ELECTRONIC commerce: Web Laws in the Wings

The lightening pace of technology is always waiting for the law to catch up, and the use of electronic authentication techniques, like digital certificates and certificate authorities, is no exception.

Many types of financial transactions now rely on electronic authentication, from Secure Electronic Transaction (SET) payments between consumers and merchants over the Internet to intrabank communications. More than 20 states have enacted or are working on specific laws that govern electronic authentication, resulting in a patchwork of regional regulation that cannot be respected by boundary-less Internet transactions. There is nearly uniform agreement among bankers and technology vendors that this dilemma would be best solved by Federal legislation. "The good thing for banks or anybody else that wants to play in the electronic commerce game is that they want a fairly uniform set of laws, not only in the United States, but hopefully internationally," says Thomas Greco, associate general council for the American Bankers Association.

Two bills dealing with these issues have been proposed in Congress. Congressman Richard H. Baker, (R-6th, LA), has suggested the creation of a National Association of Certification Authorities, which would register and supervise companies that provide electronic authentication. This plan has been met with skepticism by bankers who argue that the industry needs to remain agile. "We as an industry would like to see as much flexibility as possible, so being tied to some kind of bureaucratic licensing scheme, for example, would probably not be something that we would want to see," Greco says.

The second bill has been discussed in the Subcommittee on Financial Services and Technology, and will be proposed in early 1998 by Senator Bob Bennett (R-Utah). Bennett has vowed to create "minimalist legislation" that is technology neutral. "From what we have looked at so far, it seems Senator Bennett is most on the right track," says John Burke, senior director for the Banking Industry Technology Secretariat (BITS).

Vendors are accepting the inevitability of Federal legislation-likely to be approved in 1998-and are crossing their fingers that it will take a light-handed approach. "I'm resigned to the fact that it will happen," says Brian O'Higgins, evp and CTO of Entrust Technologies. "I think some type of licensing and oversight is good for the industry, and government will play a role, but going overboard really stifles innovation."

-sausner tfn.com