[Congressional Record Volume 144, Number 4 (Monday, February 2, 1998)]
[Senate]
[Page S271]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. BENNETT:
  S. 1594. A bill to amend the Bank Protection Act of 1968 for purposes 
of facilitating the use of electronic authentication techniques by 
financial institutions, and for other purposes; to the Committee on 
Banking, Housing, and Urban Affairs.


    the digital signature and electronic authentication law of 1998

  Mr. BENNETT. Mr. President, I rise today to introduce the Digital 
Signature and Electronic Authentication Law (SEAL) of 1998.
  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. As the country 
moves into the 21st century and into the digital age, it is necessary 
for the government to validate the use of equally trustworthy forms of 
authentication for electronic transactions. In doing this, our country 
will secure its position as a leader in the international digital 
economy.
  Electronic authentication, broadly defined, is any technology which 
provides a way for the recipient of a message to verify the identity of 
the sender, make sure the message was not altered in transit, and 
confirm that the message was the one the sender intended to transmit. 
Parties to electronic transactions must have access to this 
authentication process in order to feel secure in conducting business 
over open networks.
  While this concept is fairly simple, the legislative process has 
proven quite complex. Many states have enacted legislation on 
electronic authentication, but the state laws are vastly different. 
Because electronic transactions do not respect state or national 
boundaries, there are no clear rules to govern this activity. This lack 
of direction has limited the use of electronic authentication. The 
process is further complicated by the number of competing technologies 
available to provide authentication as well as the fact that businesses 
from all different sectors of the economy seek to use and offer 
authentication services.
  As Chairman of the Banking Committee's Subcommittee on Financial 
Services and Technology, I have examined this issue and have determined 
that the appropriate first step toward addressing it is to introduce a 
firmly grounded, free-market bill that addresses the concerns of 
financial institutions. In introducing this bill, I do not want to 
suggest that this authority should belong exclusively to that group. I 
have stated repeatedly my belief that all entities, banks and nonbanks 
alike, should be authorized to use electronic authentication for their 
own transactions and offer the service to third parties. In attempting 
to fashion a bill that would appropriately address the needs and 
concerns of all interested groups, however, I have reached an impasse. 
My attempts to reach out and engage those representing nonbank 
interests in serious discussions have failed. I have determined, 
therefore, that it is appropriate for me to take a first step and 
introduce this bill to address the needs of financial institutions.
  While I do not intend to create a monopoly for banks, and indeed hope 
that this legislation can be amended to include other entities, I do 
recognize that there are valid reasons why we may choose to address the 
concerns of financial institutions separately.
  Financial institutions are accustomed to assuming ``trusted third 
party'' roles, including serving as trustee and offering notary and 
signature guarantee services. Offering electronic authentication 
services is the functional equivalent of those traditional bank 
activities.
  Financial institutions are highly regulated entities, and the 
financial institution regulators have experience in supervising these 
``trusted third party'' activities.
  Many of the transactions which individuals and businesses will seek 
to authenticate are likely to be financial transactions.
  In Europe and other countries around the world, electronic 
authentication activities are conducted almost exclusively by financial 
institutions. By taking a first step and authorizing our financial 
institutions to use electronic authentication, we will strengthen our 
position in establishing the conditions for international transactions.
  The Digital SEAL Bill is, as I have described it, a minimalist, free-
market bill. It provides quite simply that a financial institution may 
use electronic authentication in the conduct of its business and that 
the use of such electronic authentication shall be valid. A financial 
institution's use of electronic authentication shall be governed by the 
rules of the system or agreement under which it operates and shall be 
regulated by the appropriate financial institution regulator. The bill 
defines electronic authentication broadly in an effort to be as 
technologically neutral as possible.
  Of equal importance is what this bill does not do. It does not create 
a new regulatory bureaucracy to supervise this activity. It does not 
impair consumers' rights under the Truth in Lending Act, the Electronic 
Fund Transfer Act, or any state law of similar purpose. Finally, it 
does not limit, in any way, the ability of any other entity to use or 
offer electronic authentication in the course of its business.
  The time has come for Congress to begin a serious discussion of the 
impact of technology on commercial transactions and consider how age-
old concepts, like the importance of a signature, will fit into an 
increasingly electronic world. Electronic authentication is a good 
starting point for this discussion, and passage of this bill will 
advance the development of electronic banking and commerce.
  I look forward to working with my colleagues to enact this 
legislation to give financial institutions, and appropriate other 
entities, the authority to use electronic authentication.
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