Vol.
71, No. 4, April 1998
At Issue
AB 811 regulates the use of
digital signatures in Wisconsin
To promote greater electronic commerce, lawmakers are paying
more attention to electronic commerce issues, including the expanded
use of digital signatures to enter into binding contracts using
the Internet and other computer media.
By Scott Jensen
The migration of many businesses to the Internet has caused
an explosion of new marketing opportunities for banks, merchants,
and consumers in our state. The electronic commerce revolution
has spurred airlines to offer discount fare packages to customers
registered through their home pages, encouraged banks to provide
a variety of bank-at-home services for their customers, and produced
a variety of Web sites where consumers can shop for everything
from fishing rods to European trips.
While the law always develops behind new technologies, Wisconsin
lawmakers are giving attention to a number of electronic commerce
issues, including the expanded use of digital signatures. Digital signatures are strings of encrypted characters
tacked onto electronic messages that identify and authenticate
the sender and the document. Digital signatures serve the same
legal function as written signatures.
Developing standards to facilitate the use of digital signatures
is an essential element of our efforts to take the next step
in the electronic commerce revolution in Wisconsin - to
enter into binding contracts using the Internet and other computer
media. Moving beyond email to allow consumers and businesses
to electronically "sign" a document, either to prove
its authenticity or render it useless if altered, will require
the development of a truly secure online system using encryption
to ensure that businesses, consumers, and governments can be
confident that the transactions we engage in electronically are
safe and secure.
While those familiar with electronic commerce may not be uncomfortable
with technology that jumps from the use of the pen to digital
signature, I don't know too many attorneys who would feel
comfortable advising clients to actually move funds or transfer
ownership online without having the confidence of an unbreakable
encryption system to protect the parties to the transaction.
It is hard to imagine who would advise clients in the current
regulatory environment, for example, to dispense with the traditional
signature requirement concerning an offer to purchase a home
and send the proposal to the prospective seller via an unprotected
email system.
Rep.
Scott Jensen (R-Waukesha) is the speaker
of the state Assembly. He was elected to the state Legislature
in a special election in January 1992, representing the 32nd
Assembly District. Jensen previously served as the Assembly Majority
Leader and the cochair of the Joint Committee on Finance. He
has a masters degree in public policy from the Kennedy School
of Government at Harvard University. |
As part of my efforts to promote greater electronic commerce
in Wisconsin, I recently introduced Assembly Bill 811, authorizing
the use and providing for the regulation of digital signatures.
AB 811 would:
- grant digital signatures the legal status of written signatures
under state law. Under this proposal, any documents that are
required by law to be submitted in writing may be transformed
through the use of digital signature so long as: 1) the recipient
consents to the receipt of information in digital signature;
and 2) the digital signature is verified by a certification authority
(either the Department
of Financial Institutions (DFI) or a provider licensed by
DFI to verify digital signatures);
- create a committee called the Commission on the Use of Digital
Signature to study the use and regulation of digital signatures.
The commission is required to report its recommendations one
year after the proposal is enacted into law;
- grant the DFI rulemaking authority to promulgate rules governing
the licensure and regulation of certificate authorities and the
use and verification of digital signatures. Requires DFI to promulgate
rules six months after the commission issues its report to the
Legislature; and
- delay the effective date for implementing the legislation
for one year. The delay is necessary to allow the study committee
to address the host of unresolved legal issues involving the
use of digital signatures in electronic commerce. Many questions
remain unanswered about how the financial risks of a failed electronic
transaction will be allocated and how providers will be certified
to verify digital signatures. Such risks involve the negligent,
fraudulent, or innocent use of digital signatures in conducting
electronic commerce. Moreover, this bill does not address the
list of activities that regulators may want to prohibit in conducting
commerce with the use of digital signatures.
This legislation is an important first step as Wisconsin moves
forward in its efforts to address the growth of electronic commerce
in our state. AB 811 does not attempt to answer the myriad of
new issues that will emerge with the increased use of digital
signatures to conduct electronic commerce. We cannot accurately
predict all the issues that might need to be regulated until
an extensive working model of the industry is in place. However,
an industry cannot establish an extensive working model until
our state authorizes digital signatures. AB 811 creates a framework
from which private industry and regulators may begin developing
the technology and infrastructure necessary for safe electronic
digital authentication.
For more information, please contact me at (608) 266-2402
or by email.
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