A Doing Crypto Index study
showed that the main political and regulatory actors regard distributed ledger technology as a helpful innovation. Regulators note that the reliability, decentralization and transparency of blockchain can increase the efficiency of information exchange in many areas of public administration, economy and social sphere.
Some countries are already implementing blockchain projects. For example, the Australian government
has allocated about half a million dollars to explore the possibilities of the technology. There are similar blockchain research projects in the UK, Singapore and Japan. In Brazil, Italy, Canada, China, Singapore, Estonia and other countries, DLT is being introduced in taxation, licensing, cinema, international trade, interbank transfers, construction, education, transport and healthcare.
Even those who are skeptical about cryptocurrencies are often positive about blockchain technology itself. In this regard, the words of Ravi Menon
, managing director of the Monetary Authority of Singapore, are illustrative: at the beginning of 2018 he commented on the growing interest in Bitcoin, saying he hoped when the euphoria was over and things collapsed, deeper and more significant technology connected with digital currencies and blockchain would not be undermined.
However, DLT requires not only a favorable policy environment, but also adequate legislative regulation to make the process of blockchain implementation simple and understandable. Below we will see how blockchain is regulated in Italy, the United States and Belarus. Italy
Italy was one of the first European countries to introduce special blockchain regulations. In February 2019, the Senate adopted amendments
to Senate Act No. 989 that legally define smart contracts and DLT. The documents obtained through blockchain have the same legal effect as notarized documents. Amendments 8.0.3. to Senate Act No. 989
provide the following DLT definition: "They are technologies and protocols that use the distributed, decentralized, replicated and real-time ledger to register, verify, update and store data, whether they are encrypted or not, which cannot be changed or forged."
According to the amendments, a smart contract is "a computer program based on distributed ledger technology, the implementation of which is legally binding for two or more parties with reference to the consequences previously agreed by the parties."
According to Amendments 8.0.3. to Senate Act No. 989 , smart contracts have a legal status. Electronic documents obtained through blockchain have the legal force as having an electronic seal in accordance with article 41 of EU Regulation No. 910/2014
and can therefore be used as evidence in legal proceedings. The United States
In the United States, individual states — Arizona, Tennessee and Nevada — have introduced special legislation on distributed ledger technology. It includes similar definitions of blockchain and smart contracts and regulates the use of technology by commercial companies and government agencies.
For example, Arizona House Bill 2417
defines blockchain as "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."
The smart contract is "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 law equates the status of blockchain signatures with that of "electronic signatures", and the status of blockchain records and agreements with that of "electronic records". It also legitimizes smart contracts, including in commercial relationships. Furthermore, according to Arizona House Bill 2417 , a person retains the same rights of ownership or use with respect to that information as before the person secured the information using blockchain technology. Tennessee Senate Bill 1662
provides a definition of the technology that is similar to the one quoted above. It lends the same status of a signature and record to smart contracts and identifies the right of ownership to information. However, the definition of the smart contract is expanded compared with that in the Arizona bill:
"Smart contract" means an event-driven computer program, that executes on an electronic, distributed, decentralized, shared, and replicated ledger that is used to automate transactions, including, but not limited to, transactions that:
Nevada Senate Bill No. 162
- take custody over and instruct transfer of assets on that ledger;
- create and distribute electronic assets;
- synchronize information; or
- manage identity and user access to software applications.
provides the following definition of blockchain technology:
"Blockchain means an electronic record of transactions or other data which is:
- uniformly ordered;
- processed using a decentralized method by which one or more computers or machines verify the recorded transactions or other data;
- redundantly maintained or processed by one or more computers or machines to guarantee the consistency or nonrepudiation of the recorded transactions or other data; and
- validated by the use of cryptography."
Senate Bill No. 162 also introduces the notion "public blockchain", which is blockchain, in which records can be viewed from any computer. The bill also regulates electronic document management by requiring government agencies to accept electronic documents, including those certified with the help of blockchain technology. The law allows businesses to store internal blockchain records.
A similar bill is currently under consideration
in the Connecticut General Assembly. The state of Ohio is reviewing Ohio House Bill 220
that allows government agencies to use blockchain technology to exercise their powers. Belarus
Belarus is the first country in the world to introduce regulation of smart contracts at the legislative level. Decree No. 8 "On the Development of the Digital Economy"
signed by the President of Belarus in December 2017 ensured comprehensive regulation of activities related to cryptocurrencies and blockchain.
The Decree provides the following definitions:
"The Ledger of Transactions Blocks (Blockchain) is a sequence of blocks with information about transactions made in a distributed decentralized information system that uses cryptographic methods of information protection.
The Smart Contract is a program code designed for the operation in the ledger of transaction blocks (blockchain), or other distributed information systems for the purpose of automated execution and/or settlement of transactions or making other legally significant actions."
Residents of the High Technologies Park (regulatory sandbox for IT companies) are entitled to "perform the execution and/or settlement of transactions through a smart contract. The person that has settled a transaction using a smart contract shall be considered to have been duly informed about its terms, including those expressed by the program code, until proven otherwise.
Therefore, a smart contract is a technology, not a transaction, although its parameters are determined by the terms and conditions of a transaction. According to the Decree, the non-compliance of parameters of a smart contract with the terms and conditions of a transaction shall be interpreted in favor of the terms and conditions of the transaction, but the person that refers to it needs to prove that this non-compliance was unknown to them. Prospects of regulatory development
Some legislators are currently discussing the possibility of making special regulation of blockchain. For example, Law Commission
and Law Tech Delivery Panel
in the United Kingdom are analyzing ways to regulate smart contracts. The South Korean Ministry of Science and ICT has organized a study group
to explore ways to improve the blockchain law: protection of personal data, smart contracts, electronic documents and digital signatures. Seven European countries have signed the Ministerial Declaration on Distributed Ledger Technologies
, which envisages the possibility of creating flexible and specific legislation to regulate the technology. The Swiss Federal Council
has initiated a discussion on legislative changes to regulate DLT.
At the same time, many countries either remain silent about the special regulation of distributed ledger technology or, like Thailand,
regulate associated legal relationships by analogy with acts already in place.
Therefore, countries approach to blockchain regulation in various ways: there is a trend to refuse to introduce special technology regulation and attempts, including those quite successful, to create special legislation. The cases of already existing regulatory frameworks in Italy and the United States, as well as some legislative initiatives in Europe and South Korea show that special DLT regulation will be gravitating towards the following:
- Definition of blockchain or DLT in the legislation;
- Legalization of the status of obligations arising from smart contracts;
- Determination of the legal validity of documents obtained through blockchain;
- Regulation of blockchain-based documents (e.g., provisions obliging public authorities to accept such documents in the electronic format).