Blockchain technology is changing the world as we know it. Indeed, the investment opportunities it has spawned—namely, cryptocurrency and NFTs—have captured imaginations worldwide.
Headlines about newly minted crypto millionaires and eye-popping NFT deals aside, there are many questions surrounding blockchains (both private and public), including uncertainty about who bears responsibility for maintaining privately-owned blockchains versus public ones that are sustained by way of mining requirements or gas fees.
What we do know for certain is that blockchains (essentially, shared databases that securely store and verify information) have the potential to markedly advance industries, the legal sector included.
Here, we identify 5 major ways blockchains are—and will continue—shaking the legal space.
1. Smart Contracts
The process of entering into binding agreements will transform with the continued adoption of smart contracts—programs that automate the execution of agreements once certain predetermined conditions are satisfied. Essentially, smart contracts are governed by “if/when…then…” instructions written into code and residing on a blockchain. Once the “if/when” (or predetermined) conditions are met, the “then” occurs with computers executing specific actions—say, project funding, purchases and sales and the like. Smart contracts are fast and efficient in terms of execution and benefit from the security and transparency inherent in blockchain technology.
2. Intellectual Property
The way intellectual property is protected is evolving thanks to the blockchain as well. This tech can be leveraged to create records of unregistered IP rights and help track creation timelines. Not only that, blockchains can be leaned on to determine who has previously viewed and accessed copyrighted materials. As a result, advances in trademark and copyright law are clearly on the horizon.
3. Crypto Litigation
As more and more individuals and entities embrace Bitcoin, Ethereum and other cryptocurrencies, crypto litigation will keep on surging. Lawsuits, including those against coin exchanges, are on the rise, as are crypto-related cases alleging false advertising, breach of fiduciary duty and/or fraud. SEC and other regulatory litigation is becoming more prevalent too, as are Department of Justice prosecutions for money laundering offenses. and misinformation lawsuits.
4. Chain of Custody
In the event of litigation—crypto-related or otherwise—blockchains will make “chain of custody” issues more easily reconcilable. In legal parlance, chain of custody is used in both the criminal and civil context to refer to the order in which items of evidence have been handled. An unbroken chain of custody is typically required for documents and other evidence to be considered in court. Blockchain technology will be leaned upon to facilitate the ability to adequately document the chain of custody in court cases nationwide.
5. Enhanced Oversight
The financial instruments produced by blockchains (read: cryptocurrency) will be subject to increased regulation and oversight. Exhibit A is the recent executive order on crypto issued by President Joe Biden. This EO directs the U.S. Treasury Department to assess and develop policy recommendations addressing the rapidly growing digital asset sector and resulting changes in financial markets. The order also encourages regulators to safeguard against systemic financial risks posed by digital assets, among other things. Going forward, we can expect additional EOs providing strategies to best protect consumers, preserve financial stability, enhance national security and address climate-related risks connected to cryptocurrencies and digital assets. Taken together, enhanced blockchain-related oversight will surely be fodder for litigation and related legal work for years to come.
This blog post is not offered, and should not be relied on, as legal advice. You should consult an attorney for advice in specific situations.