The SRA has today published a Risk Outlook report focusing on distributed ledger technologies (DLTs), such as blockchain-based cryptocurrencies and their implications for legal services providers.
All types of businesses are utilising new technologies all the time and the legal sector is no exception. While not every firm will be at the forefront of use and development for a whole host of reasons, some technologies might be unavoidable as they become the standard for the industry.
These have a high potential to benefit firms and their consumers. However, issues such as the anonymity of current cryptocurrency systems do pose risks. Every firm should weigh up the pros and cons of new technologies before investing in new systems.
DLTs refer to a network or database where all participants can verify transactions or ownership within the network. Just as a typical ledger is a collection of financial accounts, DLT has a digital ‘record of consensus’ with an audit trail. The most common current form of this is blockchains. These systems are now widespread, and will continue to grow.
These are topical and fast developing areas. Some law firms are already using blockchain technology to increase their efficiency and verify transactions – which might support firms to improve or expand their services.
The implications of these systems will vary by firm size and sector but solicitors have many reasons to consider how they might impact their and their clients’ businesses. For example:
- The Law Commission has confirmed that smart contracts can be used in England and Wales and is proposing law reforms for other digital assets such as non-fungible tokens (NFTs).
- Some law firms might also be asked to advise on legal issues related to cryptoassets. In July 2022 it was announced that the Law Commission plans to publish proposed legislation on the legal status of cryptoassets.
- The Master of the Rolls, Geoffrey Vos, has described them as being at the same stage of development as the internet in 1995.
- LawtechUK expects that non-lawyers and venture capitalists will take a greater role in developing and funding legal tech startup companies.
