Tennessee has become one of the first states in the country to approve the use of “smart contracts,” which are made through the use of blockchain technology.
In essence, the law gives blockchain contracts and electronic signatures submitted through blockchain as having equal standing to more traditional forms of contracts.
The Chamberlains officially defines “blockchain technology” as “distributed ledger technology that uses a distributed, decentralized, shared, and replicated ledger” to record transactions.
By design, blockchain permanently records all transactions and is unalterable. Blockchain transactions replicate across millions of computers, making it virtually impossible to alter the transaction. In these deals, both parties have the assurance that the transaction has been permanently recorded without the need for a traditional intermediary, such as a bank or other institution.
While blockchain is currently the method for verifying transactions using the popular cryptocurrency Bitcoin, the technology has the capabilities to be used in an endless variety of transactions across a multitude of industries.
The law, which was submitted as Senate Bill 1662, was unanimously passed in the state House and Senate and was signed by Gov. Bill Haslam in late March. The bill officially amended the Tennessee Code Annotated, Title 47, Chapter 10.
Tennessee joins a handful of other states, including Wyoming, Nebraska, Florida, New York and Colorado, that have officially recognized blockchain technology as a means of verifying contracts.
While noteworthy, it just one step for a technology that remains in its infancy.
The state should next turn its attention to the Uniform Regulation of Virtual-Currency Businesses Act, which was recently proposed by the Uniform Law Commission.
Waller’s Charles A. Trost, who has previously served as commissioner of the Tennessee Department of Revenue, is a member of the 19-person committee that created the draft legislation.
This set of rules creates a “statutory framework for regulating companies engaged in virtual-currency business activity.”
The uniform legislation was drafted by a coalition of leaders in virtual currency, banking, business, government officials, according to the ULC. Thus far, state legislatures in Connecticut, Hawaii, and Nebraska have introduced the legislation.
According to the ULC, there are four benefits for the proposed legislation:
— it specifically regulates companies that assume “control” of a client’s virtual currency.
— It creates an “on-ramp” for some smaller companies to operate without a license, which allows for room for innovation and experimentation, the ULC contends.
— It assures consumers of the safety and security of virtual currency. It would require all virtual-currency businesses to create specific policies and compliance programs to guard against fraud, cyber threats, and terrorist activity.
— It allows for reciprocal licensing, which creates better coordination among states, while also reducing hassles for member companies.
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