Current Legal Landscape:

• Evolving Regulation: While the hype around blockchain has subsided, legal advancements are still happening, particularly in well-established industries like supply chain management and tokenisation.
• Recent Legislation: Blockchain-related conflicts are being heard by courts more often, and the Property Digital Assets Bill seeks to establish digital assets as property under UK law.
• Ongoing Challenges: Financial laws are one area where regulatory frameworks for decentralised autonomous organisations (DAOs) are currently developing.

Essential Advice for Clients:

• Evaluate Use Cases: Ascertain that blockchain technology best suits your requirements and can be convincingly explained to authorities and investors..
• Compliance Focus: Make early plans for compliance with financial rules and regulatory standards like GDPR to prevent challenges later.
• Governance and Ownership: In distributed ledger systems, take care of third-party agreements, governance, and decision-making.

Threats and Opportunities:

• Threats: GDPR compliance is still a significant challenge, and expansion may be impeded by the lack of a complete regulatory framework in the UK.
• Opportunities: Changes in regulations, like the Financial Services and Markets Act, may encourage more money to be invested in cryptocurrency assets, creating new business prospects.

Maintaining High Client Satisfaction:

• Expertise and Collaboration: Get up to date with frequent updates from professionals in the field and academics, backed by a specialised blockchain working group.
• Engagement: Engaging in discussions and industry partnerships actively contributes to improving the firm’s knowledge and providing better recommendations to clients.

Technological Advancements:

• Consensus Models: Transitioning to energy-efficient models like proof-of-stake supports ESG compliance and expands blockchain use cases.
• AI Integration: The intersection of AI and blockchain offers new possibilities for optimizing compliance and decentralizing AI applications.

What is the current legal landscape for Blockchain law in your jurisdiction?

Ian:
So I think it’s fair to say that the hype train around blockchain has died down a little bit in the wake of the new kid on the block AI. What we’re seeing in the legal market is that there is still some developments going on in the blockchain sphere.

So certainly in the more mature markets like supply chain management and in securities tokenisation, in terms of the recent legal developments, I think we’ve seen a number of cases recently relating to blockchain technology that are showing that the courts are a robust forum for hearing disputes relating to blockchain technology.
So virtual trading case being a prime example. And just recently we’ve had the government announce the Property Digital Assets Bill to effectively codify what is probably the common law position that digital assets can be property law.

Emily:
Absolutely, and we’re also seeing that maturing happening in the tax and financial regulation spheres, although there is some way to go still on our financial regulation, the final say and what that’s going to look like. And you know, this is an ever-evolving area.

We’re still thinking about how decentralised autonomous organisations are treated to English law. So it’s still evolving, but more mature than we have been so far.

What three essential pieces of advice would you give to the clients involved in Blockchain matters?

Emily:
So first we would say challenge yourself, is blockchain the best technology for your use case as we would, you know, ask this question for any new area of technology and are you able to understand and articulate to investors or potentially even regulators where that’s relevant, why blockchain helps you achieve the outcome you want to achieve?

Ian:
Yeah, I think it’s fair to say that it’s easy to get excited over new technology, but really, it’s important from particularly the sort of investor perspective or customer perspective that you pick the solution that’s best for your use case. I think on the second stage is probably to start thinking about compliance. So how do you make a solution that complies with legal and regulatory requirements?

I think GDPR in particular has proved challenging on the compliance side for blockchain solutions. So thinking early about how making how to make your solution compliant is, is key. I think there’s also the financial Reg side of that as well.

Emily:
Yeah, absolutely. Because I think, you know, there are some peculiarities this technology that kind of overlay with how you’re going to comply with regulation, particularly for example, with custody, settlement, finality, conflict of laws, GDPR.

And the final point we’d make is around kind of governance and ownership. So with a distributed Ledger, how are you achieving consensus? How are decisions being made? How do you make changes to the Ledger if you need to or if you’re getting a solution from a third party, how you’re making sure those governance questions are resolved?

What are the greatest threats and opportunities in Blockchain in the next 12 months?

Ian:
So it’s not a new one and one that we just mentioned before. I think GDPR compliance is definitely still a challenge. I think there’s a lot of commentary out there that is still grappling with how you can make solutions using blockchain technology GDPR compliant and there definitely are still some problems to be overcome on that front.

Emily:
I think another opportunity is over the next 12 months, I’ll be interested to see whether, you know, established financial services clients are interested in investing in crypto asset businesses as more of them come within a more onerous regulatory framework under the Financial Services and Markets Act 2000.

I mean, obviously that new framework won’t obviate the need for careful due diligence, but there’s also potentially a threat line there in the sense that there have been delays to the UK establishing it’s, it’s kind of broader regulatory framework there. Meanwhile, the EU is still pulling ahead with its markets and crypto assets regulation or Mika.

How do you ensure high client satisfaction levels are maintained by your practice?

Ian:
So without being too self-aggrandizing, I think key is keeping across the technology. So one thing we do is we have experts come in to talk to us about some of the latest developments in these spaces from universities and academics coming to speak to us all people from industry. And that’s very helpful often in in keeping the whole team across what’s going on.

Emily:
And we’re also all talking to each other. So we work in a multi specialist way collaboratively across the firm. Ian, I are in different teams, but all both be talking regularly about these kinds of developments including informally, but also we have a blockchain working groups specifically for that purpose.

Ian:
And then I think the last point is probably about engaging in wider conversations. So we would contribute to consultations or respond to various requests for information.

Emily:
Yeah, and industry bodies and just bringing that kind of broader experience to our client advice.

What technological advancements are reshaping Blockchain Law, and how can clients benefit from them?

Ian:
I think one of the most exciting developments in this space more recently is the shift from proof of work to proof of state consensus models for a lot of the blockchain technologies or alternative consensus models that reduce the energy consumption compute power required to run a lot of blockchain technology.

That’s having an obvious positive benefit on the ESG side and particularly for ESG compliance. As this technology is adopted by more corporates, it’s quite important to minimise the environmental impact. And I think that’s hopefully opening it up to a wider market of use cases.

Emily:
Yeah. And of course, AI, the topic that everyone’s talking about and how that intersects with blockchain technology, you know, people are exploring both sides of the coin, so how AI can optimise blockchain and particularly compliance around IP or data privacy, and then the other side of using blockchain technology to decentralise AI. And this is a subject that we do a deeper dive on in an article accompanying this video.