Arizona Bill Seeks to Update Law to Recognize Smart Contracts

A bill recently introduced in the Arizona state House of Representatives by state Rep. Jeff Weninger, seeks to amend the state’s Electronic Transactions Act to recognize signatures secured through blockchain technology, as well as to legally recognize smart contracts. House Bill 2417 introduced by Rep. Weninger on February 6^th, 2017, states that, “A signature that is secured through blockchain technology is considered to be in an electronic form and to be an electronic signature.” The bill also states that, “A record or contract that is secured through blockchain technology is considered to be in an electronic form and to be an electronic record.”

The bill would confirm the validity of smart contracts in commerce, and would ensure that legal standing and enforceability could not be denied solely due to it’s smart contract term. The proposed legislation also includes a stipulation on who exactly owns the information secured by a blockchain. “Notwithstanding any other law, a person that, in or affecting interstate or foreign commerce, uses blockchain technology to secure information that the person owns or has the right to use retains rights of ownership or use with respect to that information as before the person secured the information using blockchain technology,” the bill states.

House Bill 2417 defines blockchain technology as a, “distributed ledger technology that uses a distributed, decentralized, shared and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless. The data on the ledger is protected with cryptography, is immutable and auditable and provides an uncensored truth.” The proposed legislation defines a smart contract as, “an event-driven program, with state, that runs on a distributed, decentralized, shared and replicated ledger and that can take custody over and instruct transfer of assets on that ledger.”

The Arizona bill is not unlike a law enacted last year in the state of Vermont which made blockchain records admissible as evidence in court. The legislation from Vermont concerning blockchain records was part of a larger economic development bill, H. 868, which was passed by the Vermont General Assembly, and signed into law by the Governor of Vermont as Act 157 on June 2^nd, 2016. Arizona’s House Bill 2417 was assigned to the state House of Representative’s Commerce Committee on February 7^th, and also to the Rules Committee on February 7^th. It was read for the second time in the state House on February 8^th. Currently, no hearing is scheduled for House Bill 2417. Another bill in the Arizona state House of Representatives also concerns blockchain technology, Rep. Paul Boyer’s bill, House Bill 2216, which seeks to prohibit the mandatory use of blockchain technology to track firearms.