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Blockchain: Legal implications, questions, opportunities and risks
Understanding the potential benefits, risks and technology behind 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.
Learn more about blockchain
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.
What is blockchain?
- At its simplest, blockchain involves recording information in a way that creates trust in the information recorded.
- This provides value to users because it creates a transparent chain of data, eliminating the need for intermediaries and other third parties, while being both safe and cost efficient.
- Since blockchain records are immutable, it is essential that the technical requirements are established up front.
- Legal input is essential to understand what requirements must be fulfilled or avoided and any regulatory frameworks must be complied with.
- As such the name smart contracts is a misnomer: they are neither smart (there is no cognitive component), nor a contract in a legal sense. Why then are they a useful element in blockchain?
- There are many possible legal applications for blockchain. While legal uses of blockchain are still being explored, a number of practical functions are being utilized.
- Blockchain participants need to be aware of the legal ramifications of the solution they are using including public law, private law, criminal law and financial and regulatory law.
- A number of solutions are being explored as lawyers wrestle with the legal implications of blockchain.
Global trade aspects
- Parties trading globally need higher supply chain visibility and security, data that is both high quality and secure, and trade compliance systems that can cope with electronic exchange of data. Technologies such as blockchain allow businesses to cope with these challenges.
What is next?
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.