1     
BLOCKCHAIN LIABILITY AMENDMENTS

2     
2023 GENERAL SESSION

3     
STATE OF UTAH

4     
Chief Sponsor: Kirk A. Cullimore

5     
House Sponsor: Jordan D. Teuscher

6     

7     LONG TITLE
8     General Description:
9          This bill creates a judicial cause of action for the reversal of certain transactions
10     occurring on a blockchain.
11     Highlighted Provisions:
12          This bill:
13          ▸     defines terms;
14          ▸     creates a cause of action for fraudulent transactions that have been committed on a
15     blockchain that has specific technology implemented to allow reversal of
16     transactions; and
17          ▸     authorizes the Attorney General's Office to operate a node on a blockchain that
18     allows the Attorney General's Office to reverse a fraudulent transaction on a
19     blockchain.
20     Money Appropriated in this Bill:
21          None
22     Other Special Clauses:
23          None
24     Utah Code Sections Affected:
25     ENACTS:
26          67-5-39, Utah Code Annotated 1953
27          78B-3-112, Utah Code Annotated 1953
28     

29     Be it enacted by the Legislature of the state of Utah:

30          Section 1. Section 67-5-39 is enacted to read:
31          67-5-39. Sheriff Node Program.
32          (1) As used in this section:
33          (a) "Blockchain" means the same as that term is defined in Section 78B-3-112.
34          (b) "Reversible blockchain" means the same as that term is defined in Section
35     78B-3-112.
36          (c) "Sheriff node" means a computer that:
37          (i) is connected to a reversible blockchain;
38          (ii) is administered by the Office of the Attorney General; and
39          (iii) allows the Office of the Attorney General to reverse a mistaken or fraudulent
40     transaction upon receipt of:
41          (A) a court order issued under Section 78B-3-112; or
42          (B) an award issued in a valid and binding arbitration.
43          (d) "Transaction" means the same as that term is defined in Section 78B-3-112.
44          (2) (a) There is created a program known as the "Sheriff Node Program" within the
45     Office of the Attorney General to operate a sheriff node on a reversible blockchain.
46          (b) The attorney general shall administer the program with funds available for this
47     purpose.
48          (3) The attorney general shall operate the program only to reverse a transaction on a
49     reversible blockchain upon receipt of:
50          (a) a court order issued under Section 78B-3-112; or
51          (b) an award issued in a valid and binding arbitration.
52          (4) The attorney general may make rules in accordance with Title 63G, Chapter 3, Utah
53     Administrative Rulemaking Act, to carry out the program, including to:
54          (a) establish the number of reversible blockchains for which the attorney general may
55     administer a sheriff node;
56          (b) charge and assess fees and costs for the operation of a sheriff node on a reversible
57     blockchain;

58          (c) establish criteria for determining the validity of an arbitration award; and
59          (d) establish other rules reasonably necessary to efficiently carry out the sheriff node
60     program.
61          Section 2. Section 78B-3-112 is enacted to read:
62          78B-3-112. Action for mistaken or fraudulent transaction on a reversible
63     blockchain.
64          (1) As used in this section:
65          (a) "Blockchain" means a digital ledger of transactions:
66          (i) that is distributed across multiple nodes;
67          (ii) that is mathematically verified; and
68          (iii) where the validity of transactions is maintained by consensus of nodes.
69          (b) "Blockchain administrator" means a person that is responsible for maintaining and
70     overseeing a blockchain.
71          (c) "Division" means the Division of Consumer Protection created in Section 13-2-1.
72          (d) "Fraudulent transaction" means a transaction that a person undertakes with the
73     intent to deceive another person, including a transaction that involves:
74          (i) false representation;
75          (ii) omissions of material fact; or
76          (iii) the use of a false or stolen identity.
77          (e) "Node" means a computer connected to a blockchain.
78          (f) "Proof of identity" means government-issued identification that contains the
79     following information:
80          (i) a person's name;
81          (ii) an individual's date of birth;
82          (iii) a person's address, which is:
83          (A) for an individual, a residential or business street address;
84          (B) for an individual who does not have a residential or business street address, a Post
85     Office box number or the residential or business street address of next of kin or of another

86     contact individual; or
87          (C) for a person other than an individual, the principal place of business; and
88          (iv) an identification number, which is:
89          (A) for a United States person, a taxpayer identification number; or
90          (B) for a non-United States person, a taxpayer identification number, passport number
91     and country of issuance, alien identification card number, or the number and country of
92     issuance of any other government-issued document evidencing nationality or residence and
93     bearing a photograph or similar safeguard.
94          (g) "Reversible blockchain" means a blockchain that:
95          (i) requires the blockchain's users to:
96          (A) provide proof of identity to the blockchain administrator;
97          (B) acknowledge and agree that all transactions occurring on the blockchain are subject
98     to reversal by a sheriff node; and
99          (C) agree to be subject to jurisdiction of a court in Utah; and
100          (ii) requires the blockchain administrator to:
101          (A) verify a user's identity by checking the user's proof of identity against
102     government-issued identification databases; and
103          (B) maintain records of a user's proof of identity for a minimum of five years.
104          (h) "Sheriff node" means the same as that term is defined in Section 67-5-39.
105          (i) "Transaction" means the transfer of digital assets, rights, privileges, or obligations
106     from one person to another that occurs on a blockchain.
107          (j) (i) "User" means a person that interacts with a blockchain.
108          (ii) "User" includes a person that is:
109          (A) sending or receiving transactions;
110          (B) accessing data stored on the blockchain;
111          (C) participating in consensus or governance mechanisms;
112          (D) running a node on the blockchain;
113          (E) interacting with smart contracts or decentralized applications; or

114          (F) holding or managing digital assets.
115          (2) A plaintiff may bring a cause of action against a person to reverse:
116          (a) a fraudulent transaction if:
117          (i) the transaction occurred on a reversible blockchain;
118          (ii) the plaintiff entered into the transaction with reasonable reliance on the person's:
119          (A) fraudulent representation;
120          (B) omission of material fact; or
121          (C) use of a false or stolen identity; and
122          (iii) the plaintiff was injured as a result of that reasonable reliance; or
123          (b) a mistaken transaction if:
124          (i) the transaction occurs on a reversible blockchain;
125          (ii) the transaction resulted in a transfer of assets:
126          (A) to the wrong recipient; or
127          (B) in the wrong amount; and
128          (iii) the recipient's refusal to return the assets resulted in the unjust enrichment of the
129     recipient.
130          (3) Upon a finding of a mistaken or fraudulent transaction, the court shall issue an
131     order to the Office of the Attorney General to reverse the transaction in accordance with
132     Section 67-5-39.