Arizona Blockchain Regulation
Arizona passes an amendment to its Electronic Transactions Act adding a new Article 5 to recognize aspects of blockchain technology and smart contracts.
Arizona HB 2417 was signed by Arizona Governor Doug Ducey putting into effect certain amendments to the Arizona Electronic Transactions Act (AETA) § 44-7001 et sec. which followed the Uniform Electronic Transactions Act.
New Blockchian Provisions
The current amendments largely address 3 new areas:
- “a signature that is secured through blockchain technology is considered to be in an electronic form and to be an electronic signature” §44-7061(a)
- “a record or contract that is secured through blockchain technology is considered to be in an electronic form and to be an electronic record.” §44-7061(a), and
- The Act also specifically recognizes that “a contract relating to a transaction may not be denied legal effect, validity or enforceability solely because that contract contains a smart contract term.” §44-7061(c)
The AETA including the new amendments contain the following definitions:
- “blockchain technology" means distributed ledger technology that uses a distributed, decentralized, shared and replicated ledger, which may be public or private, permissioned or permissionless, or driven by tokenized crypto economics or tokenless. The data on the ledger is protected with cryptography, is immutable and auditable and provides an uncensored truth.
- “smart contract" means an event-driven program, with state, that runs on a distributed, decentralized, shared and replicated ledger and that can take custody over and instruct transfer of assets on that ledger
- “Electronic record” means a record that is created, generated, sent, communicated, received or stored by electronic means.
- “Electronic signature” means an electronic sound, symbol or process that is attached to or logically associated with a record and that is executed or adopted by an individual with the intent to sign the record.
Amendments to Arizona Electronic Transactions Act
The full text to the Arizona Electronic Transactions Act is as follows:
AN ACT AMENDING SECTION 44-7003, ARIZONA REVISED STATUTES; AMENDING TITLE 44, CHAPTER 26, ARIZONA REVISED STATUTES, BY ADDING ARTICLE 5; RELATING TO ELECTRONIC TRANSACTIONS.
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 44-7003, Arizona Revised Statutes, is amended to read:
A. Except as otherwise provided in subsection SUBSECTIONS B AND C of this section, this chapter applies to any electronic record and electronic signature relating to a transaction.
B. FOR THE PURPOSES OF THIS ARTICLE AND ARTICLES 2, 3 AND 4 OF THIS CHAPTER, this chapter does not apply to a transaction to the extent the transaction is governed by:
1. Title 14 as it relates to the creation and execution of wills, codicils or testamentary trusts.
2. Title 47, other than TITLE 47, chapters 2 and 2A and section 47‑1306 and as otherwise provided in section 44-7016.
C. ARTICLE 5 OF THIS CHAPTER APPLIES ONLY TO TRANSACTIONS GOVERNED BY TITLE 47, CHAPTERS 2, 2A AND 7.
C. D. This chapter applies to an electronic record or electronic signature otherwise excluded from the application of this chapter under subsection B OR C of this section to the extent the record or signature is governed by a law other than those laws described in subsection B OR C of this section.
D. E. Any transaction subject to this chapter is also subject to any other applicable substantive law.
Sec. 2. Title 44, chapter 26, Arizona Revised Statutes, is amended by adding article 5, to read:
ARTICLE 5. BLOCKCHAIN TECHNOLOGY
44-7061. Signatures and records secured through blockchain technology; smart contracts; ownership of information; definitions
A. A SIGNATURE THAT IS SECURED THROUGH BLOCKCHAIN TECHNOLOGY IS CONSIDERED TO BE IN AN ELECTRONIC FORM AND TO BE AN ELECTRONIC SIGNATURE.
B. A RECORD OR CONTRACT THAT IS SECURED THROUGH BLOCKCHAIN TECHNOLOGY IS CONSIDERED TO BE IN AN ELECTRONIC FORM AND TO BE AN ELECTRONIC RECORD.
C. SMART CONTRACTS MAY EXIST IN COMMERCE. A CONTRACT RELATING TO A TRANSACTION MAY NOT BE DENIED LEGAL EFFECT, VALIDITY OR ENFORCEABILITY SOLELY BECAUSE THAT CONTRACT CONTAINS A SMART CONTRACT TERM.
D. NOTWITHSTANDING ANY OTHER LAW, A PERSON THAT, IN OR AFFECTING INTERSTATE OR FOREIGN COMMERCE, USES BLOCKCHAIN TECHNOLOGY TO SECURE INFORMATION THAT THE PERSON OWNS OR HAS THE RIGHT TO USE RETAINS THE SAME RIGHTS OF OWNERSHIP OR USE WITH RESPECT TO THAT INFORMATION AS BEFORE THE PERSON SECURED THE INFORMATION USING BLOCKCHAIN TECHNOLOGY. THIS SUBSECTION DOES NOT APPLY TO THE USE OF BLOCKCHAIN TECHNOLOGY TO SECURE INFORMATION IN CONNECTION WITH A TRANSACTION TO THE EXTENT THAT THE TERMS OF THE TRANSACTION EXPRESSLY PROVIDE FOR THE TRANSFER OF RIGHTS OF OWNERSHIP OR USE WITH RESPECT TO THAT INFORMATION.
E. FOR THE PURPOSES OF THIS SECTION:
1. “BLOCKCHAIN TECHNOLOGY" MEANS DISTRIBUTED LEDGER TECHNOLOGY THAT USES A DISTRIBUTED, DECENTRALIZED, SHARED AND REPLICATED LEDGER, WHICH MAY BE PUBLIC OR PRIVATE, PERMISSIONED OR PERMISSIONLESS, OR DRIVEN BY TOKENIZED CRYPTO ECONOMICS OR TOKENLESS. THE DATA ON THE LEDGER IS PROTECTED WITH CRYPTOGRAPHY, IS IMMUTABLE AND AUDITABLE AND PROVIDES AN UNCENSORED TRUTH.
2. “SMART CONTRACT" MEANS AN EVENT-DRIVEN PROGRAM, WITH STATE, THAT RUNS ON A DISTRIBUTED, DECENTRALIZED, SHARED AND REPLICATED LEDGER AND THAT CAN TAKE CUSTODY OVER AND INSTRUCT TRANSFER OF ASSETS ON THAT LEDGER.
Bottom Line for Arizona Blockchain REGULATION
Arizona officially brings blockchain records and blockchain signatures within its Electronic Transactions act and officially recognizes the legal effect and validity of blockchain enabled smart contracts.