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Vermont’s New Blockchain Data Authentication Law

During 2016, the Vermont legislature approved the first law in the United States to use the advantages of blockchain technology to verify and authenticate records and information. Under this law, a fact or record verified through a valid application of blockchain technology is presumed to be authentic for purposes of introducing such fact or record as evidence in a legal proceeding.

Background

Before a document or record can be introduced in a U.S. legal proceeding to show the truth of the statements it contains, rules of evidence generally require that the document or record must first be “authenticated.” This means that a party who wishes to introduce a document as evidence must first demonstrate that the document is what it appears to be. So, for example, to introduce an e-mail as evidence, testimony by the sender may be presented to verify that he or she sent the email. This requirement can prove difficult to satisfy at times, e.g. with respect to a business database containing emails from many people.

There are narrow classes of exceptions to this general requirement. One consists of signed documents, such as promissory notes or other original documents. To be introduced in a legal proceeding, these documents would need to be verified or authenticated as original documents. Another class of documents that can be admitted in a legal proceeding consists of certain documents in public records, such as real estate records. These documents are referred to as self-authenticating, because they are maintained by a public institution during the regular course of its activities. A third set of documents consists of documents that are records of a regularly conducted business activity. To introduce these documents, a specific set of rules must be satisfied which include a statement from a person keeping those records that the record to be introduced was made at or near the time of the occurrence of the event (e.g. the date an email was sent) by a person with knowledge of the matters in the record. The recordkeeping must be part of a regularly conducted business activity. A certification of the records needs to be obtained from the person responsible for maintaining the records of the business. Many disputes have occurred regarding satisfaction of these requirements.

Vermont’s Blockchain Data Authentication Law

Vermont law recognizes the unique nature of a blockchain as a secured, chronological, and decentralized consensus ledger. As such, as long as verification can be obtained as to the date and time of recording of information in a blockchain from a qualified person, and if such information is entered as a regular practice, the information qualifies as a self-authenticating record and as a regularly maintained business record for purposes of any legal proceeding governed by Vermont law. This means that information introduced into a blockchain is presumed to be accurate for a number of purposes, including: (i) determining contractual parties, contractual provisions, and the execution of documents; (ii) determining the ownership, assignment, negotiation, and transfer of money; and (iii) participation in the management and governance of any person. This presumption does not apply to the contents of the record itself. In other words, a copy of a document registered in the blockchain could be introduced as evidence in a legal proceeding but the parties in the legal proceeding could still challenge the contents of the document as inaccurate.

Current and Potential Uses

There are many potential uses for blockchain technology in addition to digital currency such as bitcoin. One potential use is to verify other types of financial transactions, such as stock trading. Another is in the area of maintaining public record directories. Still another is in the area of online identity. Each of these and many other uses of blockchain technology are being analyzed and developed.

Real World Use Cases

Several products designed to take advantage of Vermont’s law have been developed by BlockNotary, Inc. Its products include Interview, Timestamp, and Journal. Data records produced through these products can be used as self-authenticating evidence based on Vermont’s law. This solution potentially provides new advantages for businesses such as banks and insurance companies, which are subject to detailed regulatory requirements. The Interview and Timestamp apps are designed to authenticate photos, video, audio files, and metadata, and securely timestamp them. The Journal app combines electronic notarization and blockchain authentication. These apps and others provide new opportunities for “anchoring” data and records among multiple parties and expediting transactions in many industries where transactions need to be verified.

Summary

By allowing blockchain technology to verify the authenticity of documents for purposes of legal proceedings, Vermont law has taken an important step to reflect the advantages of that technology. As more applications of blockchain technology are developed over time, this legal principle could grow significantly in importance.

- by Peter Erly, Gravel & Shea PC

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Company name: Block Notary, Inc.

Company site: https://www.blocknotary.com

Company contacts: Igor Barinov

Email: igor@blocknotary.com


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