Nevada protects Blockchains and Smart Contracts from Government taxes, licenses, and certifications

Nevada Senate Bill 398 was recently signed by the State Governor, and officially passed into law on Monday. The bill establishes various provisions relating to the use of blockchain technology, and makes the Silver State the third in the Union to recognize the immutability of blockchains.  

The new law defines terms related to the use of blockchain technology and prohibits local governments from taxing, licensing and imposing other requirements on its use. Several provisions concern the use of a blockchain in contracts.

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

- Nevada Senate Bill 398

The bill was introduced to the Senate in Carson City on March 20, and sponsored by Republican Senator Ben Kieckhefer. While the legislation has been amended twice, it passed the vote 41 to 0.

Kieckhefer states that the bill will help ensure the State keeps pace with technological advancements, “and provide a legal framework for people using a blockchain to not do so in a legal gray area.”

“Senate Bill 398 is an offshoot of several efforts I worked on in the 2015-2016 Interim to ensure Nevada has an environment welcoming and inclusive of startups,” the State Senator from District 16 adds. “Entrepreneurs have been working on a package of legislation to ensure that, instead of just incentivizing large companies to relocate to the State, we have policies incentivizing them and smaller companies to start and grow here.”

- Senator Ben Kieckhefer

The bill defines a blockchain as “an electronic record created by the use of a decentralized method by multiple parties to verify and store a digital record of transactions which is secured by the use of a cryptographic hash of previous transaction information.”

Smart contracts are also defined as an electronic record, verified by the use of a blockchain: “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.”

Existing law gives legal recognition to electronic records. The term now includes, without limitation, a blockchain. The definition also provides the use of a blockchain with various protections from local governments.

The bill further clarifies that: “A local governmental entity shall not: (a) Impose any tax or fee on the use of a blockchain or smart contract by any person or entity; (b) Require any person or entity to obtain from the local governmental entity any certificate, license or permit to use a blockchain or smart contract; or (c) Impose any other requirement relating to the use of a blockchain or smart contract by any person or entity.”

Electronic signatures stored on a blockchain are specifically protected. “If a law requires a signature, submission of a blockchain which electronically contains the signature or verifies the intent of a person to provide the signature satisfies the law,” the bill decrees.

- Nevada Senate Bill 398, Sec. 13

Two other US states have recognized blockchains as an appropriate data store, and at least seven US States have legislation relating to blockchains. The most similar bill is from nearby Arizona, which passed House Bill 2417 into law at the end of March.

Arizona’s law defines blockchain technology and encourages it for public use, declaring that all data tied to a blockchain is "considered to be in an electronic format and to be an electronic record," which is acceptable for use by the state. It stops short of mentioning any restrictions on taxes or licensing, however.

The definition for a blockchain is quite different, however. "’Blockchain technology’ means 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," it reads. "The data on the ledger is protected with cryptography, is immutable and auditable and provides an uncensored truth.”

While Hawaii, Maine, and the US Congress all have pending legislation for various other blockchain programs and investigative initiatives, Vermont is the only other state to declare blockchain data appropriate for legal use in 2017.