The Law Society has published the second edition of its blockchain report in collaboration with the Tech London Advocates (TLA) Blockchain Legal and Regulatory Group.
It’s a useful guide for lawyers who want to understand more about DLT and crypto and the potential legal issues that need to be navigated.
Part 1 of the report covers the growing types and uses of DLTs and specifically crypto-assets including:
- how DLTs work
- public and private blockchains
- types of crypto-assets
- tokens, including non-fungible tokens (NFTs) and social tokens
Part 2 of the report covers topics such as:
- smart contracts
- data and governance
- blockchain consortia
- data protection
- intellectual property rights
- dispute resolution
- environmental, social and governance (ESG)
Perhaps the most interesting aspect of the report and the need for a second edition so soon is the changes we have already seen in terms of the regulation of crypto-assets and the growth in NFTs since the first edition. Crypto-assets remain the prime use case for blockchain at this point. There are over 100 mentions of NFTs in the new report. The NFT craze is certainly a bubble at this point but the question is, as with the ICO bubble, what’s left when the initial hype falls away. If ICOs are any guide, the answer is that there will remain a clear market for crypto-assets (including NFTs) that is not likely to go away, particularly as large brands, corporates and influencers continue to increase adoption and mainstream awareness spreads. It will be important for lawyers to continue to track regulation in this area. In addition to developments from the financial regulators, we have seen the ASA issue a crackdown on crypto ads and the Law Commission expects to publish a consultation paper on NFTs and crypto tokens in summer 2022.
Our team at Baker McKenzie were pleased to contribute the chapter in the guide providing guidance around the practical challenges around creating effective blockchain consortia and multi-party contracting relating to blockchain use cases.
In our experience, when a group of companies come together to explore the development of an ambitious blockchain use case, it’s often not the technical or legal issues that are the biggest challenges, but it’s the age-old issue of how to get a group of different organizations to work together effectively to achieve their objective (even agreeing on what that objective should be can be trickier than you might think).
For the law, although there are certainly some tricky legal issues to navigate when it comes to certain use cases involving blockchain and crypto-assets, particularly where there are grey areas because existing law wasn’t designed for the tech (it almost never is..), there are often analogous circumstances that we can draw upon as lawyers to help guide our clients. But how to ensure effective governance and project management, well, that is a perennial issue on technology projects and continues to be a practical headache for ambitious multi-party technology projects.
Lawyers are increasingly assuming the role of project managers, working with various technological experts and specialists.
Alongside well-known cryptoassets such as the cryptocurrency bitcoin, DLTs offer opportunities to build new platforms, products and protocols.
You need to be aware not only of how network technology and other code-based technologies operate, but how these technologies impact the wider areas of litigation.
This includes how decentralisation and smart contracts are changing the way financial, property and legal services are carried out.
As the complexity of DLT grows, so does the need for lawyers to understand it. This guidance aims to provide a useful stepping-stone in this process.
This guidance aims to provide a useful stepping-stone in this process.
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