Distributed ledger technology (DLT) has revolutionized transaction of data, assets, and value, including the proliferation of cryptocurrencies and other digital assets. In order to leverage this emerging and revolutionary technology, state governments across the United States are looking to clarify how DLT use cases, specifically blockchains and their various sub-use cases, are treated under state law. With the adoption of HB 177.05, Ohio has joined the fray.

Distributed Ledger Technologies

Transactions recorded on blockchains are immutable and can be made without a centralized authority. This allows people and entities—both public and private—to enhance efficiency, security, and transparency in their operations and recordkeeping. Exciting use cases include property transfers, legal contract execution, patent protection, and document validation.

DLT Adoption in State Government

The Delaware Blockchain Initiative (the DBI) made Delaware an early leader in blockchain adoption. The DBI was designed to encourage public and private entities to adopt DLT, specifically blockchains. Then-Governor Jack Markell noted: “smart contracts offer a powerful and innovative way to streamline cumbersome back office procedures, and manage and reduce risk.” Since 2016, many states have followed Delaware’s lead by creating their own initiatives, while other states have been resistant to adopt such an affirmative posture.

Ohio HB 177.05

Before HB 177.05 was enacted, Ohio had no grant of authority permitting public entities to leverage DLT. No longer. HB 177.05, which enacts section 9.16 of the Ohio Revised Code, granting Ohio “governmental entities” permission to “utilize distributed ledger technology,” including “blockchain technology.”

The bill is broad; authorizing any governmental entity to use DLT so long as the use remains “in the exercise of [the entity’s] authority.” The term “governmental entity” is likewise broad, defined as the “State” and “political subdivisions” as defined in Section 2744.01 of the Ohio Code. Together, those definitions include any instrumentality of the State of Ohio, as well as any “municipal corporation, township, county school district, or other body corporate and politic responsible for governmental activities in a geographic area smaller than that of the state.”    

How DLTs will be incorporated into Ohio government programs remains to be seen, but HB 177.05 is a turning point.

Entrepreneurs and service providers aiming to provide solutions to Ohio public entities now have the greenlight to do so.

As always, Dinsmore attorneys are appraising the impact of this new legislation, and remain available for counsel in matters pertaining to DLT and blockchains.

*Tanner Dowdy is a summer associate at Dinsmore & Shohl, LLP, and is not licensed to practice law.