In view of the abundance of online and digital transactions in today’s world, blockchain technology can prove to be extremely useful as evidence in a court of law, however, a question remains as to what extent is blockchain admissible as evidence. Increasing technological standards have at times rendered evidentiary legislation outdated and due to the lower evidentiary value of digital/electronic evidences in certain circumstances, there is always a question of reliability. In the United States of America (“US”), the Federal Rules of Evidence (“FRE”) governs the admissibility of evidences on the bases of reliability and relevance. In this context, a question arises whether blockchain shall be considered as ‘hearsay evidence’ since its essentially decentralised in nature, invoking an analysis into Article VIII of FRE which governs hearsay evidences.
According to Rule 802 of FRE, hearsay evidences are inadmissible. The purpose of this rule is to check the reliability of the evidences presented in a court. When compared to other digital/electronic evidences, blockchain evidences are actually reliable. This is because in blockchain technology, a block of data can never be deleted, changed or corrupted it can only be complemented with another block of data which are time-stamped and added sequentially, meaning every block of data is bound to a specific time and are kept chronologically. Further, each block of data is connected to other blocks of data in a chain by an encrypted unique identification code called hash, reducing the risk of data loss or corruption. In simpler terms, since, every new block has the hash function of the previous block, alteration of data is extremely difficult which renders the blockchain to be ‘tamper-proof’.
But legally speaking, proving that blockchain is a reliable technology from a technical point of view is not enough in a court of law. The law of evidence is a standard procedure that lies at the core of justice being delivered in a fair manner. Therefore, for blockchain evidences to be admissible in a court of law it should be proved reliable from a legal perspective and not from a technological perspective. For this blockchains should not fall under the definition of hearsay provided under FRE, if in case it does fall under hearsay’s definition then the only hope lies under the exceptions of hearsay evidences.
Hearsay is defined under Rule 801 of FRE, as an “out-of-court statement offered to prove the truth of the matter asserted therein”. An important facet in the hearsay definition is the element of human interference because essentially statements are provided by actual persons. When collaborating this definition with blockchain, it can be asserted that a computer-generated network i.e. blockchain cannot make a statement, because a statement requires some kind of assertion from a person. This theory is based on the case named United States v Lizarraga-Tirado (“Case”), where the court examined the status of the coordinates mentioned on a satellite image taken by Google Earth program to state that since Google Earth automatically labels the GPS coordinates, there is no human involvement and hence, no assertion for hearsay. Hence, ruling that the evidence provided did not fall under the definition of hearsay. A comparison can be made with blockchain since the working of the blockchain involves algorithmic correspondences that are self-generated with almost least human interactions.
However, considering the yet developing jurisprudence in the blockchain regime, an argument towards blockchain being within the ambit of hearsay can also be made. This circumstance would arise when the blockchain is not in itself the declarant of data but when the person who has fed data into the blockchain is the declarant, making the blockchain a mere medium of storing information. In such a case, there would be a human element present and the court may not interpret it to be independent of human input, hence making it an element of ‘statement’ under the hearsay rule as essentially a person has stored information on a blockchain. In this sense and upon considering that information in a blockchain is not under oath, one may assert that blockchain falls within the rule of hearsay.
Fortunately, there are hearsay exclusions and exceptions mentioned under Article VIII of FRE. Such exceptions shall depend on a case by case basis. Hearsay exceptions are mention under rule 803, 804 and 807 of FRE. Under rule 803 two sub-clauses are of importance, they are sub-clause (8) and (6). Sub-clause 8 exempts public records. This means if details of any government service are required as evidence then the public office can produce a blockchain record entailing all the details, provided that they use blockchain technology to provide such services. Sub-clause (6) provides an exemption for business records, since blockchains are essentially electronic ledgers which can keep records of business activities they can be exempted under this sub-clause.
Rule 307 makes a strong case for blockchain evidence as it is a residuary rule for evidences that do not fall under other exceptions provided under Article VIII. In this scenario, the litigants have to show that blockchain was not compromised and guarantees higher trustworthiness than other establishes exceptions. Although this rule provides a good deal, it has never been used repeatedly for an entire class of evidence.
There are very few instances where the admissibility of blockchain evidence has been considered meaningfully. For example in China, the Supreme People’s Court determined that blockchain evidence as admissible in cases before three internet courts that have specialised jurisdiction over suits in online sale of goods, intellectual property rights ownership and online infringement, etc. In United Kingdom, the Digital Architecture and Cyber Security at Her Majesty’s Courts and Tribunals Service announced a pilot project to store evidence on blockchain.
In the US there is no development at a federal level because of which admissibility of blockchain evidence is still unclear. Nevertheless, a few states have either amended their legislation or introduced a new legislation to mark clarity with respect to blockchain evidences. For example, (i) Vermont adopted a legislation which presumes blockchain authenticity given that there is a written statement from a qualified person attesting the transition; (ii) Arizona amended the Arizona Electronic Transaction Act to include blockchain records, signatures and smart contracts, which “may not be denied legal effect, validity or enforceability”; (iii) Delaware permitted businesses to keep business records in distributed electronic networks or databases by amending the Delaware General Corporation law; and (iv) Illinois introduced a Blockchain Technology Act.
The US is currently in need of amending the FRE because although different states are applying different methods to adopt blockchain evidences, they don't have a uniform effect on the way blockchain evidences are accepted into jurisprudence. Amendment of FRE will not only provide uniform and predictable standards while dealing with blockchain evidences in a court of law but will also discourage forum shopping. Therefore, the amendment should be tailored according to the current needs to keep pace with the changes in technology.
The article is authored by Rishika Raghuwanshi, Co-Head, BlockSuits
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