Arizona’s Blockchain Records Bill Passes Senate, Paving Way For Smart Contracts

The senate of the state of Arizona has passed a bill pertaining to the blockchain that would enable smart contracts and blockchain signatures to be treated as legally binding.

The bill, which passed a senate vote by 28-1, is now being sent to Governor Doug Ducey for final clearance, which would see the instrument pass into state law.

Assuming approval from the governor, the law will give data collected through blockchain applications recognition as an electronic format and electronic records — important legal distinctions that bring the technology in line with provisions for other electronic data.

Importantly, the bill specifically addresses the issue of smart contracts, providing for a legal framework that will allow smart contracts to be upheld and enforced under Arizona law.

Smart contracts, permitted by blockchain technology, allow for dynamic contracts between contracting parties, automating and simulating the logic of contractual terms for more efficient transactions — a key future growth area for development in this field.

According to the bill, " '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."

The decision to include provision for smart contracts has been welcomed by analysts watching over proceedings, as a future-proofing mechanism in ensuring the state laws are likely to remain fit for purpose in the months and years to come.

There is no suggestion that the bill’s approval will be a formality, and it ultimately rests on Ducey’s shoulders whether it passes into law.

However, with robust, almost unanimous support in Arizona’s lower chamber, it seems politically unlikely there will be any disruption to its passage onto the statute books.

The bill follows in the footsteps of similar legislation passed in Vermont in 2016, giving legal effect to information gathered via the blockchain.

It is hoped that this type of legislation, in officially recognizing the legal validity of blockchain data, will contribute toward a more developer-friendly environment for the technology, while providing end users with legal certainty over the transactions, records and contracts managed via blockchain solutions.