The state of Tennessee has now joined Arizona and Vermont in their legal acceptance of the blockchain and smart contracts. On March 8th, the Tennessee state senate passed Bill 1662 which officially recognizes smart contracts as legally binding agreements. This is yet another piece of good news in the cryptocurrency world as many other government entities have been quick to shun or outright deny the use of these technologies and currencies. For example, before launching their own coin, the government of Venezuela banned the mining of cryptocurrencies within their borders, and digital coins are also currently banned in places such as Algeria, Ecuador, Bangladesh, Nepal, and Cambodia. China has also made headlines in their legislation of cryptocurrencies. The Chinese government banned financial firms from holding digital coins, but still permit individuals to use them for trade.
What appears to be the most interesting aspect of the Tennessee bill, and the others put forth by states such as Vermont and Arizona, is that each of them seem to have their own slightly different definitions of what the blockchain is and what smart contracts are. They all want to accept the blockchain and smart contracts as legitimate parts of reputable transactions, but they possibly jeopardize that goal with their legislative language.
For example, in the Tennessee bill, the blockchain is specifically referred to as something that is either ‘public’ or ‘private’. In the Vermont bill, no mention of the privacy of the blockchain is mentioned. With certain government and business organizations becoming involved in the creation of cryptocurrencies, the legitimacy of a non-transparent or ‘private’ blockchain must be a legal consideration. One of the reasons that blockchain technology works as well as it does is because it is transparent.
Another difference between the Tennessee and Vermont bills is seen in their mention, or lack of mention, of cryptography. The Tennessee bill clearly states that the data on the blockchain ledger must be protected through ‘cryptography’. The Vermont bill does not stipulate any sort of digital security. The fact that a blockchain would be protected through cryptography seems fairly obvious, but that’s for the majority of us that are clearly in favour of the positive and legitimate properties of the technology. This, and other gaps in legislative language, need to be addressed in further bills passed at the state level. The federal government may take a good while before they get around to making legislation themselves so it is up to the states to do a good job of it until that time.