Illinois recognises blockchain smart contracts as admissible in court

The US state of Illinois has officially passed the ‘Blockchain Technology Act’, which makes smart contracts and blockchain-based electronic records admissible in court.

As one of the biggest strides towards blockchain adoption in recent US legal history, Illinois officially passed the legislation at the beginning of January.

The new act defines smart contracts as “a contract stored as an electronic record which is verified by the use of a blockchain”.

Smart contracts have the potential to disintermediate legal processes, which may reduce reliance on lawyers and solicitors – both of which incur hefty legal fees and may take a long time to process legal contracts.

Instead, it is hoped that smart contracts will soon reach a level of sophistication which allows them to be easily written and coded by lay people or administrative officials.

The bill, proposed by Representative Keith Wheeler, states that smart contracts are legally binding due to their immutable blockchain-based nature.

Describing the legal precedent for smart contracts, the bill reads:

“A smart contract, record, or signature may not be denied legal effect or enforceability solely because a blockchain was used to create, store, or verify the smart contract, record, or signature.”

Additionally, the new act suggests that blockchain-based smart contracts or records may entirely replace written contracts in some contexts, stating:

“If a law requires a record to be in writing, submission of a blockchain which electronically contains the record satisfies the law.”

Use of blockchain-based contracts in Illinois is now officially protected by law, with the act stating that the local government may not impose any tax or fee for using a blockchain contract in a legal context, nor do individuals have to seek permission prior to submitting a blockchain contract.

The act is one of the biggest endorsements of blockchain technology by an official US state administration to date.

Blockchain limitations

The new act also details several scenarios where a blockchain is not suitable as a replacement for written confirmation.

These include public utility cancellation notices, the repossession of property or vehicles, termination of health insurance, or product recalls.

The US state of Colorado has also been historically pro-blockchain, passing the Colorado Digital Token Act last January which allowed cryptocurrencies to bypass securities laws.

Illinois is the birthplace and childhood home of Kelly Loeffler, a recently appointed US senator and ex-CEO of the Bakkt Bitcoin futures platform.

You can read more about smart contracts here.