Written By Ceilidh Hemmati
One of the buzzwords in the legal and financial industries in 2016 was "blockchain", and the buzz appears to be going strong in 2017. Blockchain, in simple terms, is a distributed database that maintains a record of transactions between the participants in the system. Using the technology, transactions can be validated by the network without the need for a central administrator (such as a bank). Once verified, the record of the transaction is permanent and unalterable, making it resistant to hacking and fraud.
While blockchain has been around for some time, most famously as the foundation for Bitcoin, it has been receiving increasing attention as of late for its potential to manage and streamline transactions in a wide range of areas, from financial services, to real estate transactions and the sale of energy and commodities.
Nevada has recently joined a small group of states, including Arizona and Vermont, in passing a law relating to the use of blockchain technology in business, commercial and governmental transactions. In Nevada's case, the bill specifically includes blockchain as a type of electronic record for the purposes of the Uniform Electronic Transactions Act (UETA), which gives legal recognition to electronic records, signatures and contracts, provided certain requirements are met.
The law means that if a record or signature is legally required to be in writing, a blockchain which contains the record or signature will suffice. In addition, the bill is significant in that it prohibits local government entities in Nevada from taxing, licensing or imposing other requirements on its use.
So why does this matter in Alberta?
So why does this matter if you don't live in Nevada? In Alberta, the Electronic Transactions Act (ETA), like the UETA, legally recognizes electronic information or records to which the ETA applies, and prohibits such information and records from being denied legal effect solely because they are in electronic form. Also like the UETA, the ETA should be open-ended enough to encompass blockchain as an electronic record without requiring a specific reference to blockchain in the legislation. Laws that are "technology neutral" and avoid specific references to any one technology are often preferable, as they avoid the need for repeated updates as new innovations emerge. However, one of the stated purposes of the Nevada bill was to remove some of the grey area around the use of blockchain in transactions by providing a clear legal framework. Those who wish to use blockchain technologies in their commercial transactions, and startups whose businesses are based around applications of the technology, now have a better idea of Nevada's approach to regulating it.
Given the excitement around the potential applications for blockchain as of late, attention is clearly being paid to how this technology fits (or doesn't) with existing laws in various jurisdictions. By explicitly addressing blockchain, Nevada is taking proactive steps to encourage companies in this space to relocate or grow their business in the state. It will be interesting to see how Alberta and other provinces choose to encourage innovation and set standards for the use of blockchain as its use begins to gain traction in Canada.
Bennett Jones