HB2540eng 101ST GENERAL ASSEMBLY

HB2540 Engrossed LRB101 06907 RJF 51939 b

AN ACT concerning business.

Be it enacted by the People of the State of Illinois, represented in the General Assembly:

Section 1. Short title. This Act may be cited as the Blockchain Business Development Act.

Section 5. Definitions. As used in this Act:

"Blockchain" means an electronic record created by the use of a decentralized method by multiple parties to verify and store a digital record of transactions which is secured by the use of a cryptographic hash of previous transaction information.

"Blockchain technology" means computer software or hardware or collections of computer software or hardware, or both, that utilize or enable a blockchain.

"Participant" means: (1) each person that has a partial or complete copy of the decentralized consensus ledger or database utilized by the blockchain technology, or otherwise participates in the validation processes of such ledger or database; (2) each person in control of any digital asset native to the blockchain technology; and (3) each person that makes a material contribution to the protocols.

"Personal information" means data capable of being associated with a particular natural person, including gender identification, birth information, marital status, citizenship and nationality, biometric records, government identification designations, and personal, educational, and financial histories.

"Protocols" means the designated regulatory model of the software that governs the rules, operations, and communication between nodes on the network utilized by the participants.

Section 10. Blockchain-based limited liability company.

(a) For the purposes of this Section, "company" means a blockchain-based limited liability company.

(b) A limited liability company organized under the Limited Liability Company Act for the purpose of operating a business that utilizes blockchain technology for a material portion of its business activities may elect to be a blockchain-based limited liability company (BBLLC) by:

(1) specifying in its articles of organization that it elects to be such a company (BBLLC); and

(2) meeting the requirements of subsections (c) and (d).

(c) Notwithstanding any provision of law to the contrary, a blockchain-based limited liability company established under this Section may provide for its governance, in whole or in part, through blockchain technology. The operating agreement for the company shall:

(1) provide a summary description of the mission or purpose of the company;

(2) specify whether the decentralized consensus ledger or database utilized or enabled by the company will be fully decentralized or partially decentralized and whether such ledger or database will be fully or partially public or private, including the extent of participants' access to information and read and write permissions with respect to protocols;

(3) adopt voting procedures, which may include smart contracts carried out on the blockchain technology, to address:

(A) proposals from managers, members, or other groups of participants in the company for upgrades or modifications to software systems or protocols, or both;

(B) other proposed changes to the company operating agreement; or

(C) any other matter of governance or activities within the purpose of the company;

(4) adopt protocols to respond to system security breaches or other unauthorized actions that affect the integrity of the blockchain technology utilized by the company;

(5) provide how a person becomes a member of the company with an interest, which may be denominated in the form of units, shares of capital stock, or other forms of ownership or profit interests; and

(6) specify the rights and obligations of each group of participants within the company, including which participants shall be entitled to the rights and obligations of members and managers.

(d) A member or manager of a blockchain-based limited liability company may interact with the company in multiple roles, including as a member, manager, developer, node, miner, or other participant in the company, or as a trader and holder of the currency in its own account and for the account of others, provided such member or manager complies with any applicable fiduciary duties. The activities of a member or manager who interacts with the company through multiple roles are not deemed to take place in this State solely because the company is organized in this State.

(e) A blockchain-based limited liability company may adopt any reasonable algorithmic means for accomplishing the consensus process for validating records, as well as requirements, processes, and procedures for conducting operations, or making organizational decisions on the blockchain technology used by the company.

(f) A blockchain-based limited liability company may, in accordance with any procedure specified under subsection (c), modify the consensus process, requirements, processes, and procedures, or substitute a new consensus process, requirements, processes, or procedures that comply with the requirements of law and the governance provisions of the company.

(g) Except as expressly provided otherwise, this Section does not exempt a blockchain-based limited liability company from any other judicial, statutory, or regulatory provision of Illinois law or federal law, including State and federal securities laws. Except to the extent inconsistent with the provisions of this Section, the provisions of the Limited Liability Company Act govern.

Section 15. Public record blockchain study; report.

(a) On or before January 1, 2021, the Secretary of State shall:

(1) evaluate blockchain technology for the systematic and efficient management of public records;

(2) recommend legislation, including uniform laws, necessary to support the possible use of blockchain technology for public records; and

(3) submit its findings and recommendations to Governor and the General Assembly.

(b) This Section is repealed January 1, 2022.

Section 20. Blockchain banking study.

(a) The Department of Financial and Professional Regulation shall review the potential application of blockchain technology to the provision of banking, and consider areas for potential adoption and any necessary regulatory changes in Illinois.

(b) On or before January 1, 2021, the Department shall submit a report of its findings and recommendations to the Governor and General Assembly.

(c) This Section is repealed January 1, 2022.

Section 25. Blockchain and financial technology promotion. The Department of Commerce and Economic Opportunity shall incorporate into one or more of its economic development marketing and business support programs, events, and activities the following topics:

(1) opportunities to promote blockchain technology and financial technology-related economic development in the private sector, including in the areas of banking, insurance, retail and service businesses, and cryptocurrency;

(2) legal and regulatory mechanisms that enable and promote the adoption of blockchain technology and financial technology in this State; and

(3) educational and workforce training opportunities in blockchain technology, financial technology, and related areas.