The Assembly Privacy and Consumer Protection Committee on Tuesday unanimously approved legislation by Assembly Majority Leader Ian Calderon that would recognize blockchain as a legal electronic record.
“Without knowing the legal standing of blockchain, businesses and industry might avoid innovating or utilizing blockchain as part of their business,” Calderon told his colleagues when he presented the bill.
Whether state law needs to be updated to include this specific technology is a matter of dispute. Calderon, backed by a number of blockchain companies, contends that California must create a regulatory framework if it wants to protect and encourage its innovators and entrepreneurs in this growing field.
Critics say that state and federal laws already allow for blockchain to operate in the digital marketplace and that a patchwork of state laws could actually land the industry in court defending legal challenges.
The idea of blockchain technology is relatively simple. It allows parties to interact and make transactions without a so-called central authority, such as a bank, to validate them. It uses a distributed ledger that continuously updates digital records in databases that are shared and, supporters say, cannot be altered.
“Once a record is written to a blockchain, it is there forever,” said Gangadharam (Greg) Osuri, co-founder and CEO of Overclock Labs, based in San Francisco. “It cannot be altered, and it is visible to anyone with access to the chain.”
The technology, Osuri told lawmakers, is in its infancy but the potential impact on commerce “rival that of the World Wide Web itself.”
The bill, AB 2658, expands California’s definition of an electronic record. Currently, an electronic record is defined under the Uniform Electronic Transactions Act as a “record created, generated, sent, communicated, received, or stored by electronic means.” Calderon’s bill would also define a record or signature secured through blockchain as an electronic record and electronic signature under UETA.
It is modeled after an Arizona law, but a handful of other states have also passed blockchain bills that offer varying definitions. That’s a concern to the Judicial Council, which questioned whether Calderon’s bill would provide the legal certainty its author seeks.
“The bill as currently written suggest it does not do that,” said Dan Pone, with the Judicial Council. “There’s not currently a uniform established standard for what constitutes blockchain technology.”
Andrew Glidden, head of Legal Research for Blockchain@BerkeleyLaw, added that blockchain is actually already regulated and that any legal uncertainty that exists is not at the state level.
Calderon, who has already amended his bill to remove a contentious provision about so-called smart contracts, pledged to work with the Judicial Council and others to refine his bill.
“I will do whatever it takes to make sure we get this right and strike the right balance,” Calderon said.
The bill now moves to the Assembly Judiciary Committee for consideration.
