Washington State Bill Supporting Blockchain Industry is Now Law
Note: This article was originally published in April 2019 at Coinlaw.io
Washington’s Blockchain Bill is now state law. Governor Jay Inslee officially signed Substitute Senate Bill 5638 (SB 5638) into law on April 26th enshrining the act “recognizing the validity of distributed ledger technology” into state law. Blockchain innovators in Washington State are excited at the bill’s passage, believing that it will help to kickstart innovation in fintech.
SB 5638 was introduced on January 25th 2019 by State Senator Sharon Brown and would revise the “Washington Electronic Authentication Act” by adding legal definitions for “blockchain” and “distributed ledger technology”. The law provides clarification on the legality of storing records using distributed ledger technology and eases the regulatory environment in Washington State. This gives records created and stored using distributed ledger technologies the same standing as other electronic records. SB 5638 also clears the path for smart contracts and other distributed ledger technology communications to be considered in the same manner as other electronic records under state law. Distributed ledger technology is already enjoying widespread success in fields such as produce supply chain, cattle, and real estate transactions.
Washington State has previously been characterized as having a “bad rep on blockchain and cryptocurrency,” and companies such as Shapeshift left Washington State in the fall of 2017 going so far as to call state regulators “unethical, wasteful, and reckless” after the passage of Senate Bill 5031. SB 5031 was interpreted by regulators to classify many blockchain businesses as money transmitters just like the Western Union’s of the world and would have meant massive licensing fees would be levied on these same businesses. In addition, it would have required companies such as Shapeshift to remove customer information from their blockchain and centralize it in a database, defeating the purpose of having a distributed database format and destroying the purpose behind blockchain businesses.
The passage of SB5638 to fix this clouded regulatory environment enjoyed near-unanimous bipartisan support thanks to its focus on encouraging the development of distributed ledger technology, and successfully managing digital records. Passage of the bill ensures that electronic records won’t be denied legal effect due to being stored or generated through distributed ledger technologies like blockchain.
The bill’s sponsor State Senator Sharon Brown (R-Kennewick) noted the importance of the bill in keeping blockchain innovators in Washington saying “We develop this technology here and we want to keep these companies here. This bill will ensure that Washington state will continue to be a leader in distributed ledger technology,”
Seattle based Blockchain technologist Brandon Kite, another of the bill’s supporters called the bill a triumph saying that ”The largely unanimous passage of SB 5638 demonstrates Washington states’ proactive approach to ensuring socially responsible technology advancement. While other regulatory environments tend to polarize towards the extremes of either a total ban or laissez-faire, Washington state is a champion of striking a smart balance between consumer protections and technology enablement.”
It's important to note that this bill was championed by the Cascadia Blockchain Council - part of the Washington Technology Industry Association. With members such as Council Chair Arry Yu (Former COO of Storm), John deVadoss (head of development at NEO), and Lawrence Lerner (CEO of Pithia, the former investment arm for RChain Coop), as well as widespread support in the legislature for this year’s blockchain bill, many are expecting additional blockchain legislation to be coming soon. Such legislation could further define and fine tune the Washington State regulatory environment. Due to the adjournment Sunday April 28th of Washington State’s 2019 legislative session, this new legislation is widely expected to be forthcoming in the 2020 legislative session.
Signing of SB 5638 with Governor Jay Inslee et. al
