Senate File 137 - Introduced SENATE FILE 137 BY LOFGREN A BILL FOR An Act relating to electronic transactions by permitting the 1 use of distributed ledger technology and smart contracts. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 1059XS (3) 88 gh/rn

S.F. 137 Section 1. Section 554D.103, Code 2019, is amended by adding 1 the following new subsections: 2 NEW SUBSECTION . 4A. “Distributed ledger technology” means 3 an electronic record of transactions or other data to which all 4 of the following apply: 5 a. The electronic record is uniformly ordered. 6 b. The electronic record is redundantly maintained or 7 processed by one or more computers or machines to guarantee the 8 consistency or nonrepudiation of the recorded transactions or 9 other data. 10 c. The electronic record is validated by the use of 11 cryptography. 12 NEW SUBSECTION . 14A. “Smart contract” means an event-driven 13 program or computerized transaction protocol that runs on a 14 distributed, decentralized, shared, and replicated ledger that 15 executes the terms of a contract by taking custody over and 16 instructing transfer of assets on the ledger. 17 Sec. 2. Section 554D.103, subsections 4, 7, and 8, Code 18 2019, are amended to read as follows: 19 4. “Contract” means the total legal obligation resulting 20 from the parties’ agreement as affected by this chapter and 21 other applicable law. “Contract” includes any contract secured 22 through distributed ledger technology and a smart contract as 23 defined in subsection 14A. 24 7. “Electronic record” means a record created, generated, 25 sent, communicated, received, or stored by electronic means. 26 “Electronic record” includes any record secured through 27 distributed ledger technology. 28 8. “Electronic signature” means an electronic sound, symbol, 29 or process attached to or logically associated with a record 30 and executed or adopted by a person with the intent to sign the 31 record. “Electronic signature” includes a signature that is 32 secured through distributed ledger technology. 33 Sec. 3. NEW SECTION . 554D.106A Use of distributed ledger 34 technology. 35 -1- LSB 1059XS (3) 88 gh/rn 1/ 3

S.F. 137 A person who, in engaging in or affecting interstate or 1 foreign commerce, uses distributed ledger technology to secure 2 information that the person owns or has the right to use 3 retains the same rights of ownership or use with respect to 4 such information as before the person secured the information 5 using distributed ledger technology. This section does not 6 apply to the use of distributed ledger technology to secure 7 information in connection with a transaction to the extent that 8 the terms of the transaction expressly provide for the transfer 9 of rights of ownership or use with respect to such information. 10 Sec. 4. Section 554D.108, subsection 2, Code 2019, is 11 amended to read as follows: 12 2. A contract shall not be denied legal effect or 13 enforceability solely because an electronic record was used in 14 its formation or because the contract is a smart contract or 15 contains a smart contract provision . 16 EXPLANATION 17 The inclusion of this explanation does not constitute agreement with 18 the explanation’s substance by the members of the general assembly. 19 Code chapter 554D, the uniform electronic transactions Act, 20 facilitates the use of electronic transactions in commerce by 21 giving legal recognition to electronic records, signatures, and 22 contracts. This bill modifies the Code chapter by permitting 23 the use of distributed ledger technology and smart contracts in 24 electronic transactions. 25 The bill defines “distributed ledger technology” as an 26 electronic record of transactions or other data that is 27 uniformly ordered, redundantly maintained or processed by one 28 or more computers or machines to guarantee the consistency or 29 nonrepudiation of the recorded transactions or other data, and 30 is validated by the use of cryptography. The bill defines 31 “smart contract” as an event-driven program or computerized 32 transaction protocol that runs on a distributed, decentralized, 33 shared, and replicated ledger that executes the terms of a 34 contract by taking custody over and instructing transfer of 35 -2- LSB 1059XS (3) 88 gh/rn 2/ 3

S.F. 137 assets on the ledger. 1 The bill adds contracts secured through distributed ledger 2 technology and smart contracts to the definition of “contract”. 3 The bill adds records secured through distributed ledger 4 technology to the definition of “electronic record”. The bill 5 adds signatures that are secured through distributed ledger 6 technology to the definition of “electronic signature”. 7 The bill provides that a person who, in engaging in or 8 affecting interstate or foreign commerce, uses distributed 9 ledger technology to secure information that the person owns 10 or has the right to use retains the same rights of ownership 11 or use with respect to such information as before the person 12 secured the information using distributed ledger technology, 13 unless in connection with a transaction with terms that 14 expressly provide for the transfer of rights of ownership or 15 use with respect to such information. 16 The bill provides that a contract shall not be denied legal 17 effect or enforceability solely because the contract is a smart 18 contract or contains a smart contract provision. 19 -3- LSB 1059XS (3) 88 gh/rn 3/ 3