‘Unworkable’ bill to ban blockchain immutability is introduced in Illinois

A recently introduced bill by the Illinois State Senate has been ridiculed by the crypto community for its “impossible” plans to force blockchain miners and validators to do “impossible things” — like reverse transactions if ordered by a state court.

Senate bill was silent introduced to the Illinois Legislature on February 9 by Illinois Senator Robert Peters, but it appears only recently noticed Florida lawyer Drew Hinks, who discussed the bill in a February 19 Twitter post.

The bill, called the “Digital Property Protection and Law Enforcement Act,” empowers the courts—upon a valid request from the Attorney General or State Attorney under the laws of the State of Illinois—to dispose of a blockchain transaction that is executed through a smart contract that is subject to modification or termination.

The law will apply to any “blockchain network that processes a blockchain transaction occurring in the state.”

Senator Robert Peter’s bill to ban blockchain immutability. Source: Illinois General Assembly.

Hincks called the bill “the most dysfunctional state law” related to blockchain and cryptocurrency that he has ever seen.

“This is a stunning reversal for a state that has previously been a proponent of innovation. Instead, we are now getting what is arguably the most unworkable state law related to #crypto and #blockchain that I have ever seen,” he said.

The bill states that any blockchain miners and validators could be fined between $5,000 and $10,000 for each day they fail to comply with a court order.

Recognizing the need to implement bills to strengthen consumer protections, Hinckes said it would be “impossible” for miners and validators to comply with the bill proposed by Senator Peters.

Hinckes was also shocked to see that there would be no “protection” for miners or validators operating on the blockchain network who “have not adopted reasonable available procedures” to comply with court orders.

The bill also appears to require “any person using a smart contract to deliver goods and services” to include code in a smart contract that can be used to enforce court orders.

“Any person using a smart contract to deliver goods or services in this state must include smart contract code capable of enforcing smart contract court orders.”

Other members of the cryptocurrency community reacted with similar ridicule over the bill proposed by Peters.

Cryptocurrency analyst “foobar” told his 120,800 Twitter followers on Feb. 19 that the court ordered transactions to be modified in some way “without the need for the private key” of the participants, which he considers “fun.”

Gabriel Shapiro, lawyer and general counsel at investment firm Delphi Labs, explained very briefly to his 34,100 Twitter followers on Feb. 19 that the bill would essentially attempt to ban blockchain immutability:

Meanwhile, Carla Reyes, assistant professor of law at Southern Methodist University, in a February 19 tweet: declared that legislators should only introduce bills if they understand how the technology works.

While immutability is a common property of blockchains and distributed ledgers, the Peters-sponsored bill explains that such networks lack an enforcement mechanism that can be used by courts:

“As a result, the costs of securing legal rights to digital property are often prohibitive so that ownership cannot be verified and the vast majority of blockchain-related crimes go unpunished.”

The bill notes that fraud and error will be the two most commonly used cases where Illinois courts can order a blockchain transaction to the victim or the original sender.

The bill also wants to help users recover their assets if they lose their private keys.

What is blockchain technology? How it works?

Although the bill was only introduced on Feb. 9, it will need to be “read” and voted on in three separate committee hearings before it goes to Illinois Gov. Jay Pritzker to formally sign the bill.

The first reading took place on the same day that Peters presented it to the Illinois General Assembly.

If it is ever passed, the content of the bill will take effect 30 days after it becomes law.

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