Category: Blog Row 2 (Member Viewpoints)

Technological Innovation and Economic Growth – A Legislative Toolkit for State Legislators

by Chamber

Technological Innovation and Economic Growth – A Legislative Toolkit for State Legislators

Technological Innovation and Economic Growth – A Legislative Toolkit for State Legislators

The year 2018 saw legislators in many states introduce legislation relating to blockchain, smart contracts, and distributed ledgertechnologies (DLT) in an effort to promote their use and encourage businesses related to these technologies to locate in their state.  This is an important development – policy makers at high levels of government are recognizing the potential of this technology and sorting out ways to promote it.  Some efforts, such as legislation coming from Wyoming, were quite progressive.  Others were very well-intentioned, but could have benefitted from additional guidance from the industry.

We have prepared this Toolkit as a resource for state legislators as they explore ways to encourage these industries to grow and bring economic benefits to states. In it, we explain the importance of blockchain and DLT and the economic and social benefits they provide; give an overview of legislative developments; explain legislative principles and options available to legislators; explore how blockchain technology can be used in various industries; provide an overview of smart contracts; and make available additional technical resources in our appendix and glossary.

Blockchain and DLT offer immense possibilities for business, government, and consumers.  These include the opportunity to spur economic growth and optimize cost efficiencies. It’s no wonder that policymakers are starting to realize the importance of blockchain technology, the commercial potential it brings, and the need to support its responsible growth.

Countries around the world are taking this opportunity to pass legislation and develop regulatory frameworks to encourage blockchain companies to relocate to their jurisdictions. 

While the United States has grown accustomed to technological progress, it does not automatically follow that America will maintain its preeminence in the blockchain sector. The United States needs to foster the same interest and energy it had for the development of the Internet and harness it for blockchain to ensure that it remains a leader in technological advancement.

This Toolkit serves as a resource to those policymakers who seek to encourage growth of the blockchain industry to ensure state economies and consumers can benefit from this transformative opportunity.  Thus, the principles and proposals offered in this Toolkit will assist legislators in fostering U.S. competitiveness through a balance of light-touch regulation and proactive laws enabling use of this important technology.

Big News for Blockchain Policy: U.S. Congressmen Support Blockchain Innovation & Regulatory Clarity

by Chamber

Big News for Blockchain Policy:
U.S. Congressmen Support Blockchain Innovation & Regulatory Clarity

October 3, 2018

Big News for Blockchain Policy: U.S. Congressmen Support Blockchain Innovation & Regulatory Clarity

By Chamber of Digital Commerce

Last week garnered unprecedented support for blockchain technology in the U.S. Congress, with significant progress in growing the Blockchain Caucus leadership and in taking steps to clarify the laws impacting use of the technology. Specifically, two resolutions were introduced to foster broad support for light touch regulation of blockchain and digital currency activity. Three bills were proposed to help alleviate uncertainty surrounding application of certain tax treatment, exclusions from money transmitter registration and licensing, and clarification around smart contracts.  Finally, 15 Members of Congress wrote to SEC Chairman Jay Clayton requesting further clarification on the treatment of digital tokens under securities laws.

These Congressional efforts (below) demonstrate that education and advocacy is creating true blockchain champions in government and is broadening the understanding and determination of more Members of Congress to promote real policy solutions for our industry. But, more needs to be done. We continue to advocate in Washington, DC and beyond to ensure that this momentum translates into the implementation of blockchain-friendly policies for industry.

The Latest Blockchain Developments from Capitol Hill:

 

    • The leadership of the Congressional Blockchain Caucus is growing. Bill Foster (D-IL) and Rep. Tom Emmer (R-MN) have joined Rep. David Schweikert (R-AZ) and Rep. Jared Polis (D-CO) as co-chairs of the Caucus.  We look forward to more visionary support from these leaders in the coming months.
      • Tom Emmer introduced three pieces of legislation: (1) H. Res. 1102, a resolution that supports blockchain and digital currencies; (2) H.R. 6974, a bill clarifying that certain non-controlling service providers are exempt from federal money transmitter licensing and registration requirements; and (3) H.R. 6973, a bill protecting taxpayers who have received forked convertible virtual currency from IRS penalties until the IRS can provide clearer guidance on these types of gains. Congressman Emmer is clearly making strides in his new role as a co-chair of the Congressional Blockchain Caucus. In case you missed it, he gave an inspiring speech calling for a light touch to regulation at our DC Blockchain Summit earlier this year.
        • David Schweikert introduced two pieces of legislation. H. Res. 1108, a resolution recognizing blockchain as a technology with “incredible potential that must be nurtured through support for research and development, and a thoughtful and innovation-friendly regulatory approach.” It summarizes the potential promise of blockchain to government, businesses, and consumers and outlines the industries and areas that stand to benefit from it, including education, identity, and cybersecurity. H.R. 7002 seeks to amend the E-SIGN Act to confirm the applicability of blockchain and smart contracts within laws governing electronic records and signatures. It pursues remedying the problem of a developing patchwork of state legislation addressing the use of blockchain and smart contract technology in electronic signatures and records. We have been vocal on this issue for quite some time. (Our most recent white paper, “Smart Contracts: Is the Law Ready?,” discusses our position in greater detail and was also published last week.) Congressman Schweikert has been a steadfast leader in Congress on these issues (watch him talk about the amazing potential of blockchain technology at our DC Blockchain Summit!), and we look forward to further collaboration to support industry-related topics.
          • Over the past year, the Congressional Blockchain Caucus convened a series of the roundtables with industry leaders covering: (1) digital identity; (2) payments; and (3) supply chain. The series resulted in a reportentitled, “Understanding Blockchain’s Promise for Government,” published in consultation with the Caucus outlining the findings made during the roundtables.
            • Ted Budd (R-NC), along with 14 other members of Congress, sent a letter to SEC Chairman Clayton asking for more regulatory clarity for the token industry. The letter requests that the SEC elaborate on the criteria used to determine when offers and sales of digital tokens should properly be considered “investment contracts,” and to confirm that digital tokens originally sold as investment contracts can become non-securities. The letter also requests confirmation regarding statements made in SEC Director of Corporation Finance Bill Hinman’s June 2018 speech “When Howey Met Gary (Plastic)” (and expresses appreciation for statements made by SEC Commissioner Hester Peirce in her speech Motherhood and Humble Pie). Finally, the letter seeks more information about the various tools the SEC has to provide further guidance to innovators.
              • Warren Davidson (R-OH) hosted a forum on the regulation of digital currencies and initial coin offerings (ICOs). During the event, he discussed the legislation that he has been developing, which may include preemption provisions for state licensing requirements for entities such as token trading platforms. During the forum, Paul Atkins, former SEC Commissioner, CEO of Patomak Global Partners, and Co-Chair of the Chamber’s Token Alliance, while discussing the state licensing preemption provisions said, “[w]e have 50 states here, and those states have many different people who have interests in securities markets.”

Diving Into Smart Contracts

by Chamber

Diving into Smart Contracts

Can Smart Contracts Be Used to Develop & Negotiate Legal Contracts? Will They Hold Up in Court?
The Chamber’s Smart Contracts Alliance Releases Legal Examination into the Technology

By Amy Kim & Paul Brigner

Smart contract technology has the promise to transform the way in which we interact in innumerable ways. The ability to facilitate actions based on pre-programmed delivery terms and established price parameters offers significant economic potential due to their frictionless nature – both for personnel, time and, ultimately, money.  A seemingly limitless number of transactions can take place through smart contracts.  This concept is what motivates much of the excitement surrounding blockchain technology.

Despite their name, smart contracts may not be legal contracts; rather, they are computer code that can be used to create “smart legal contracts.”  Smart contract use cases span a variety of industries and could lead to significant economic efficiencies by eliminating the intermediaries required for many transaction types and can enable multiple automated functions.

In 2016, the Chamber of Digital Commerce launched the Smart Contracts Alliance, bringing together thought leaders and innovators from across the technology, legal and financial services industries to help educate and shape policy for smart contracts moving forward.  The Smart Contracts Alliance published its first white paper, “Smart Contracts: 12 Use Case Cases for Business & Beyond,” describing the potential applications of smart contract technology across various industries to convey the importance of this technology.

Now, under the leadership of co-chairs Mark Smith of Symbiont, Ronald Smith of Norton Rose Fulbright, and Jordan Earls of QTUM, the Smart Contracts Alliance is introducing its second comprehensive white paper, “SMART CONTRACTS: Is the Law Ready?”

The white paper breaks important ground analyzing the enforceability of laws governing smart contracts, including those governing electronic signatures and records. This paper assesses several legal regimes to answer the question of enforceability, to better understand whether smart contracts can in fact be used in legal contracts, and if so, whether they hold up in a court of law. The Chamber presents the white paper as a resource to industry, government, and the public. The Smart Contracts Alliance – which takes the position that existing laws provide an unquestionable legal basis for smart contract technology executing the terms of a legal contract – will continue to expand its knowledge on issues relating to smart contracts and, in so doing, and promote the adoption of smart contracts through education and advocacy efforts.

The Smart Contracts Alliance co-chairs conclude the white paper’s Foreword by saying:

This white paper explains that, under legislation of some jurisdictions, smart contracts are likely to be regarded as “electronic agents,” with enabling consequences in terms of legal or contractual effect. Where might we see the deployment of electronic agents? Artificial Intelligence (AI) is, at the moment, probably the most talked about developing technology. Put AI machine learning in combination with electronic agents such as smart contracts and you have functionality that can autonomously decide and then automatically perform, without the need for human intervention. Realizing business efficiencies, transforming business processes, enabling peer-to-peer interactions, and de-risking aspects of established commercial transactions — the potential of smart contracts is enormous…

The white paper offers a universal lexicon and a deep dive in Chapter One into when smart contracts can constitute legally binding contracts, including what are the required elements in both common law and civil code; their various models and associated nuances; applicable law; governance, enforcement mechanisms, and scope of liability. The paper concludes in Chapter Two that smart contracts may act as legally binding electronic agents under U.S. e-commerce legislation (ESIGN and UETA) using electronic records and signatures. Finally, the paper analyzes in Chapter Three the potential use of smart contracts in securitization procedures, security interests and their perfection under the UCC; various categories of blockchain-based assets for UCC purposes; and the issues associated with the use of wallets through an intermediary.

The paper was written by leading legal and smart contracts experts, including: Miren Aparicio Bijuesca of The World Bank; Joshua Boehm of Perkins Coie; Jenny Cieplak of Crowell & Moring; Fred Fedynyshyn of Perkins Coie; Patricia Fry of University of Missouri-Columbia School of Law; Phillip H. Griffin of Wells Fargo; Dax Hansen of Perkins Coie; Sean Murphy of Norton Rose Fulbright; Mark Radcliffe of DLA Piper; Margo Tank of DLA Piper; and David Whitaker of DLA Piper. A special thank you to those who dedicated their time to pull the paper together.

The Smart Contracts Alliance white paper, as viewed through a legal lens by renowned thought leaders in the blockchain ecosystem, is an essential step toward increasing the adoption of this transformative technology.

Is the law ready? Is enterprise ready? Are you ready?

Dive in.

A Blockchain Innovators Guide to IP Policy

by Chamber

A Blockchain Innovators Guide to IP Policy

Blockchain technology is beginning to experience more intellectual property questions as adoption continues to grow. The Chamber’s Blockchain Intellectual Property Council, strives to assist companies in navigating intellectual property decision making. For developers in the space looking for background on the subject, the Blockchain Intellectual Property Council’s first white paper “A Blockchain Innovator’s Guide to IP Strategy, Protecting Innovation & Avoiding Infringement” provides high-level guidance for those business decisions surrounding IP.


Read the full white paper and learn more: “A Blockchain Innovator’s Guide to IP Strategy, Protecting Innovation & Avoiding Infringement”