As blockchain technology matures, there will be a wide range of legal challenges. The industry needs specialized law firms who can give advice to both, the private and the public sector. Liechtenstein’s present-day blockchain ecosystem already includes law firms, but more will be needed soon.
There are two kinds of lawyers, those who know the law and those who know the judge.
… Just joking. Please don’t sue me 😉
We need lawyers. There are a lot already, but depending on the country barely any who are specialized on blockchain-related issues.
The blockchain industry in 2018 often reminds of the internet industry in the early 90s, when the technology was still in its infancy. And just like in the 90s, the fast pace of technological change creates a legal limbo for corporations and users.
That’s why regulators around the globe have started to introduce laws and regulations for the industry. But new laws are often far from being perfect. They come with many legal loopholes and leave room for interpretation.
It’s a bit like walking through a swamp right now. Both, businesses as well as governments just carefully put one foot before the other and test the ground.
On the one hand, the lack of legal precedent and blockchain-literate law firms makes it hard for blockchain companies to clearly understand their legal rights and responsibilities. As a result, they often just try things out and test if they can get away with it.
One the other hand, governments don’t really understand the technology. So they just sort of go with the flow and see what happens. Or they simply outlaw the technology so they don’t have to deal with it. Problem solved? Not really.
The industry needs specialized law firms
In terms of regulatory legislation, Liechtenstein is at least one step ahead compared to the rest of the world. The Blockchain Act will be put into force in early 2019 and will create a legal framework for the industry.
That’s a step in the right direction, but blockchain firms will need help applying these new laws. Especially tech start-ups do often not have the legal expertise to clearly understand the legal side of their business.
Thus, the industry needs more specialized law firms that are able to give solid and up-to-date legal advice.
“The Internet forced attorneys to better understand copyright law,” says Aaron Wright, associate clinical professor at Cardazo Law School. “Similarly, blockchain will require a better understanding of securities law and an understanding of the underlying technology of smart contracts.”
Blockchain will create legal challenges
So far, blockchain businesses have mostly been left alone by regulators and law enforcement. As the industry matures, that will certainly change.
One major legal question is the application of data protection laws. Sure, blockchain offers a very secure way to store data. But data breaches are possible. And then what?
How can a user or a blockchain company take legal action in case of a data breach? What about fraudulent ICOs? What if someone steals Bitcoin from my wallet, who bears the responsibility?
Furthermore, many blockchain applications use smart contracts – encoded contract terms which execute automatically once a certain contract condition is met. As smart contracts will become more common, the blockchain industry will need specialized attorneys who can work out the legal aspects.
Besides the contract terms itself, there is also the question of jurisdiction and legal enforcement. Blockchain technology is borderless, so which laws apply?
Then there is the whole cryptocurrency space. From KYC and AML rules, cross-border taxation and business licensing to corporate accounts – crypto-companies will need legal assistance.
The list goes on: supply chain auditing, managing digital identities, STO and ICO consulting …
Blockchain is said to disrupt nearly every industry, and it will create entirely new ways of conducting business transactions and structuring business processes. That comes with many legal challenges.
Liechtenstein’s law firms
Law firms form a crucial part of Liechtenstein’s blockchain ecosystem.
Thomas Nägele at Nägele Law in Vaduz is one of Liechtenstein’s blockchain-law pioneers. He has gained an international reputation for consulting blockchain-related businesses. His work is regularly featured in international publications and he is actively involved in industry debates surrounding the legal challenges.
Another address in Liechtenstein is Matthias Langer at Actus-AG in Vaduz. His expertise includes cryptocurrency investments and crypto-taxation.
Klaus Stark at Ganten Group is an expert for blockchain business licensing in Liechtenstein and offers local trustee services.
Hence, there are some specialized law firms, but more will be needed soon. The industry grows rapidly, and so does the need for legal advice.
The blockchain industry needs to learn from mistakes made in the 90s
The recent data scandal at Facebook has made it obvious that there are complex legal issues in the internet-industry that have never been addressed in a proper way. That is also due to the fact that nobody has really thought about it at the very beginning.
These mistakes can be avoided. And the best way to do this is if not only governments, but also law firms start picking up the trend early (Now!!) and create the legal expertise needed to establish a solid legal foundation for the industry.