We Americans place such trust in the act of signing a document that we traditionally
have referred to the written signature as a "John Hancock" after one of the first
signers of the Declaration of Independence and one of our country's founding fathers.
Putting pen to paper to sign a document has served us well, but as our country moves
toward the 21st century and heads into the digital age, electronic forms of
authentication will be essential as transactions increasingly move from paper to open
The technology for electronic authentication is readily available. In fact many
different technologies have been developed and are competing for the vast potential
business they anticipate as electronic banking and commerce develops. Several of
those vendors have submitted statements for our hearing record today.
Unfortunately, financial institutions and other businesses across the country have
hesitated to fully invest in the available technologies. Why? Because the law on
electronic authentication does not currently provide the support necessary to justify
such a substantial investment. Many states have adopted laws on electronic
authentication, but those laws take vastly different approaches on key issues, such as
oversight and liability. This patchwork regulatory scheme leaves potential providers
and users with little certainty about how open network transactions, which do not
respect state borders, would be treated under the law.
The need for legal certainty extends beyond this country as well. Internet
transactions also do not respect national borders, and countries around the world are
getting their own systems and laws in place. Similarly, we need to get federal
legislation enacted so we can negotiate with those other countries on a
comprehensive global scheme.
On February 2, 1998, I introduced the Digital Signature and Electronic
Authentication Law (SEAL) of 1998. That legislation would authorize financial
institutions to use electronic authentication. The legislation would further provide
that when the parties to a transaction agree to use electronic authentication, the
electronic signature is as valid as one created with pen and paper.
I have stated repeatedly throughout this process that it is not my intent to create a
monopoly for financial institutions. I believe that all entities, banks and nonbanks
alike, should be authorized to use this technology and offer it to others.
Nevertheless, I introduced this bill because I recognized that there are valid reasons
why the concerns of financial institutions should be addressed separately. First,
financial institutions are accustomed to assuming 'trusted third party' roles including
serving as trustee and offering notary and signature guarantee services. Second,
financial institutions are highly regulated entities and those regulators are available to
provide the necessary oversight in this area. Finally, many of the transactions
individuals and businesses will seek to authenticate are financial transactions.
I have called this hearing today to discuss the merits of this legislation. We welcome
the following witnesses:
Mike Nugent, General Counsel for Technology and Intellectual Property at Citibank
Ken Lieberman, Senior Vice-President for Corporate Risk Management at VISA
Harris Miller, President of Information Technology Association of America
Alfred Pollard, Senior Director for Legislative Affairs at Bankers Roundtable
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