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The law will help companies looking to utilize blockchain-based records systems. However, the law’s wording is vague in some places, so that it could face legal challenges.
The last but not the least, Illinois finally started to recognize smart contracts and other blockchain-based records as legal instruments with the beginning of 2020.
The state’s “Blockchain Technology Act” was therefore sponsored by Rep. Keith Wheeler (R), and took effect Jan. 1, opening a bunch of possibilities of eventual new legal scenarios for blockchain-based contracts.
These contracts are now justifiable as evidence in court, they are accepted as a visible alternative to paper-based records and statutory excused from local taxes.
The law itself reads:
“A smart contract, record or signature may not be denied legal effect or enforceability solely because a blockchain was used to create, store or verify the smart contract, record or signature.”
Illinois joins other U.S. states in accepting smart contracts as valid, legal evidence. First, it was Vermont that already started to make blockchain records accepted by judges in 2016. One year later, Arizona went with similar legislation recognizing blockchain signatures.
The Illinois law now gives the same legal recognition already enjoyed by paper contracts to blockchain contracts and agreements so that they are recognized as a legal obligation in the eyes of the state.
Protects Industry from Government Interference
But that’s not all. It also protects the blockchain industry from local government interference. We all know that cities and towns always want to grab money wherever they can. Well, with blockchain they won’t. They cannot impose taxes or any regulations neither require licensing nor permits on blockchain systems or those who use them.
He bill was proposed by Alison Mangiero, president of blockchain technology company TQ Tezos who said:
“The law ensures that businesses and individual community members will not have to navigate a patchwork of local blockchain regulation.”
Its supporters in the Illinois State legislature welcomed the bill when it was passed because that meant fewer jobs for authorities as well. It means that companies and businesses will finally be provided with a legal framework that recognizes new technologies. Governor J.B. Pritzker signed the measure into law in August.
Mangiero commented that the exact legal foregone conclusion and stability will allow companies to work on their efforts on developing new uses for the technology, including expediting transactions.
Tatyana Ruderman, counsel at InfoLawGroup’s Chicago offices, said the law may give some boost to the firms which want to use blockchain-based records systems. However, she notices the law’s wording is ambiguous in some parts. So, she predicts it will probably have some legal challenges.
She added the Illinois law’s success may be impeded by its margins. Just because Illinois accepts blockchain and smart contracts, this doesn’t necessarily mean that other states will do the same.