As blockchain technology becomes increasingly commonplace, lawmakers at the state level are increasingly examining how their governments should regulate distributed ledger and token-based business activity. Two recently proposed state laws — one in California, and the other in Wyoming — would provide much-needed legal clarity and protections for blockchain-based operations in the U.S., perhaps even setting a regulatory precedent for other states to follow.Wyoming’s House Bill 70 would exempt some utility-focused cryptocurrency and ICO tokens from the current regulations and restrictions placed on securities. This would include “open blockchain” tokens that are not intended to be sold as investments, but are instead intended to be redeemed for goods or services. Such tokens would effectively be exempt from state taxes on securities. Qualifying tokens must not be marketed as investments, and developers may not enter into a repurchasing agreement with the intent of raising the value of the token on a secondary market. (A likely example would be the proposed KODAKcoin token, intended for use in image verification, as well as those used in healtcare or smart contract blockchains.) Blockchains used by banks and other money transmitting businesses are not eligible for these protections.
HB 70 received strong bipartisan support, passing the Wyoming House of Representatives unanimously, and is expected to be approved by the state’s Senate and signed into law by the Governor later this year.
California’s proposed law, Assembly Bill 2658, focuses on revisions to the state’s existing Uniform Electronic Transactions Act. The bill revises the definitions of “electronic record” and “electronic signature” to include documents that have been secured through blockchain technology. In effect, the bill would give blockchain-powered smart contracts and other agreements the same legal standing as existing electronically signed documents. The law would apply to any foreign or domestic entity doing business in California, something that is sure to be welcomed by the hundreds of blockchain-based startups in Silicon Valley.
The California bill is slated to be heard in committee on March 18th, but it remains unclear how much support it garner from other state lawmakers. While there is little to object to in the language of the bill, state-level partisan politics frequently come into play in California’s government, particularly when bills involving controversial topics are concerned. With blockchain-based business topics becoming a huge factor in the state’s tech circles, some lawmakers may decide to save these revisions for a more comprehensive set of cryptocurrency-specific laws to be proposed later.
Although typically ahead of the curve on technology legislation, California is actually lagging behind when it comes to cryptocurrency and blockchain laws. Lawmakers in Arizona passed a similar law recognizing smart contracts late last year, and another is currently being debated in committee in Florida.