The states in the USA have been speedily working on crypto regulation. Notably, while Wyoming is being cheered on for friendly crypto regulations, Illinois is driving away any chance of crypto innovation.
According to the recently introduced Illinois Senate Bill 1887, the Digital Property Protection and Law Enforcement Act in the state includes digital transactions and the execution of smart contracts. It also notes “provisions concerning the protection of digital property and contract rights, security interests, and service of process.”
While the bill is still pending in the Senate Assignments Committee, some have identified its flaws. Drew Hinkes, Partner at K&L Gates, an American multinational corporation law firm, and adjunct Professor at NYU School of Law called the crypto bill a “mess.”
He severely condemned the state’s course and action and identified it against the inherent nature of promoting innovation. He said:
This is a stunning reverse course for a state previously pro-innovation. Instead, we now get possibly the most unworkable state law related to crypto and blockchain I’ve ever seen. A shocking turn of events for the tech community in Illinois.
However, he acknowledged and appreciated the goal of protecting consumers but criticized the method. He explained that the manner in which it seeks to protect consumers “is to require node operators, miners, and validators to do impossible things or things that create for themselves new criminal and civil liability at the pain of fines/fees.”
According to Hinkes, the proposed bill would enable courts to order any acceptable blockchain transaction for digital property or the execution of a smart contract. It would mandate a blockchain network upon receipt of an order from the Attorney General or State’s Attorney. He explained that:
“A court can order a blockchain transaction as a remedy for a lost private key if the owner loses the key or is dead & the key is unknown to the administrator, or order a blockchain transaction to refund a victim in case of fraud/mistake.”
The crypto bill in Illinois contrasts with what was passed in Wyoming. The region passed a law prohibiting the forced production of a private key which safeguards other state-granted rights and interests, including digital identities.
However, Illinois allows a court to compel a blockchain transaction in response to a “valid request.” Hinkes noted that a secured party would not require a private key.
By enforcing tight regulations, the Securities and Exchange Commission (SEC) of the United States is clamping down on Web3 businesses. Recently, the regulator imposed a $30 million punishment on Kraken and ruled that its staking reward facilities must be shut down. The SEC also warned Paxos about potential legal action for breaking securities law.