California passes bill recognizing smart contracts, blockchain tech
The state of California will soon include blockchain technology among electronic records that could be used for legally binding contracts.
California Assembly Bill 2658, introduced by Assembly Member Ian Calderon last February, amends the state’s Civil Code, its Corporations Code, its Government Code and its Insurance Code to recognize smart contracts on blockchain as contracts that are as valid as traditional ones.
Upon passage of the bill, Calderon said, “As a complex, emerging technology, it is important to define ‘blockchain technology’ in statute, as well as identify potential technical, regulatory, and governance hurdles, in order to provide greater certainty regarding the technology’s legal standing.”
In the final version of the bill, the definition of blockchain is “a mathematically secured, chronological, and decentralized ledger or database.”
Added to the definition of ‘contract’ is the sentence “‘Contract’ includes a smart contract.” ‘Smart contract,’ in turn, is defined as “an event-driven program that runs on a distributed, decentralized, shared, and replicated ledger that can take custody over, and instruct transfer of, assets on that ledger.”
The definition of ‘electronic record’ now includes the sentence “A record that is secured through blockchain technology is an electronic record.” The definition of ‘Electronic signature’ now says in addition, “A signature that is secured through blockchain technology is an electronic signature.”
The bill also creates a blockchain working group, to be formed by July 1, 2019, that would provide its own definition of ‘blockchain’ and “report to the Legislature on the potential uses, risks, and benefits of the use of blockchain technology by state government and California-based businesses, as specified.” The working group shall consist of an assortment of people in various industries in the private sector, as well as government officials.
A related bill, California Senate Bill 838, pertains to blockchain use in a corporation’s articles of incorporation, wherein data on stockholders and their addresses and number of shares shall be stored via blockchain technology. It is currently pending in the state Senate.
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