Blockchain technology has unleashed a revolution across various industries, introducing a new digital landscape with far-reaching implications. In our latest Class Actions Shieldcast episode, we had the opportunity to discuss the intricacies of blockchain and its legal ramifications with Matt Green, Blockchain Litigation Lead at Shoosmiths.
This blog post provides a summary of the key points shared during the conversation, shedding light on what this emerging technology is, as well as the challenges and opportunities lawyers face when navigating this developing and complex market.
What is covered in this article:
- Understanding blockchain technology
- Legal challenges in the blockchain market
- Opportunities for law firms
- The role of litigation lawyers
- Areas of growth in the market
Understanding blockchain technology
Blockchain technology is a buzzword at the moment, and whilst that means a lot of people have heard of it, they may not truly understand what it is. We asked Matt to answer the most basic question at the very beginning of the discussion to set the context and clarify some of the complexities of this subject matter: what is blockchain technology in its simplest form?
I asked Matt to give us a clear definition and explanation of what blockchain technology is. He broke it down into four key characteristics:
1. It’s an immutable ledger of transactions.2. It’s decentralised. The information is not hosted on a single individual place but held and verified by a network and group of people, in servers called nodes.
3. It’s permissionless. Noone needs permission to view it. It’s open to all.
4. It’s stored cryptographically into blocks.
Legal challenges in the blockchain market
Matt provided an overview of the key areas of the market that are at the forefront of his practices as a blockchain litigation lawyer. He said, “the market is busy, and you really need to keep up with it all. It can be challenging to keep up with the varying positions in law”.
1. Fraud:Matt called this his “bread and butter”. Fraud, scams, and misappropriation of funds pose significant challenges in the blockchain market – in fact, Matt quoted it to be to the sum of $20.6bn. According to a Chain Analysis report, illicit transaction volume rose for the second consecutive year hitting this all-time high. Addressing these issues and helping affected individuals recover their crypto assets are now critical aspects of legal work in this field.
2. Decentralised Autonomous Organisations (DAOs): DAOs are novel structures that allow voting and decision-making within an organisation. Token holders possess voting rights, enabling them to shape policies and make decisions. Part of our conversation about DAOs centred around the question of whether they are democratic because of this system. Matt argued that it’s more like “people with equity making decisions for a company”. Where this becomes tricky is around the determination of liability. Matt cited a case in the US against the cryptocurrency Ooki where it was recently determined that any Ooki token holder who has participated in DAO governance votes is liable for the DAO’s conduct.
3. Regulatory frameworks: Regulation within the blockchain space is still evolving globally. In the European Union and the UK, frameworks like MiCA aim to robustly regulate crypto asset activities. Governments are striving to bring clarity and confidence to consumers and businesses alike, regulating financial promotions, consumer rights, securities, and financial products. Determining the classification of Non-Fungible Tokens (NFTs) is also a significant consideration. Matt looked to the case of NBA Top Shot NFT basketball cards being classified as securities in the US as a consideration – we will see if this trend is adopted in other jurisdictions.
4. Intellectual Property and NFTs: With a background in intellectual property law, Matt is closely watching the developments in NFTs and monitoring how the intersection with trademarks and copyright is playing out. This area sparks discussions on ownership, licensing, and transparency for rights holders. Last year, the EU Parliament released a paper on this subject exploring the potential of distributed ledgers to ensure transparency and authenticity in tokenised art and other intellectual property domains. It is still a developing space, and I think there will be more use cases coming to light in the coming years.
Opportunities for law firms
Law firms are adapting to the blockchain revolution, recognising the need to future-proof themselves. By understanding blockchain technology and adding value to the industry, law firms can establish themselves as leaders in this emerging field. The current market offers substantial business potential, which is expected to grow further as blockchain technology continues to disrupt multiple sectors. Matt said: “[Blockchain litigation] is new, and if you can jump on it early and understand it and add value to the industry, then it's a great place to be.”
The role of litigation lawyers
Litigation lawyers specialising in blockchain and crypto disputes play a pivotal role in assisting clients who have fallen victim to fraud or scams. Their primary objective is to recover lost assets and pursue legal remedies on behalf of their clients. As civil lawyers, they are dedicated to advocating for clients and pursuing monetary compensation for legitimate losses caused by fraudulent activities or scams.
Areas of growth in the market
Throughout our conversation, Matt unearthed three key areas of change and growth in the market which may present new opportunities for lawyers, as well as other key stakeholders across the blockchain space.
1. Learning, developing and deploying – As this technology matures, and more people learn about it and comprehend its power, we will see its applications expand far beyond cryptocurrencies. In this episode, Matt called out videogaming, the metaverse, transport, and logistics as prime sectors for deploying this technology.
2. Regulatory frameworks – While I have already touched on this in this article, it is a critical part of the evolution of the market. Regulation can change everything around how companies and consumers interact and behave. In particular, the role of consumer protection will be a turning point in the UK and how the government delivers on its promises to set out “ambitious plans robustly regulate crypto asset activities” after its consultation this year.
3. Funding – A new opportunity that Matt is working on is developing is a funding solution for this area of the market, his words, “to allow people to recover assets who can't otherwise do it. To unlock a market that is currently unavailable”. His work over the past few years has proven that digital asset recovery is possible: “It’s tried and tested, and people can get their money back”. We will see where this goes as Matt develops conversations with funders to bring this idea to life and offer this service to vulnerable people who need financial support.
Blockchain technology has brought forth a wave of change and continues to bring new opportunities as well as disruption to our day-to-day lives. As this complex market continues to evolve, Matt highlighted the importance for legal professionals to stay informed and keep a watchful eye on key areas of growth and explained the value of law firms positioning themselves as pioneers in this transformative era, providing value and solutions to their clients in the blockchain and crypto space.
This is just a short summary of our conversation – there are plenty more insights and in-depth explanations from Matt embedded throughout our podcast episode. If you want to listen the full session, you can stream the conversation here.
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