The federal Electronic Signatures in Global and National Commerce Act ("E-SIGN Act"), which was enacted in 2000, permits electronic signatures in certain business and consumer contracts to have the same legal enforceability as signed paper contracts. The E-SIGN Act states that "with respect to any transaction in or affecting interstate or foreign commerce (1) a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and (2) a contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation." 15 U.S.C. § 7001(a).
In addition, the E-SIGN Act states that "If a statute, regulation, or other rule of law requires a signature or record relating to a transaction in or affecting interstate or foreign commerce to be notarized, acknowledged, verified, or made under oath, that requirement is satisfied if the electronic signature of the person authorized to perform those acts, together with all other information required to be included by other applicable statute, regulation, or rule of law, is attached to or logically associated with the signature or record." 15 U.S.C. § 7001(g).
The E-SIGN Act does not apply to certain types of contracts and documents. The E-SIGN Act does not apply to wills, trusts, matters of family law, or commercial business transactions subject to the Uniform Commercial Code. See 15 U.S.C. § 7003(a). The E-SIGN Act also does not apply to (i) court documents, (ii) notices of cancellation or termination of utility services, (iii) a default under a credit or rental agreement for a primary residence of an individual, (iv) the cancellation or termination of health or life insurance benefits (excluding annuities), (v) a notice of a material failure or recall of a product that risks endangering health and safety, or (vi) any document required to accompany any transportation or handling of hazardous materials, pesticides or other toxic or dangerous materials. See 15 U.S.C. § 7003(b).
The broad definition of "electronic signature" in the E-SIGN Act includes signatures made by cryptographic keys in blockchain-based smart contracts. The E-SIGN Act defines "electronic signature" as "an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record." 15 U.S.C. § 7006(5). The E-SIGN Act defines ‘‘record’’ as "information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form." 15 U.S.C. § 7006(9).
The District of Columbia and 47 states (excluding Illinois, New York and Washington) have enacted the Uniform Electronic Transactions Act ("UETA"). UETA is a more comprehensive statute than E-SIGN, and includes additional provisions governing such as issues as (i) the attribution of a signature to an individual, (ii) the effect of mistakes in electronic communications, and (iii) the admissibility of electronic records into evidence.
Instead of enacting UETA, Illinois has enacted the Electronic Commerce Security Act (5 ILCS 175/1). New York has enacted the Electronic Signatures and Records Act (N.Y. Stat Tech L §§ 301-309). Washington has enacted the Electronic Authentication Act (R.C.W. ch. 19.34).
Certain states have enacted additional laws that are supportive of the use of blockchain technology in connection with smart contracts and digital assets. Some of the state statutes are set forth below.
|State||Description of State Blockchain Law|
|Arizona||On March 29, 2017, the Arizona Electronic Transactions Act was amended to add Az. Rev. Stat. § 44-7061, which specifically deems (i) a "signature secured through blockchain technology" to be an electronic signature, (ii) a "record or contract secured through blockchain technology" to be an electronic form or record, and (iii) a "smart contract" to be legally valid and enforceable.|
|Delaware||On August 1, 2017, Sections 219, 224 and 232(c) of the Delaware General Corporation Law were amended to expressly permit Delaware corporations to put stock ledgers on "distributed electronic networks or databases."|
|Nevada||On June 5, 2017, the Nevada Uniform Electronic Transactions Act was amended to specifically define "blockchain" and deem blockchain records to be electronic records. In addition, Nevada prohibited counties, cities and other local governments from imposing a tax, fee or license on the use of a blockchain.|
|New Hampshire||Effective on August 1, 2017, New Hampshire exempted from money transmitter licensing "persons conducting business using transactions conducted in whole or in part in virtual currency."|
|Tennessee||On March 22, 2018, the Tennessee Uniform Electronic Transactions Act was amended to (i) define "distributed ledger technology" and "smart contract," (ii) deem records secured through distributed ledger technology to be an electronic record and (iii) deem a "cryptographic signature that is generated and stored through distributed ledger technology . . . to be in an electronic form and to be an electronic signature."|
|Vermont||On June 2, 2016, 12 V.S.A. § 1913 was enacted, which enabled blockchain records to be deemed self-authenticating under Vermont Rule of Evidence 902. On May 4, 2017, Vermont money transmitters were permitted to hold "virtual currency" as a permissible investment, subject to certain limitations. Effective on July 1, 2018, (i) 11 V.S.A. § 4172 will permit a Vermont LLC to elect to be a "blockchain-based limited liability company" and (ii) the wording of 12 V.S.A. § 1913 will be revised.|
|Wyoming||On March 7, 2018, the Wyoming Money Transmitter Act was amended to create an exemption for buying, selling, issuing or taking custody of "virtual currency." On March 10, 2018, the Wyoming Money Transmitter Act and the Wyoming Uniform Securities Act were amended to create exemptions for "open blockchain tokens."|
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