SB 5638 — Recognizing the validity of distributed ledger technology.

S-1624.2SUBSTITUTES-0082.3SENATE SENATE BILL 5638State of Washington66th Legislature2019 Regular SessionBySenateSessionBySenators Environment, Energy & Technology (originally sponsored by Senators Brown, Rivers, Becker, and Short)READShortAN FIRST TIME 02/20/19.AN ACT Relating to recognizing the validity of distributed ledger technology;

andamending addingRCW a19.34.010 newand chapter19.34.020; to Title 19 RCW.BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:NEW SECTION.  Sec.

adding a new section to chapter 19.34 RCW;

and creating a new section.BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:Sec.

TheRCW legislature19.34.010 intendsand 1999 c 287 s 1 are each amended to encourageread as follows:This chapter ((shall))must be construed consistently with what is commercially reasonable under the developmentcircumstances and to effectuate the following purposes:(1) To facilitate commerce by means of distributedreliable ledgerelectronic technology.messages;(2) To ensure that electronic signatures are not denied legal recognition solely because they are in electronic form;(3) To provide a voluntary licensing mechanism for digital signature certification authorities by which businesses, consumers, courts, government agencies, and other entities can reasonably be assured as to the integrity, authenticity, and nonrepudiation of a digitally signed electronic communication;(4) To establish procedures governing the use of digital signatures for official public business to provide reasonable assurance of the integrity, authenticity, and nonrepudiation of an electronic communication;(5) To minimize the incidence of forged digital signatures and fraud in electronic commerce;(6) To implement legally the general import of relevant standards;

It((and))(7) furtherTo intendsestablish, forin thiscoordination chapterwith tostates complyand withother 15jurisdictions, U.S.C.uniform rules regarding the authentication and reliability of electronic messages;

Sec.and(8) To encourage the development of distributed ledger technology.Sec.

7002 and here makes specific reference to chapter 96 of Title 15 of the United States Code.NEW SECTION.  Sec.

TheRCW definitions19.34.020 inand this2000 sectionc apply171 throughouts this50 chapterare unlesseach theamended contextto clearlyread requiresas otherwise.(1)follows:((Unless "Blockchain"the meanscontext aclearly cryptographicallyrequires secured,otherwise,))The chronological,definitions andin decentralizedthis consensussection ledgerapply orthroughout consensusthis databasechapter((:))unless maintainedthe viacontext internet,clearly peer-to-peerrequires network,otherwise.(1) or"Accept othera similarcertificate" interaction.(2) "Distributed ledger technology" means anyto distributedmanifest ledgerapproval protocolof and supporting infrastructure, including blockchain, that uses a distributed,certificate, decentralized,while shared,knowing and replicated ledger.(3) "Electronic record" means a record generated, communicated, received, or storedhaving bynotice electronicof meansits forcontents. use in an information system or for transmission from one information system to another.NEW SECTION.  Sec.

Such approval may be manifested by the use of the certificate.(2) "Accept a digital signature" means to verify a digital signature or take an action in reliance on a digital signature.(3) "Asymmetric cryptosystem" means an algorithm or series of algorithms that provide a secure key pair.(4) "Certificate" means a computer-based record that:(a) Identifies the certification authority issuing it;(b) Names or identifies its subscriber;(c) Contains the subscriber's public key;

and(d) Is digitally signed by the certification authority issuing it.(5) "Certification authority" means a person who issues a certificate.(6) "Certification authority disclosure record" means an online, publicly accessible record that concerns a licensed certification authority and is kept by the secretary.(7) "Certification practice statement" means a declaration of the practices that a certification authority employs in issuing certificates.(8) "Certify" means to declare with reference to a certificate, with ample opportunity to reflect, and with a duty to apprise oneself of all material facts.(9) "Confirm" means to ascertain through appropriate inquiry and investigation.(10) "Correspond," with reference to keys, means to belong to the same key pair.(11) "Digital signature" means an electronic signature that is a transformation of a message using an asymmetric cryptosystem such that a person having the initial message and the signer's public key can accurately determine:(a) Whether the transformation was created using the private key that corresponds to the signer's public key;

and(b) Whether the initial message has been altered since the transformation was made.(12) "Electronic" means electrical, digital, magnetic, optical, electromagnetic, or any other form of technology that entails capabilities similar to these technologies.(13) "Electronic record" means a record generated, communicated, received, or stored by electronic means for use in an information system or for transmission from one information system to another.(14) "Electronic signature" means a signature in electronic form attached to or logically associated with an electronic record, including but not limited to a digital signature.(15) "Financial institution" means a national or state-chartered commercial bank or trust company, savings bank, savings association, or credit union authorized to do business in the state of Washington and the deposits of which are federally insured.(16) "Forge a digital signature" means either:(a) To create a digital signature without the authorization of the rightful holder of the private key;

or(b) To create a digital signature verifiable by a certificate listing as subscriber a person who either:(i) Does not exist;

or(ii) Does not hold the private key corresponding to the public key listed in the certificate.(17) "Hold a private key" means to be authorized to utilize a private key.(18) "Incorporate by reference" means to make one message a part of another message by identifying the message to be incorporated and expressing the intention that it be incorporated.(19) "Issue a certificate" means the acts of a certification authority in creating a certificate and notifying the subscriber listed in the certificate of the contents of the certificate.(20) "Key pair" means a private key and its corresponding public key in an asymmetric cryptosystem, keys which have the property that the public key can verify a digital signature that the private key creates.(21) "Licensed certification authority" means a certification authority to whom a license has been issued by the secretary and whose license is in effect.(22) "Message" means a digital representation of information.(23) "Notify" means to communicate a fact to another person in a manner reasonably likely under the circumstances to impart knowledge of the information to the other person.(24) "Official public business" means any legally authorized transaction or communication among state agencies, tribes, and local governments, or between a state agency, tribe, or local government and a private person or entity.(25) "Operative personnel" means one or more natural persons acting as a certification authority or its agent, or in the employment of, or under contract with, a certification authority, and who have:(a) Duties directly involving the issuance of certificates, or creation of private keys;(b) Responsibility for the secure operation of the trustworthy system used by the certification authority or any recognized repository;(c) Direct responsibility, beyond general supervisory authority, for establishing or adopting policies regarding the operation and security of the certification authority;

or(d) Such other responsibilities or duties as the secretary may establish by rule.(26) "Person" means a human being or an organization capable of signing a document, either legally or as a matter of fact.(27) "Private key" means the key of a key pair used to create a digital signature.(28) "Public key" means the key of a key pair used to verify a digital signature.(29) "Publish" means to make information publicly available.(30) "Qualified right to payment" means an award of damages against a licensed certification authority by a court having jurisdiction over the certification authority in a civil action for violation of this chapter.(31) "Recipient" means a person who has received a certificate and a digital signature verifiable with reference to a public key listed in the certificate and is in a position to rely on it.(32) "Recognized repository" means a repository recognized by the secretary under RCW 19.34.400.(33) "Recommended reliance limit" means the monetary amount recommended for reliance on a certificate under RCW 19.34.280(1).(34) "Repository" means a system for storing and retrieving certificates and other information relevant to digital signatures.(35) "Revoke a certificate" means to make a certificate ineffective permanently from a specified time forward.

Revocation is effected by notation or inclusion in a set of revoked certificates, and does not imply that a revoked certificate is destroyed or made illegible.(36) "Rightfully hold a private key" means the authority to utilize a private key:(a) That the holder or the holder's agents have not disclosed to a person in violation of RCW 19.34.240(1);

and(b) That the holder has not obtained through theft, deceit, eavesdropping, or other unlawful means.(37) "Secretary" means the secretary of state.(38) "Subscriber" means a person who:(a) Is the subject listed in a certificate;(b) Applies for or accepts the certificate;

and(c) Holds a private key that corresponds to a public key listed in that certificate.(39) "Suitable guaranty" means either a surety bond executed by a surety authorized by the insurance commissioner to do business in this state, or an irrevocable letter of credit issued by a financial institution authorized to do business in this state, which, in either event, satisfies all of the following requirements:(a) It is issued payable to the secretary for the benefit of persons holding qualified rights of payment against the licensed certification authority named as the principal of the bond or customer of the letter of credit;(b) It is in an amount specified by rule by the secretary under RCW 19.34.030;(c) It states that it is issued for filing under this chapter;(d) It specifies a term of effectiveness extending at least as long as the term of the license to be issued to the certification authority;

and(e) It is in a form prescribed or approved by rule by the secretary.A suitable guaranty may also provide that the total annual liability on the guaranty to all persons making claims based on it may not exceed the face amount of the guaranty.(40) "Suspend a certificate" means to make a certificate ineffective temporarily for a specified time forward.(41) "Time stamp" means either:(a) To append or attach a digitally signed notation indicating at least the date, time, and identity of the person appending or attaching the notation to a message, digital signature, or certificate;

or(b) The notation thus appended or attached.(42) "Transactional certificate" means a valid certificate incorporating by reference one or more digital signatures.(43) "Trustworthy system" means computer hardware and software that:(a) Are reasonably secure from intrusion and misuse;

and(b) Conform with the requirements established by the secretary by rule.(44) "Valid certificate" means a certificate that:(a) A licensed certification authority has issued;(b) The subscriber listed in it has accepted;(c) Has not been revoked or suspended;

and(d) Has not expired.However, a transactional certificate is a valid certificate only in relation to the digital signature incorporated in it by reference.(45) "Verify a digital signature" means, in relation to a given digital signature, message, and public key, to determine accurately that:(a) The digital signature was created by the private key corresponding to the public key;

and(b) The message has not been altered since its digital signature was created.(46) "Blockchain" means a cryptographically secured, chronological, and decentralized consensus ledger or consensus database maintained via internet, peer-to-peer network, or other similar interaction.(47) "Distributed ledger technology" means any distributed ledger protocol and supporting infrastructure, including blockchain, that uses a distributed, decentralized, shared, and replicated ledger.NEW SECTION.  Sec.

AnA new section is added to chapter 19.34 RCW to read as follows:An electronic record or electronic signature may not be denied legal effect, validity, or enforceability solely because it is generated, communicated, received, or stored using distributed ledger technology.NEW SECTION.  Sec.

SectionsThe 1legislature throughintends 3for of this act constituteto acomply newwith chapter15 inU.S.C. Title 19 RCW.--- END ---

Sec.

7002 and here makes specific reference to chapter 96 of Title 15 of the United States Code.--- END ---