By Eric Devaughn
On Saturday, March 31st, 2019,at Bushwick Brooklyn, there was a day long Meet and Conference on Computational Law. It was sponsored by Legal Hackers, hosted by Emerick Patterson. The focus of this lawyer conference was to discuss how current law and regulations pertain to Blockchain technology in its current form and what evolutions may occur in the Blockchain and what regulations may be expected from the Securities and Exchange Commission. (SEC).
As Emerick Patterson said, “The law is marbled into everything”
Participating as panelists were Professor Jonathan Askin, Brooklyn Law School. Daniel A. Nathan, Partner, Orrick Law Firm. Jorge Pesok, Managing Associate, White Collar, Investigations, Securities Litigation & Compliance, Blockchain and Cryptocurrency. Lisa Lefever, Compliance and Operations, LGO Markets.
As moderator asking questions of the panelists was Steven S. Nam of Stanford University, Journal of Blockchain Law and Policy, Managing Editor. Discussed were many aspects of digital and computational law with the audience asking many insightful questions. Mongkol Thitithamasak, Founder and CEO of Yezcoin.com, an audience participant, brought forward a question that with the increasing use of Blockchain to store a variety of data including personal information, whether the panel thinks Blockchain will help companies to comply with GDPR. Prof. Askin replied that Blockchain should be able to enhance privacy in Europe. The exception is the right to be forgotten. This is the third rail issue. There should be some work around exceptions on this issue.
Lisa added that from her recent experience working with vendors, her clients needed to provide customers’ information to a vendor for processing. To ensure that her clients complied with GDPR, the question was raised whether the vendor can delete customers’ information in 14 days. In the crypto trading application, the aspect of what is to be stored on-chain or off-chain needs to be considered to ensure no customer’s personal information is stored on-chain.
Also discussed were developments in States of Wyoming and Vermont regarding new Blockchain policy. Prof. Askin shared that Wyoming and Vermont want to become the forefront of Blockchain States by enacting state law to recognize LLC as legal entities for Blockchain technology. Delaware may not be far behind. Daniel A. Nathan from Orrick Law Firm joked “It is the only time you will hear Wyoming and Estonia in the same sentence”.
In the presentation regarding DAO, (Decentralized Autonomous Organization), the speaker showed a flowchart with her vision of what organizational structure, rights, responsibilities, obligations, a DAO should have in order to be accepted internationally. The audience was invited to give their input. Mongkol Thitithamasak proposed not to limit DAO to only anonymous participants for there are many useful instances associated with identity and fair voting rights (One person, one vote). Emerick Patterson added that it is useful to allow flexibility to the definition of participants in a DAO. He proposed to have 3 categories of participants: 1) participants who are not required to prove any forms of ID 2) participants who are required to show government issued ID 3) participants who are required to present non-government issued forms of ID
The panelists agreed that the S.E.C., which has become the regulatory agency that blockchain technology falls under is deliberately slow to issue new regulations and guidelines in order to let the new technology and applications grow, rather than stifle this area prematurely. They will deal with the bad actors once revealed, over time.
Prof. Askin lamented that the changing of Administrations from Democrat to Republican and back, the regulatory agencies of the S.E.C., D.O.J, F.T.C. and Treasury will flip flop regulations. As a follow up I inquired to Emerick Patterson, given his past political experience with Congress, whether Congress would pass meaningful regulations regarding Blockchain technology and Computational Law. He responded “Not meaningful regulations”,
“Not likely, not in this polarized political environment...not for a very long time”
Prof. Askin shared a story of two MIT engineers inviting him to work on a project that would digitize legal contracts using AI technology. It was a dilemma feeling he would be working on a project that would take away jobs from his students; however, he realized the inevitable benefits of working on this project and preparing his students for this disruptive technology. “It is better to keep your enemy close”. He said that computer code and the law are two opposites that need to come together. Computer code is a series of zeros and ones and the law is the gray area between all those zeros and ones.
Daniel A. Nathan from Orrick Law Firm said “In the heady days of 2017 it was let’s use the Blockchain for everything.” “In 2019 you don’t hear that anymore.” He suggested that companies keep it simple and stick to what they know and what they have in house. If it can be done with traditional technology, don’t complicate themselves with Blockchain. If they need to use Blockchain, prepare legal matters in advance. He also pointed out the contradiction where cryptocurrencies first came out as a security but later on classified as a non-security.
Jorge Pesok, from Orrick Law Firm stated that “whereas two years ago tokens were used for two purposes, not they are used for ten purposes”. The Blockchain is evolving rapidly on its own so it is difficult to issue regulations while it is evolving. You don’t need regulations to be a knee jerk reaction, not well thought out.
As a Compliance and Operations attorney, Lisa LeFever shared her experiences helping her clients to comply with KYC (Know Your Customer) regulations. She gave another example of where clarity is needed to comply with corporate fund management (multi-signature approval to move funds in the Blockchain era)
It was a spirited discussion with more questions than solid answers. The collapse of the ICO market had many asking “What is next, over what time frame?” Stated best by Professor Jonathan Askin “It's like re-engineering the bicycle while you are still riding the bicycle.”
Link to the meetup event https://www.meetup.com/BushGen/events/258769006/
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