• Arizona requires secretary of state to draft electronic notarization requirements: On March 16, 2018, the governor of Arizona signed into law a bill that transfers the requirements for electronic notarization from statute to the rulemaking authority of the secretary of state. To do so, the law repeals the statutory requirements related to electronic notarization and requires the secretary of state to adopt rules for implementing electronic notarization by December 31, 2019.
• Indiana becomes fifth state to allow remote online notarization: On March 13, 2018, the governor of Indiana signed into law a bill that will allow Indiana notaries to perform remote online notarizations. The law also requires the secretary of state to establish standards related to remote online notarization, such as standards for audio visual communication technology and identity proofing. The law specifies various requirements for remote notarial acts, including requirements covering registration, record keeping and maintenance of records. The four other states allowing remote online notarization are Montana, Virginia, Texas and Nevada. Contact the authors for summaries.
• New Indiana law governing electronic wills: On March 8, 2018, the governor of Indiana signed legislation that governs electronic wills, electronic trust instruments and electronic powers of attorney. The legislation allows testators to electronically sign documents so long as there are two witnesses in the physical presence of the signer to witness the signature.
• Arizona passes two laws that expand the use of blockchain technology, including through a use of a “regulatory sandbox program”:
• On April 3, 2018, the governor of Arizona signed legislation that expands the scope of blockchain technology transactions to apply to written transactions within Arizona’s Corporations and Associations law. Arizona amended its Uniform Electronic Transactions Act to state that blockchain technology applies to electronic transactions within the Corporation and Associations law and that “writing” or “written” within that law includes blockchain technology.
• On March 22, 2018, the governor of Arizona signed legislation making Arizona the first state to adopt a “regulatory sandbox program” that allows companies to test new products and technologies – such as those employing blockchain technology – without needing to acquire licensure or other needed authorization. Instead, companies will apply to the state Attorney General’s Office to participate in the sandbox program. The test period lasts for two years (with a possible one-year extension) and allows up to 10,000 Arizona residents to use the product (unless the company demonstrates adequate capitalization and risk management process to handle a greater number).
• Tennessee passes law explicitly recognizing legality of smart contracts: On March 22, 2018, the governor of Tennessee signed legislation that amended existing law to explicitly recognize the legality of and to define “distributed ledger technology” and “smart contracts.” The legislation, which amended Tennessee’s Uniform Electronic Transactions Act, states that a contract cannot be denied legal effect solely because that contract is executed through a smart contract. The legislation further states (i) that a cryptographic signature that is generated and stored through distributed ledger technology constitutes an electronic signature and (ii) that a record or contract secured through distributed ledger technology constitutes an electronic record. Tennessee became the second state to adopt such legislation, with Arizona doing so last year.
• The governor of Wyoming signs five bills that expand the use of blockchain technology within Wyoming
• Wyoming Money Transmitter Act – virtual currency exemption: This bill exempts virtual currencies from Wyoming’s Money Transmitter Act. This exemption allows entities that buy, sell, issue or have custody of payment instruments or store value that are in virtual currency, or who receive virtual currency for transmission to another location in Wyoming to operate without licensure. Virtual currency means any type of digital representation of value that is used as a store of value or medium of exchange and that is not recognized as legal tender by the US government.
• Open Blockchain Tokens – exemptions: This bill, nicknamed the “utility token bill,” exempts “open blockchain tokens” (eg, utility tokens) from securities and money transmitter laws. To qualify as an open blockchain token, (i) the token must be able to be redeemed for products or services and (ii) the token was not sold to the initial buyer as a financial investment.
• Electronic Corporate Records: This bill amends the Wyoming Business Corporations Act to authorize corporations to (i) use distributed or other electronic networks or databases for creating or maintaining corporate records, (ii) provide notice to a shareholder by an electronic transmission to a data address provided by the shareholder, (iii) identify a shareholder by a data address, (iv) accepting shareholder votes signed by network signatures that correspond to a data address and (v) keep records administered by or on behalf of, or maintained by, the corporation on one or more distributed or other electronic networks or databases, provided the records are kept in written form or in another form capable of conversion into written form within a reasonable time.
• Limited Liability Companies – Series: This bill provides for the establishment of a designated series of members, managers, transferable interests or assets to be treated as a separate unit of the LLC for certain purposes.
• Property Taxation – Digital Currencies: This bill exempts “virtual currencies” from property taxation. Virtual currency means any type of digital representation of value that is (i) used for exchange, accounting or to store value and (ii) not recognized as legal tender.
• Chamber of Digital Commerce (CDC) and Electronic Signature and Records Association (ESRA) joint letter criticizes state “smart contracts” legislation: In April 2018, the CDC and ESRA issued a joint letter responding to recent state “smart contracts” legislation. The letter stated cryptographic signatures are already captured within the definition of “electronic signature” as set forth in UETA and ESIGN and that these laws already ensure that electronic records, electronic signatures and contracts in made or memorialized in electronic format enjoy the same legal status as pen and ink contracts. Therefore, legislation that defines blockchain technology or smart contracts – no matter how well intentioned – is harmful because it (i) creates redundancy, (ii) creates inconsistency and (iii) ESIGN preempts any state law that gives special effect to a specific technology.