The Iowa House of Representatives has passed a bill this week which seeks to legally recognize transactions made and executed via smart contracts.
The bill, which was approved by the Senate earlier in March, will give smart contracts the same legal status as regular contracts. It would also be a step forward in distributed-ledger technology being viewed as a reliable electronic store of record in the United States, analysts have noted.
“The bill provides that a contract shall not be denied legal effect or enforceability solely because the contract is a smart contract or contains a smart contract provision,” the recently passed bill, bill SF541, reads.
It adds that any new registration of rights/ownership would not be invalidated by it being broadcast on a blockchain network – unless the transaction was specifically related to a transfer of rights
“A person who, in engaging in or affecting interstate or foreign commerce, uses distributed ledger technology to secure information that the person owns or has the right to use retains the same rights of ownership or use with respect to such information as before the person secured the information using distributed ledger technology unless in connection with a transaction with terms that expressly provide for the transfer of rights of ownership or use with respect to such information,” the bill adds.
The bill was approved by the House on Monday, with representatives voting 94-0 in its favor. Earlier this month, the bill was passed by the Senate with unanimous support.
Democratic Representative Steve Hansen has suggested that the implementation of this bill is likely to lead to broader regulation of cryptocurrency throughout the US.
Meanwhile, Republican Representative Jeff Shipley said the piece of legislation is more about laying down definitions, not regulations, for the time being. He added that he believes Bitcoin will also fall under the scope of these definitions eventually.
What Are Smart Contracts?
Smart contracts are essentially a type of self-executing contract that is hosted on the blockchain network. They have a multitude of different uses, which are further broadened by the use of oracles which can allow these contracts to incorporate and make use of data that is external to the blockchain.
There are a number of platforms and toolkits, such as ZAP, which have been launched in recent years to allow developers to create decentralized apps (Dapps) and smart contracts for various industries.
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