Breaking: Smart Contracts (blockchain) legalised in Arizona

On March 29, (2017) Arizona Governor Doug Ducey signed the bill HB 2417 into law1. As covered earlier by IndiaTechLaw on Smart Contracts, this bill seeks to amend the current law and bring legal validity to blockchain signatures.

What are blockchain signatures?

Blockchain is a unique method to publicly maintain one single database of all financial transactions. It is also called the Triple Entry Accounting and Distributed Ledger Technology. This is maintained by collecting digital signatures from the parties during authorisation. The digital signatures create bind financial transactions to their parties.

Digital signatures are undeniable evidence of involvement. You can read more about digital signatures and their legal validity in India.

The digital signatures in the blockchain model are stored permanently in a single dimension, chronological order, and are available for public scrutiny. This creates an undeniable publicly available record of financial affairs. Anyone can monitor these financial records to ascertain ownership of assets.

What are smart contracts?

Smart contracts are technically softwares which software developers write in high-level programming languages, like Solidity, Python and Go. The blockchain protocol is used to store a log of all transactions between smart contracts. Smart contracts are used to facilitate, verify, or enforce the negotiation or performance of an agreement between two or more persons. The automated nature of the smart contracts essentially makes them partially or fully self-executing, self-enforcing, or both.


The new law provides that the digital signatures recorded through the blockchain protocol are valid electronic signatures covered under Arizona law. This accords smart contracts the much required legal recognition to make it legally enforceable. The House and the Senate approved the bill nearly unanimously recognising blockchain-based technology as a form of recognized legal commerce.

Although Arizona has legalised smart contracts, the neighbouring states have not. Both the federal and the state governments of the USA would need to clarify the enforcement practices across different jurisdictions.

Another point of consideration is that the reformation in law would bring in huge participation from the public. The translation of traditional contracts to their bytecode form would create a different relationship between lawyers, their clients, and computer programmers.

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  1. AZ HB2417 | 2017 | Fifty-third Legislature 1st Regular

Author: Donnie Ashok

Donnie Ashok is a software developer who happened to study law! He graduated from Gujarat National Law University in 2017 and currently works as a Full Stack Developer at a medical insurance firm in Berlin, Germany.

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