Blockchain technology act
Following the recommendations suggested by the Ibero-American Institute for Law and Finance , Ecuador implemented the most ambitious corporate law reforms observed in Latin America in the past decades. The Ecuadorian Parliament enacted the Corporate Modernization Act, intended to modernize its regulatory framework in several ways. Among other innovative reforms , the new legislation allows the use of electronic devices including blockchain technology to create and maintain corporate records. According to the Ecuadorian Modernization Act, Ecuadorian companies will be able to record their accounting books on distributed ledgers or similar means, provided that the technology utilized allows the individualization of the accounting records and their subsequent verification.
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Blockchain technology act
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Prospects and challenges posed by blockchain technology on the copyright legal system
Blockchain was invented in by a person or group known as Satoshi Nakamoto, to support Bitcoin, a decentralized peer to-peer electronic currency.
However, the technology itself is separate from Bitcoin and can be implemented to support myriad other uses. Although cryptocurrency has garnered significant attention, this article focuses on considerations applicable to the use of blockchain in multinational business, apart from cryptocurrency.
Timely, ongoing engagement is critical to conduct business on a global scale. Multinational enterprises and their clients are seeking consistency and integrity in the execution of international transactions. Differing local legal requirements, multiple stakeholders, language barriers, and time zone challenges inherent in cross-border transactions may result in disconnects among the transacting parties and even between a parent entity and its local affiliates. These disconnects can cause additional costs, delays, gaps in execution, and even regulatory noncompliance, increasing the risk to all parties involved.
Blockchain, a distributed ledger technology, has emerged as a potential global solution to these problems. As the technology is distributed by design, transaction records cannot be changed and are protected in the event of a single system failure. In addition to the immutable nature of its distributed architecture, blockchain technology provides a common view of transactions in real-time across computers, parties, and jurisdictions.
With these characteristics, blockchain promises the operational transparency, availability, integrity, and security necessary to execute multinational transactions from beginning to end with significantly reduced risk.
Blockchain enabled AIG, IBM, and Standard Chartered to provide direct notification of premium payment and policy issuance to the corporate and local stakeholders in real time. It simultaneously provided selective visibility on these transactions to participants, based on their credentials.
Corporate stakeholders had real-time visibility on the myriad transactions necessary to successfully implement a multinational insurance program across their organizations; local stakeholders saw this detail for their relevant jurisdiction.
The pilot demonstrated the potential for blockchain to create a new level transparency — reducing the delays or resources expended in communication across organizations, language barriers, and time zones to achieve consensus and visibility over the multinational process.
The visibility offered through blockchain is currently being used to track provenance and document financial transactions in a variety of multinational arrangements, ranging from supply chain to trade finance. Businesses and regulators are increasingly using blockchain to conduct and provide oversight of cross-border banking and finance activities.
The authentication necessary to execute and record a transaction, and the irreversibility of a transaction once it is recorded in the blockchain, provides a secure and auditable record of each transaction, reducing the time, labor, and costs traditionally associated with manually verifying, reconciling, and settling international payments or money transfers. Traceability and control are also driving blockchain usage in other commercial contexts, where goods ranging from perishable agricultural produce to sophisticated electronics travel through a supply chain network before reaching the end consumer.
This is especially true in multinational business when suppliers, manufacturers, transporters, storage facilities, distributors, and retailers are involved across multiple jurisdictions. Blockchain supplies a digital passport for each item or transaction in these complex value chains. Marine, ground, and air cargo transportation, food sourcing, real estate transactions, and machinery and vehicle sales are all examples of blockchain use cases in this context.
Smart contracts programmed to execute on blockchain are equally promising in the facilitation of multinational transactions. It can refer to a software program that encodes performance conditions and outcomes and the instances of code used to create that program, or to a legal contract that is, in whole or in part, automated, complemented, or replaced by software code. Consider purchasing insurance for global exposure and the various actions required at the global and local level across the insurer, reinsurer, broker, and insured organizations.
Cash before cover, anti-money laundering AML , and mandatory reinsurance retentions are examples of the many requirements to be fulfilled before one or multiple policies can be validly issued. With blockchain, many of the steps required to fulfill these requirements can be automated.
Similarly, the issuance of certificates of insurance could be defined in code to execute automatically when policies are issued. While businesses are still pondering the technology in concept and practice, legislators and regulators throughout the world are similarly determining its governance. Below is a non-exhaustive overview of the global legal and regulatory landscape with respect to blockchain technology and smart contracts.
Several US states have enacted or proposed legislation validating the use of blockchain technology in commerce. These include Vermont blockchain to be considered a regularly conducted business activity establishing a presumption that the information in the blockchain is correct , Nevada recognizing blockchain as a form of electronic records satisfying the requirement for a written record in city and county government , Delaware authorizing registration of shares of Delaware companies in blockchain form , and Wyoming permitting filings made for corporations, LLCs, and UCC financing statements to be made on blockchain.
In Asia and Australia, regulatory blockchain initiatives have been proliferating. Australia is currently implementing a blockchain-powered securities exchange. The second phase will test a real-time gross settlement system. The project currently has three additional phases and is planned to be completed in late In the European Union, regulatory agencies are reaching out for help in navigating the evolving landscape.
In France, Finance Innovation, an institution dedicated to fostering the financial sector, is establishing a working group to guide the government over initiatives they will need to lead in the blockchain sector. With respect to the jurisdictions that were surveyed outside the United States, in the absence of specific legislation governing the rules surrounding the formation of a contract by electronic means, most countries appear willing to enforce electronic contracts as long as the usual rules of contract formation offer-acceptance-consideration apply.
The law around smart contracts is likewise evolving. Various commentators have surveyed existing law in numerous jurisdictions and concluded that it forms a basis for providing legal effect to smart contracts. For example, in the analysis undertaken by Norton Rose and R3, the writers analyzing US law observed that consideration should be given to how the parties will give assent to the terms of the smart contract, what steps should be followed to ensure the parties have proper notice of the contract terms, and what must be done to bind a party to a contract that is executed electronically.
The authors concluded that if these factors are considered and addressed, courts in the United States would be willing to support automatic contracting. With respect to the jurisdictions that were surveyed outside of the United States, in the absence of specific legislation governing the rules surrounding the formation of a contract by electronic means, most countries appear willing to enforce electronic contracts as long as the usual rules of contract formation offer-acceptance-consideration apply.
In addition, certain jurisdictions in the United States have recognized the enforceability of legal transactions that are fully or partially executed via smart contract programs. Arizona passed legislation prohibiting denial of legal effect or enforceability of a contract solely because the contract contains a smart contract term.
Nebraska and Tennessee have proposed similar legislation. Aside from enforceability, there are other legal issues implicated by smart contract programs. For example, which law will govern and which jurisdiction will apply in multinational smart contracts that are silent on governing law and jurisdiction and where performance is replicated across a distributed ecosystem spanning multiple countries? Will tort concepts apply to contract interpretation when a smart contract goes awry due to bugs or errors in the programming, or in external information fed to the blockchain via an oracle that triggers a smart contract?
What systems can be put into effect to remedy an irreversible result wrongfully or erroneously achieved? These issues and others will be addressed as the technology evolves and proliferates.
It is critical to understand the geographic scope of each transaction. From a multinational legal perspective, privacy, data localization, and outsourcing tend to be the most salient considerations. As data is implicated in all blockchains and smart contracts, we should consider what information is being processed, how it is used, who is accessing it, and where it is being stored and transmitted.
The privacy of personally identifiable information PII is a concern in all regions, particularly with respect to certain types of consumer data and sensitive information. PII generally consists of information that can be used to identify, or is information about, a natural person. Sensitive information is a sub-category of PII and varies by jurisdiction. Laws in the United States generally focus on health and financial information, while EU regulations treat race and ethnicity, political and religious beliefs, genetics and biometrics, health, sex life, and sexual orientation as special information.
These issues may be mitigated by redacting, anonymizing, or encrypting the data being processed in a blockchain ecosystem or storing personal data off-chain. Data localization laws confine or limit the collection, processing, storage, or hosting of certain data related to local activities or individuals in a particular country.
This can be explicitly required by law or the result of policies that render data transfer impractical; such as requiring companies to store a copy of the data locally, requiring companies to process data locally, and mandating government approval or individual consent.
The data impacted by this type of law ranges from PII to accounting, tax, and other business records. China, Israel, Indonesia, Korea, Russia, and Turkey are among several countries with data localization requirements.
Outsourcing is particularly important in Asia, where several jurisdictions, including Indonesia, Malaysia, Taiwan, and Thailand, may prohibit transferring certain activities to another jurisdiction. Where permitted, outsourcing is often subject to stringent requirements.
In addition to service agreement and security measure requirements, the regulator must also be allowed the right to audit and otherwise inspect the financial records of the entity performing the outsourced activities. Hong Kong, Malaysia, Singapore, and Taiwan all require a risk assessment, as well as board and regulatory approval, before outsourcing can occur.
These representative bodies must be consulted by law before the implementation of any changes to process or technology impacting employment terms or working conditions. This would include changes to processes and technology. France is particularly worth mentioning since failure to consult is a criminal offense punishable with large fines and imprisonment.
Careful consideration should also be exercised in joint ventures when introducing new processes and technology. These changes should be considered against pre-existing agreements with local management and typically require the consent of business partners.
When building a private blockchain ecosystem or operating within a blockchain consortium, antitrust and competition laws may apply. Issues of concern include limiting competition between participants, price fixing among participants, and the rules surrounding membership restriction. Although collaboration is key to implementing a successful blockchain ecosystem, it is important to be aware of issues that may expose a member to antitrust or competition law violations.
Last but not least, a global company looking to effect cross-border financial transactions through blockchain must also comply with applicable AML laws where it operates or accepts such currencies. Many jurisdictions do not specifically contemplate blockchain technology at this stage, and regulators in those that do may have concerns around its use to transfer funds from another country.
These countries may either prohibit the receipt of such funds or require additional due diligence on the source. Businesses using blockchain in a multinational context should consider and examine the numerous intellectual property issues. Whether engaging in blockchain ecosystems formed by consortia or outside of that context, ownership and licensing of both newly created and pre-existing materials should be addressed up front.
For example, the parties to the ecosystem should consider whether the newly created work should be solely owned and if so, by whom or jointly owned, in which case the parties will need to determine how they act as joint owners. In each case, an agreement should also expressly state what licenses and intellectual property infringement indemnification will be provided to each party, and whether there will be any periods of exclusivity or other competitive advantage.
The intellectual property rights and protections should reflect the jurisdictions covered by the transactions encompassed by the ecosystem. Parties who participate in beta testing of blockchain products may be asked to provide the consortium or vendor developing the product with ownership or a broad license to any feedback or suggestions provided by the testing participant.
The testing participant may wish to consider whether retaining ownership of its feedback and suggestions is necessary in this context and carefully monitor what information it actually provides to ensure protection of any trade secret or other confidential information. It is also important to remember that most blockchain technologies are open source. An example is the GNU General Public License, in which code linked to the copy-lefted code is then made subject to the copyleft license.
Standards initiatives are emerging to grapple with intellectual property issues implicated by blockchain. The Chamber of Digital Commerce created the Blockchain Intellectual Property Council to promote innovation in blockchain by addressing intellectual property rights issues, including combating the proliferation of patent trolls in this space. ACC has launched a global Blockchain Initiative, which will offer programming and tools to assist in-house practitioners with the wide variety of legal issues arising from the use of blockchain and smart contracts.
ACC has launched a global Blockchain Initiative, which will offer programming and tools to assist in-house practitioners with the wide variety of legal issues arising from use of blockchain and smart contracts. Given the complexities and numerous legal issues implicated by the use of blockchain and smart contracts in multinational business, in-house lawyers should be engaged as business clients begin planning these initiatives, and proactively assist in defining the scope of blockchain use cases and architectural parameters.
This early involvement will enable the in-house lawyer to better advise their clients on the regulatory, compliance, and commercial implications of using these technologies, including the potential need to engage applicable regulators and other governmental bodies.
A distributed ledger is a database held and updated independently by each participant or node in a network. The distributed ledger records the transactions, such as the exchange of assets or data, among the participants in the network.
Blockchain is used herein to refer generally to distributed ledger technologies, although it is but one type of distributed ledger technology. Off-chain and on-chain data and transactions can be linked through various means, such as APIs and hashed blocks referencing off-chain data.
Sean Murphy et al.
Blockchain bill would spur adoption across agencies
According to a Deloitte report, fifty-five percent of a group of C-level executives surveyed said their company would be at a competitive disadvantage if it failed to adopt the technology. The UK Government is also in the game. One thing is for sure, with new disruptive technology come changes to the status quo, and that means the law has to keep up. Blockchain has potentially limitless applications, and therefore the laws that apply to online transactions and communications today will continue to apply to those done using blockchain technology. Some areas where we are likely to see complications with the growth of blockchain and, under English law, the need for decisions from regulators and the courts to provide clarity, are data protection, financial regulation, liability, and consumer protection laws. Careful thought and consideration will need to be given as to how providers of blockchain-based applications can ensure compliance. Depending on how this technology is adopted and the extent of its proliferation, we may see the legal ground of legitimate interests for the processing of personal data expands to include the necessity that arises from the fundamental characteristics of blockchain technology.
Blockchain
Blockchain is increasingly in the news, but still primarily as the underlying software used for cryptocurrencies such as Bitcoin. Many businesses have yet to realize its potential and the extensive ways in which blockchain can be used to make processes more efficient or to develop new service offerings, but momentum is gathering as its applications are more widely understood. This paper takes a high level view of blockchain technology, its practicalities and how it can be applied to the legal landscape while also looking at future opportunities for the technology. This paper is broken out into eight sections that explore what blockchain is and how it is impacting the legal environment. The outline below briefly summarizes each section of the paper. Deloitte Legal is involved in the Deloitte Blockchain Institute which offers an end-to-end portfolio of services from ideation to implementation to make your blockchain vision work. We already have over 20 prototypes in development and combine our legal, technological, talent, strategy and operations expertise to provide fully integrated blockchain capabilities. Download the paper to learn more. Please enable JavaScript to view the site. Blockchain: Legal implications, questions, opportunities and risks Understanding the potential benefits, risks and technology behind blockchain.
How Nevada Is Preparing For Blockchain Technology
By Brandi Vincent. Brett Guthrie, R-Ky. Introduced in a wider legislative package of 15 emerging tech-focused bills from Republicans on the House Energy and Commerce Committee, the Advancing Blockchain Act directs the Federal Trade Commission and the Commerce Secretary to collaboratively investigate the decentralized, distributed ledger technology over the next two years, and subsequently provide a range of recommendations to Congress to help boost American implementations. Included in the package are bills centered on the internet of things, gig economy, tech startups, 3D printing, facial recognition, unmanned delivery services, and more. Frequently associated with Bitcoin and other cryptocurrencies it underpins, blockchain is a technological tool that essentially offers a means to record and validate the provenance of transactions without a centralized authority.
Legal Aspects of the Blockchain Technology
Freeman Law is an innovative thought leader in the cryptocurrency and blockchain space. Blockchain and virtual currency activities take place in a rapidly-evolving regulatory landscape. Freeman Law is dedicated to staying at the forefront as these emerging technologies continue to revolutionize social and economic activities. Virtual and cryptocurrencies are built on blockchain technology —a technological innovation that allows for a distributed, decentralized digital ledger generally built upon cryptographic mechanisms and complex consensus protocols. From a legal perspective, many of the tax, regulatory, and other legal issues associated with blockchain technology and cryptocurrency require an understanding of this underlying technology.
Blockchain & Cryptocurrency
On October 3, , the parliament of Liechtenstein has unanimously voted for the first-ever Blockchain Act in the world. Importantly, the TVTG is focusing on blockchain and tokens in general, rather than emphasizing on cryptocurrency. As such, the act is concentrating on trustworthy technologies TT system that regulates service providers in the token economy. It is worth to mention that Liechtenstein is known as a financial hub in specializing financial services for foreign entities. In this regard, the TVTG would serve as an essential element for the financial strategy of the Liechtenstein government, especially in the token economy as the TVTG guide civil law matter dealing with client and asset protection, which should result in a higher level of certainty for all market participants and encourage more crypto-related investments. Importantly, the TVTG clarifies the general legal certainty for users and TT systems and TT service providers within the token economy, such as generating and storing tokens, but not on the regulation of activities in the financial market.
Through empirical and policy analysis, this Article explores a fundamental disconnect between the statutory objectives of the Securities and Exchange Commission and the actual outcome of its policies in digital-asset markets. Direct legal regulation is not the most efficient primary tool for regulating DEX protocols. Code is. Cardozo School of Law.
Jerry McNerny D-Calif. The Consumer Safety Technology Act was approved in a previous session of Congress, passing the House in September , but was never approved by the Senate and died at the close of the session. By reintroducing the bill and passing it onto the Senate again, McNerny and his co-sponsors, including longtime blockchain advocate Rep. Darren Soto D-Fla. The blockchain bills are one of many in a series of attempts to provide regulatory clarity on digital asset ownership and management.
What's on Practical Law? Show less Show more. Ask a question. Glossary Blockchain Related Content. A digital ledger of transactions or other data that is:. Blockchains may be publicly or privately distributed.
My hope is that this technology mix of blockchain, smart contracts, and digital assets can be a new institution for social scaling, a new way for complete strangers to collaborate without the traditional intermediaries. His research, which focuses on legal technologies, such as blockchain and smart contracts, offers a glimpse into how the law can better serve our needs in the future. Similarly, smart contracts, or self-executing agreements with terms that are coded and stored on a blockchain, are largely unprovided for in Australian legal frameworks.
Very informative. Thanks.
You the abstract person