Blockchain in the U.S. Regulatory Setting: Evidentiary Use in Vermont, Delaware, and Elsewhere
Columbia Science & Technology Law Review (May 30, 2017)
12 Pages Posted: 20 Jun 2017
Date Written: May 30, 2017
In the absence to date of any specific pre-emptive federal regulation of blockchain distributed ledger technology in fintech, smart contracts, or other uses, this paper discusses early state legislation including Arizona, California, Delaware, Hawaii, Illinois, Maine, New York, Nevada and Vermont. While the list comprises usual suspects for early adoption of disruptive technology regulation, especially of its real-time aspects that were recognized in In re Dole Food Co (Del. Ch. Feb. 15, 2017), the mechanics of blockchain are still evolving and restrictive regulations appear both premature and at risk of expedited obsolescence. Before expanding to general record-keeping transactions, blockchain was first used in bitcoin, a virtual currency. Then, blockchain evolved towards self-executing smart contracts using ethereum technology and may eventually reach an “Internet of Agreements.” While its promise for applications like virtual currencies and payments is obvious and vigorously explored by major financial institutions, blockchain’s real strength lies in authentication and keeping records up-to-date, especially for valuable, highly liquid assets like securities. Key developments for blockchain’s regulation and implementation in an evidentiary context occurred in Arizona (recognition of smart contracts), Vermont (blockchain as evidence), Chicago (real estate records), and, most importantly, Delaware (pending initiative authorizing registration of shares of Delaware companies in blockchain form). Since 64 percent of Fortune 500 companies and over 1 million entities are incorporated in Delaware, an enactment of Delaware’s initiative will change regulatory landscape for securities by setting precedent in the most important corporate jurisdiction of the U.S. Other states competing for corporate taxes and fees would be sure to follow.
Keywords: AML, blockchain, clearing & settlement, cryptocurrencies, data security, digital currencies, distributed ledger, ethereum, fintech, smart contracts, virtual currencies
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