States like Vermont and Arizona, in the US, also take advantage of technologies such as smart contracts to improve the services of their companies.
Illinois is one of the states that conducted investigations related to cryptocurrencies and blockchain technology to take advantage of this platform which stores and shares information securely.
As part of this process of investigation, to make possible a future and positive adoption, the Blockchain Technology Act of Illinois explains basic concepts such as blockchain, cryptographic hash, smart contract, electronic record, as well as some basic rules related to blockchain’s world.
Said law, sponsored by Keith R. Wheeler, who is a republican member of the Illinois House of Representatives, entered into force last January 1st, 2020.
The Blockchain Technology Act could work as a base for blockchain-based contracts. Also, it is just at this point where the state is working currently. These contracts are now a viable and admissible alternative to paper-based records.
“A smart contract, record or signature may not be denied legal effect or enforceability solely because a blockchain was used to create, store or verify the smart contract, record or signature”, the law reads in part.
Now, Illinois is another region of the United States which recognizes smart contracts in legal settings. One of the firsts states in accepting this technology was Vermont, which recognized smart contracts in 2016. It made blockchain records admissible in court. After that, Arizona, one year later, approved similar legislation recognizing blockchain firms.
What Is the Law About?
The Illinois law gives the same legal recognition already enjoyed by paper contracts to blockchain contracts and agreements so that they are recognized by the state as legally binding.
It also shields the blockchain industry from local government interference since many users prefer the decentralization that blockchain technology offers. This means that cities and towns cannot impose taxes and regulations or require licensing or permits on blockchain systems or for those who use them.
“The law ensures that businesses and individual community members will not have to navigate a patchwork of local blockchain regulation,” said Alison Mangiero, President of blockchain technology company TQ Tezos and who proposed this special bill for Illinois to adopt blockchain technology.
The Benefits
Backers of the law in Illinois consider that it is a means of providing companies and businesses with a legal framework for embracing new technologies. Governor J.B. Pritzker signed the measure into law in August.
Mangiero agrees. She said legal certainty and stability will allow firms to focus their efforts on developing new uses for the technology, including facilitating transactions.
Tatyana Ruderman, counsel at InfoLawGroup’s Chicago offices, said the law could help companies looking to utilize blockchain-based records systems. But she said the law’s wording is vague in some parts. For this reason, she predicts this law could face a legal challenge in the future.
“The law is likely to be tested in courts by parties who later want to try and invalidate a blockchain transaction”, she said.
Ruderman added the Illinois law’s success may be hindered by its borders. This is because if another state, like neighboring Indiana, does not recognize smart contracts, it does not mean that other states will recognize smart contracts too.
“It may not make sense for businesses that operate outside Illinois to implement blockchain-based contract management only in Illinois and not elsewhere (…) This may be an area where it makes sense for the industry to come together and agree on some standards to fill the gaps”, she explained.
By María Rodríguez
States like Vermont and Arizona, in the US, also take advantage of technologies such as smart contracts to improve the services of their companies.
Illinois is one of the states that conducted investigations related to cryptocurrencies and blockchain technology to take advantage of this platform which stores and shares information securely.
As part of this process of investigation, to make possible a future and positive adoption, the Blockchain Technology Act of Illinois explains basic concepts such as blockchain, cryptographic hash, smart contract, electronic record, as well as some basic rules related to blockchain’s world.
Said law, sponsored by Keith R. Wheeler, who is a republican member of the Illinois House of Representatives, entered into force last January 1st, 2020.
The Blockchain Technology Act could work as a base for blockchain-based contracts. Also, it is just at this point where the state is working currently. These contracts are now a viable and admissible alternative to paper-based records.
“A smart contract, record or signature may not be denied legal effect or enforceability solely because a blockchain was used to create, store or verify the smart contract, record or signature”, the law reads in part.
Now, Illinois is another region of the United States which recognizes smart contracts in legal settings. One of the firsts states in accepting this technology was Vermont, which recognized smart contracts in 2016. It made blockchain records admissible in court. After that, Arizona, one year later, approved similar legislation recognizing blockchain firms.
What Is the Law About?
The Illinois law gives the same legal recognition already enjoyed by paper contracts to blockchain contracts and agreements so that they are recognized by the state as legally binding.
It also shields the blockchain industry from local government interference since many users prefer the decentralization that blockchain technology offers. This means that cities and towns cannot impose taxes and regulations or require licensing or permits on blockchain systems or for those who use them.
“The law ensures that businesses and individual community members will not have to navigate a patchwork of local blockchain regulation,” said Alison Mangiero, President of blockchain technology company TQ Tezos and who proposed this special bill for Illinois to adopt blockchain technology.
The Benefits
Backers of the law in Illinois consider that it is a means of providing companies and businesses with a legal framework for embracing new technologies. Governor J.B. Pritzker signed the measure into law in August.
Mangiero agrees. She said legal certainty and stability will allow firms to focus their efforts on developing new uses for the technology, including facilitating transactions.
Tatyana Ruderman, counsel at InfoLawGroup’s Chicago offices, said the law could help companies looking to utilize blockchain-based records systems. But she said the law’s wording is vague in some parts. For this reason, she predicts this law could face a legal challenge in the future.
“The law is likely to be tested in courts by parties who later want to try and invalidate a blockchain transaction”, she said.
Ruderman added the Illinois law’s success may be hindered by its borders. This is because if another state, like neighboring Indiana, does not recognize smart contracts, it does not mean that other states will recognize smart contracts too.
“It may not make sense for businesses that operate outside Illinois to implement blockchain-based contract management only in Illinois and not elsewhere (…) This may be an area where it makes sense for the industry to come together and agree on some standards to fill the gaps”, she explained.
By María Rodríguez
