SB1887 103RD GENERAL ASSEMBLY

  
  

 


 
103RD GENERAL ASSEMBLY
State of Illinois
2023 and 2024
SB1887

 

Introduced 2/9/2023, by Sen. Robert Peters

 

SYNOPSIS AS INTRODUCED:
 
New Act

    Creates the Digital Property Protection and Law Enforcement Act. Provides that upon a valid request from the Attorney General or a State's Attorney, made pursuant to the substantive or procedural laws of the State, a court may order any appropriate blockchain transaction for digital property or for the execution of a smart contract. Provides that a blockchain network that processes a blockchain transaction originating in the State at any time after the effective date of the Act shall process a court-ordered blockchain transaction without the need for the private key associated with the digital property or smart contract. Provides that upon a petition by the Attorney General or a State's Attorney, the court shall assess a civil penalty of between $5,000 and $10,000 for each day that the blockchain network fails to comply with the order. Sets forth provisions concerning protection of digital property and contract rights, security interests, and service of process. Defines terms. Effective 30 days after becoming law.


LRB103 28369 BMS 54749 b

 

 

A BILL FOR

 

SB1887LRB103 28369 BMS 54749 b

1    AN ACT concerning regulation.
 
2    Be it enacted by the People of the State of Illinois,
3represented in the General Assembly:
 
4    Section 1. Short title. This Act may be cited as the
5Digital Property Protection and Law Enforcement Act.
 
6    Section 5. Legislative findings; intent. The General
7Assembly finds all of the following:
8    (a) Private and corporate citizens in Illinois
9increasingly own cryptocurrencies, nonfungible tokens, and
10other forms of digital property stored on blockchains.
11    (b) Digital property owners are particularly susceptible
12to injury due to frauds, hacks, phishing scams, and ransomware
13extortion as well as from the loss of cryptographic private
14keys and mistaken transactions. Hacks involving digital
15property have become routine and often result in hundreds of
16millions of dollars in losses while frauds and the loss of
17private keys have caused billions of dollars of injury to
18digital property owners.
19    (c) Illinois citizens have suffered and continue to suffer
20unnecessary losses due to these causes. Moreover, these losses
21are often visited on those least able to bear them. Younger
22persons and persons from disadvantaged communities are more
23likely than others to own digital property and more likely to

 

 

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1choose digital property over stocks or mutual funds to invest
2their savings. As a result, disadvantaged communities bear the
3brunt of losses due to digital property crimes, loss of
4private keys, and fluctuations in prices of digital assets.
5    (d) Illinois citizens have asserted legal rights regarding
6digital property but many blockchain networks lack procedures
7to enforce court orders regarding digital property or have
8adopted methods of operation that inhibit such enforcement. As
9a result, the cost to enforce legal rights in digital property
10is often prohibitive such that the property rights cannot be
11vindicated and the vast majority of blockchain crimes go
12unpunished.
13    (e) The difficulty of enforcing the law reduces the value
14of digital property, imposes burdensome costs to protect
15against risk, and inhibits the adoption of technology that
16could benefit the private and corporate citizens of the State.
17    (f) Fostering development of technologies to protect
18blockchain transactions and legal interests in digital
19property presents an economic opportunity for Illinois
20businesses.
21    (g) The public welfare, security, and safety will be
22served by regulating blockchain transactions and digital
23property in the State.
 
24    Section 10. Definitions. As used in this Act:
25    "Blockchain", "cryptographic hash", "electronic",

 

 

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1"electronic record", "record", and "smart contract" shall have
2the meanings ascribed to them in Section 5 of the Blockchain
3Technology Act.
4    "Blockchain network" means a network of 2 or more nodes
5that maintain or append a blockchain.
6    "Blockchain operator" means a person or entity operating a
7full or partial node, including, without limitation, operating
8a blockchain mining node, mining pool, validator, validator
9pool, staking pool, and staking a validator.
10    "Blockchain transaction" means the processing and storage
11of a record on a blockchain.
12    "Digital property" refers to any form of property recorded
13on a blockchain, including, without limitation,
14cryptocurrency, digital tokens, nonfungible tokens, and
15tokenized real-world assets.
16    "Private key" means a cryptographic key used to sign a
17blockchain transaction.
18    "Smart contract code" refers to computer code written to a
19blockchain and used to execute a smart contract agreement in
20whole or in part.
21    "Secured party" shall have the meaning ascribed to it in
22subsection (a) of Section 9-102 of the Uniform Commercial
23Code.
24    "Staking" means providing digital assets to a validator to
25enable that validator to participate in operating a
26proof-of-stake blockchain network.
 

 

 

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1    Section 15. Enforcement of warrants and court orders;
2penalties.
3    (a) Upon a valid request from the Attorney General or a
4State's Attorney made pursuant to the substantive or
5procedural laws of this State, a court may order any
6appropriate blockchain transaction for digital property or for
7the execution of a smart contract.
8    (b) A blockchain network that processes a blockchain
9transaction originating in this State at any time after the
10effective date of this Act shall process a court-ordered
11blockchain transaction without the need for the private key
12associated with the digital property or smart contract.
13    (c)(1) Each blockchain operator that has mined, validated,
14or otherwise participated in processing a blockchain
15transaction on the blockchain network which originated in this
16State at any time after the effective date of this Act is
17liable to this State for a violation of subsection (b).
18        (2) Upon a petition by the Attorney General or a
19    State's Attorney, the court shall assess a civil penalty
20    of between $5,000 and $10,000, as adjusted by the Federal
21    Civil Penalties Inflation Adjustment Act of 1990, 28
22    U.S.C. 2461 note, Public Law 104410, for each day that
23    the blockchain network fails to comply with the order.
24    (d) The fact that a blockchain network has not adopted
25reasonable available procedures to comply with subsection (b)

 

 

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1shall not be a defense to an action under subsection (c).
 
2    Section 20. Protection of digital property and contract
3rights.
4    (a) Any person using a smart contract to deliver goods or
5services in this State shall include smart contract code
6capable of enforcing court orders regarding the smart
7contract. Any person who violates this subsection (a) shall be
8liable to return all digital property or other consideration
9given by the plaintiff, without regard to any benefits that
10may have been received by the plaintiff, and liable for the
11costs of the action and reasonable attorney's fees as
12determined by a court.
13    (b)(1) A court may order a blockchain transaction as a
14remedy if a party to a smart contract or an owner of digital
15property loses the private key associated with the smart
16contract or digital property or if the owner of the private key
17is deceased and the private key is unknown to the executor or
18administrator of the estate. A court may also order that a
19blockchain transaction originating in this State be refunded
20to the sender if there is a legal right to a refund, such as in
21cases of fraud or mistake.
22        (2) A blockchain network that processes a blockchain
23    transaction originating in this State at any time after
24    the effective date of this Act shall process the
25    court-ordered blockchain transactions without the need for

 

 

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1    the private key associated with the digital property or
2    smart contract.
3        (3) Each blockchain operator that has mined or
4    validated a blockchain transaction on the blockchain
5    network which originated in this State at any time after
6    the effective date of this Act is liable to the plaintiff
7    for damages suffered due to a violation of paragraph (2)
8    of this subsection together with the plaintiff's costs of
9    the action and reasonable attorney's fees, as determined
10    by a court.
11        (4) The fact that a blockchain network has not adopted
12    reasonable available procedures to comply with paragraph
13    (2) of this subsection shall not be a defense to an action
14    under paragraph (3) of this subsection.
 
15    Section 25. Security interests.
16    (a) Upon a valid request made pursuant to the substantive
17or procedural laws of this State from a secured party claiming
18an interest in digital property or right in a smart contract of
19another, a court may order any transaction deemed appropriate.
20    (b) A blockchain network that processes a transaction
21originating in this State at any time after the effective date
22of this Act shall enforce a court order without need for the
23private key associated with the digital property or smart
24contract.
25    (c)(1) Each blockchain operator that has mined, validated,

 

 

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1or otherwise participated in processing a blockchain
2transaction on the blockchain network originating in this
3State at any time after the effective date of this Act is
4liable to the secured party for any damages suffered due to a
5violation of subsection (b) together with the plaintiff's
6costs of the action and reasonable attorney's fees, as
7determined by a court.
8        (2) The fact that a blockchain network has not adopted
9    reasonable available procedures to comply with subsection
10    (b) shall not be a defense to an action under this
11    subsection (c).
 
12    Section 30. Service of process. A blockchain network may
13be served by leaving a copy of the pleading, paper, filing, or
14order with a blockchain operator who has participated in the
15blockchain network at any time after the effective date of
16this Act in any manner provided for service on individuals.
 
17    Section 99. Effective date. This Act takes effect 30 days
18after becoming law.