not particularly meaningful.
Enter Illinois. It joined the list of, by my count, nine other states (AR, AZ, IL, ND, OH, OK, SD, TN, & WA) that have passed legislation declaring that the enforceability of signatures and records shall not be denied solely because they were secured through blockchain technology. The only problem is that the legislation is entirely unnecessary. All 50 states have adopted the Uniform Electronic Transactions Act (“UETA”) or similar laws that make electronic signatures legally enforceable. Illinois passed a law more than 20 years ago called the Electronic Commerce Security Act that stated that “written records” included electronic records, and “signatures” included electronic signatures. And if records recorded on a blockchain are a type of electronic records already included under the definition of written records, why all the fuss with a new law?
The Illinois law does some other things. Specifically, it establishes some limitations on the use of blockchain technology and prohibits local governments from taxing or requiring licenses to use blockchain technology.
And it could be worse. Other state legislatures crafted some pretty wacky legislation. Arkansas, for example, amended its UETA statute last year to define “blockchain distributed ledger technology” in part as technology that “contains data that … provides an uncensored truth.” Rarely do we see statutory language that flirts with the metaphysical.
Blockchain may eventually impact everything from how we buy a cup of coffee to how multinational corporations manage their businesses. Accordingly, it’s good that legislatures want to engage with this new technology. It would just be better if they wanted to understand it first.
Read this article on the Womble Hey Data Data blog.