Smart Contracts, Dumb Signatures: Why Blockchain-based signatures may not be legal in your jurisdiction
This is not legal advice, please seek professional guidance from an attorney.
Smart Contracts offer a lot of promise, yet are completely useless in a business environment if they are not legally recognized. Over the course of our legal review and audit, some things have come to light, mainly that non-accredited digital signatures are not legally recognized in certain countries.
We have devised a legally compliant digital signature system for North America, United Kingdom, Australia, New Zealand, and the E.U. Since many shipping documents deal with the title to cargo, a digital signature is required as it is considered the same as a handwritten signature. Using the new system, transactions are held until both parties have signed, then the transaction is broadcasted to the network.
There are also other regulations governing electronic contracts and agreements, which we have or are implementing solutions for.
Electronic Signature vs. Digital Signatures
Electronic signature: An electronic symbol or process attached to an agreement and executed or accepted by a person with the intent to sign the agreement or record. Examples include clicking an Accept button online, signing on a touch pad to approve a credit card purchase or typing one’s name on a signature line. Think of products like DocuSign or HelloSign.
Digital signature: An electronic signature that uses an encrypted digital certificate to authenticate the identity of the signer. Digital signatures are sometimes referred to as advanced electronic signatures, qualified electronic signatures or other terms in jurisdictions outside the United States. We also include a KYC process to further validate the person, depending on their organizational affiliation. For example, if they work for a company that already uses our platform, their onboarding processes is reduced.
Electronic Signature consent and other regulatory requirements
Consent: Agreements contain a provision stating that all parties agree that signing may be done electronically.
Opt-out option: Any parties to the document that desire to sign it using a handwritten signature must be given the option to do so. We are integrating Twillio for faxing.
Retention: All electronically signed agreements are retained in accordance with the organization’s usual document retention policies or government policies for that specific industry. Also, we are working on a business continuity plan in case of financial issues (similar to a bank’s stress test).
Regulations governing the usage of Electronic Signatures
Note: We only list countries that have laws that make non-accredited digital signatures not legally binding. However, most countries have a provision for obtaining the prior consent of all parties to conduct business electronically in order to use electronic signatures.
This is not a full list either.
While both basic electronic signatures and advanced electronic signatures are legal, admissible and enforceable under eIDAS, only qualified electronic signatures are deemed to be legally identical to handwritten signatures. Importantly, they are also the only type of electronic signature that are mutually recognized by all of the EU member states.
Brazil’s law allows only for electronic signatures that utilize the Brazilian public key infrastructure (PKI). While these government-authorized signatures are legal, the use of simple electronic signatures is not provided for under the law.
Russia requires that one use a certificate and service provider that has been certified by the Russian government.
Yes, but only those digital signatures that have been created using a digital certificate provider that has been registered with the Ministry of Communication and Information Technology and that has servers located in Indonesia are enforceable.