Blockchain technology has taken another early step towards ubiquity in the legal sector. On March 29, the state of Arizona passed a law that recognizes the legal validity of blockchain-secured records. Arizona HB 2417 states:
A RECORD OR CONTRACT THAT IS SECURED THROUGH BLOCKCHAIN TECHNOLOGY IS CONSIDERED TO BE IN AN ELECTRONIC FORM AND TO BE AN ELECTRONIC RECORD.
Stating that a blockchain record is an electronic record may seem obvious, but this statement carries legal significance. Over the past three decades, as various transactions and records were digitized, several laws were passed to confirm the legal validity of these electronic records. By stating that blockchain records are considered electronic records, blockchain records inherit the same legal standing as other electronic records.
This is good news for the proliferation of this game-changing technology, but HB 2417 gets better. The bill explicitly defines “blockchain technology” and notes that data logged on a blockchain ledger is “immutable and auditable and provides an uncensored truth.”
“BLOCKCHAIN TECHNOLOGY” MEANS 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.
Just as exciting? The law specifically defines and outlines the legal validity of smart contracts, stating that an executed smart contract “CAN TAKE CUSTODY OVER AND INSTRUCT TRANSFER OF ASSETS ON THAT LEDGER.”
This comes less than a year after Vermont passed Act No. 157 (H.868) into law, which outlined the legal standing of blockchain-based records and transactions. Delaware is drafting a similar law to recognize corporate records recorded on a blockchain. Other states would do well to follow suit.