By Michael Cross October 16, 2017
A Swansea dentist is the first property buyer in the UK to exchange contracts digitally in a process which its promoters claim has the potential to remove the need for solicitors in transactions. The buyer acquired a £700,000 commercial property in Trowbridge in an online deal secured by blockchain digital encryption technology. This is a system for rendering blocks of data tamper-proof by distributing them across ‘shared ledgers’. It is best known for underpinning the bitcoin virtual currency.
Blockchain is also being investigated by law firms and insurers as a way of creating ‘smart’ contracts, the terms of which are activated automatically on receipt of trigger information.
The Trowbridge transaction was conducted through Clicktopurchase.com, which was set up by London property investment agency Singer Vielle. The agency already conducts sales online, secured with electronic signatures compatible with the European eIDAS regulation. However chief executive Neil Singer said that blockchain could transform the process by securing all details of the transaction in a tamper-proof form and that blockchain is a ‘game changer’.
‘It is a technology which will bring speed, ease and certainty. It makes a process more efficient and removes intermediaries,’ Singer said. Last week’s purchase was completed three days after the property went on the market, in a transaction that was recorded across a blockchain-secured shared ledger in four seconds.
More at: Blockchain deal bodes ill for conveyancers – Law Society Gazette
By Sean Lawless October 10, 2017
Considering the recent Equifax data breach which put an estimated 145.5 million American’s identity at risk, main stream media outlets are starting to ask an important question; if we can’t stop data breaches, how do we project our identity? According to data from the Identity Theft Resource Center, U.S. companies and government agencies have disclosed 1,022 breaches in 2017 so far. The idea that the social security number is the foundation of our identity is under more scrutiny than ever. Bloomberg reported recently that the Trump administration is considering ways in which it can replace the social security number as a means of federal identification. So, can blockchain technology solve our identity management (IDM) problem?
More at: Is Blockchain the Answer to Identity Management? – JDSupra
By Roy Keidar and Netanella Trreistman, Yagal Arnon and Co. October 8, 2017
An Israeli District Court recently ruled that Israeli banks are not obligated to provide financial services to companies whose primary business is trading in cryptocurrencies, such as Bitcoin or Ethereum. The Court reasoned that banks should not have to assume the risks associated with providing a financial platform to these digital currency businesses when the leading Israeli authorities on the subject, namely the Central Bank, the Securities Authority, and the Anti-Money Laundering and Terror Financing Authority, themselves have been struggling to delineate clear measures to minimize them.
One of the primary risks Israeli authorities and other regulators around the globe noted is the pseudo-anonymous nature of cryptocurrency holdings. Regulators view the digital token transfer method as a “black box”, low in accountability and virtually impossible to subject to existing anti-money laundering (AML) and anti-terror financing regulations. However, built-in features of cryptocurrencies, specifically their underlying blockchain technology, have the potential to improve, not harm, AML efforts, even surpassing mechanisms already in place today.
More at: How blockchain could end, instead of enable, money laundering – VentureBeat
What happens when someone breaches a contract?
If you’ve gone through all the rigmarole of developing a paper contract, the legal ramifications are clear. But paper contracts are not only inefficient but also prone to fraud, which is why a group of startups and developers are pushing digital “smart contract” systems tied to immutable blockchains.
But what if someone breaches their smart contract? The answer, in most places throughout the world, is less clear. That is, unless you’re in Arizona.
Since passing a law in March that enshrined the validity and enforceability of digital signatures recorded on a blockchain, the Grand Canyon State has quietly emerged as a choice location for blockchain companies that develop applications based on the self-executing pieces of code.
For Sweetbridge, a Phoenix-based outfit building a blockchain supply chain finance platform, the law has afforded the company sufficient legal clarity and confidence to begin rolling out operations more aggressively.
Caroline Lynch, Sweetbridge’s public policy and legislative advisor, explained that the state’s decision to elevate smart contracts to the same legal grounding as traditional contracts has been imperative to the company’s growth.
Lynch told CoinDesk:
“It takes away that one potential area for dispute, if for no other reason than a party to a contract cannot argue that because it was executed through a digital ledger it lacks validity.”
More at: Only in Arizona: How Smart Contract Clarity Is Winning Over Startups – CoinDesk
The U.S. Securities and Exchange Commission (SEC) has recently taken several actions to make clear that it is focused on and actively monitoring the rapidly growing market for so-called “token sales” or “initial coin offerings” (ICOs).
- On July 25, 2017, the SEC issued: an investigative report; an investor bulletin; and a joint statement by the Divisions of Corporation Finance and Enforcement regarding their conclusion that certain ICOs may be securities under federal securities laws, and cautioning issuers and investors with respect to investments in ICOs.
- On August 24, 2017, the SEC contacted an ICO issuer regarding that issuer’s ongoing token sale. According to the issuer’s website, the issuer subsequently determined to cancel the ICO and refund all proceeds raised.
- On August 28, 2017, the SEC issued an investor alert, warning about companies making ICO-related claims. The investor alert reports that the SEC imposed trading halts on four companies in connection with claims regarding investments in ICOs or other coin- or token-related news.
- On September 5, 2017, Steven Peikin, Co-Director of the SEC’s Division of Enforcement, in remarks to a conference at New York University,1stated that the SEC has a number of ongoing investigations into potential fraudulent activities by companies in the blockchain and digital currency space.
More at: SEC Focuses on Initial Coin Offerings: Tokens May Be Securities Under Federal Securities Laws – JDSupra
Recently, BlockMason published an article about potential SEC regulation of ICOs, explaining the difference between product-use tokens (safe) and investment-tokens (unsafe). Now, it seems the SEC has finally made good on their promise to shut down the sale of tokens that they believe comprise securities, and therefore fall under SEC regulation. The victim of the SEC’s flexing: Protostarr, who closed shop midway through their ICO after federal investigators called CEO Joshua Gilson and asked a few too many questions.
For better or worse, this is the imminent future of ICOs for the Ethereum community. Any token sales that are not carefully vetted, do not offer product-use tokens for actual products, or do not follow the rules for investment tokens that are securities, will be shut down by the SEC. Purchasing such tokens is NOT SAFE, and customers should make sure to carefully research all tokens before buying. While Protostarr has refunded their investors after shutting down, not all companies may be so scrupulous.
More at: SEC Shuts Down Protostarr ICO: When the Bodies Hit The Floor – Blockchain News
Much has been written on blockchain recently, even in legal. We continue our series with Mark Oblad, VP, Legal and Finance at JW Player, who has coded a number of tools for automating transactions. Last time we talked about open source and industry source of information for contracts here. This time, we look first at smart contracts. The concept of the “smart contract” has taken hold and is becoming increasingly the focus of legal technology groups, such as the Computable Contracts Initiative at Stanford Law School’s CodeX, Cardozo Law School’s Tech Startup Clinic, New York Law School’s Center for Business and Financial Law, law.MIT.edu, and Computational Legal Studies.
More at: Legal Technology and Smart Contracts: Blockchain & Smart Contracts (Part IV) – Forbes Entrepreneurs #NewTech