Ricci Dipshan, Legaltech News
As legacy tech firms look at
bringing blockchain technology to the market, legal tech experts caution
against a "one size fits all" attitude.
The move to develop blockchain
technology—which uses cryptographic hashing to "timestamp" and
validate transactions—for a host of financial, legal and security processes
received yet another boost this year when a major tech player entered the
innovation fold.
IBM recently announced plans
to open a blockchain innovation center in Singapore to foster collaboration between
government, academic and industry officials in creating blockchain and
artificial intelligence-focused enterprise solutions.
The move comes just months
after Deloitte announced a partnership with blockchain
technology providers to develop 20 blockchains for processes such as digital
identity, digital banking, and international payments.
In a statement announcing the
center, Robert Morris, vice president of Global Labs, IBM Research, noted that
"this is IBM's first collaboration with the private sector and multiple
government agencies within the same country to explore the use of blockchain
and cognitive technologies to improve business transactions across several
different industries."
He added that "with new
cloud services that make these technologies more accessible, leaders from all
industries are beginning to take note of the resulting profound and disruptive
implications in a range of settings including finance, banking, IoT, health
care, supply chains, manufacturing, technology, government, the legal system,
and more."
For its first few years, the
center's staff, which includes Singaporean experts and researchers from IBM
Research Labs worldwide, will engage with small and medium-sized companies to
create blockchains applications for use in finance and trade. The effort will
build on IBM's work in the Linux Foundation Hyperledger platform.
While many of those
applications, such as blockchain contract tools, can be easily transferred and
applied to the legal field, Peter Hunn and professor Houman Shadab, co-founders
of Clause, cautioned that the legal industry should not take a "one sizes
fits all" approach with the technology.
"In the contracting
space, there is a lot of good work being done by startups. But it is an area
that is blighted by a lack of semantic clarity," Hunn and Shadab jointly
said in an email. "As an industry, there is a real need to address what we
mean by the term 'smart contract.' It is a term that has been appropriated to a
degree by blockchain technologies. Whilst these scripts on the blockchain
certainly have contractual features, the term itself is something of a
misnomer, at least to lawyers."
While "legal contracts
will likely increasingly interface with blockchain technology, what that will
look like is not clear—that is why interoperability and modularity are
key," they said, adding, "The importance of modularity is the ability
to use the blockchain where it makes sense and not where it doesn't."
At Clause, Hunn and Shadab's
team "are building an infrastructure that provides the core benefits of
smart contract functionalities and blockchain technology to legal contracts in
a truly innovative way. We are completely open and modular without relying on a
mined blockchain or, indeed any distributed ledger technology, to function. I
think it is a mistake to become wholly wedded to blockchain technology unless
that technology itself is the inherent solution to a given problem."
While contracts will be
changed by blockchain technology, they believe "that this may not be as
radically impacted as some think. The executionary functionalities of
blockchain will most likely find their way into contracts—and most immediately
through a hybrid structure in which a portion of the terms are represented in
natural language and the portion amenable to representation in code will be
represented through blockchain-based smart contract scripts."
How much blockchain technology
will comes to define legal tech, Hunn and Shadab added, depends on how much it
is able to demonstrate benefit, either through "instances where the
technology provides an obvious and inherent functional benefit," or
through "instances where it is driven by the adoption and maturity of the
technology in other areas.
One area that blockchain
provides obvious benefit, they noted, is regulation. But adoption of
"regtech" solutions that use the technology, "will be driven by
the ease of which new solutions can be integrated into enterprise. This will
take time, but will be accelerated by the manner and speed at which public
institutions adopt the technology."
Yet, "we should not be
trying to shoehorn blockchain into applications where it just does not fit or
does not provide an appreciable benefit," Hunn and Shadab added.
"Those may come in time if, and in many instances when, distributed
applications become the status quo. I think blockchain or a blockchain-inspired
technology will play a significant part in the tech infrastructure of tomorrow.
What part and how is part of the excitement that, naturally, is liable to
hype."
But while "adoption of
innovation always takes time," they said, "Legaltech has lagged
behind other areas of technology so the benefits blockchain will likely
bring—where appropriate—are overdue."
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