Distributed Ledger Technologies (DLTs) have great promise to transform the recording and management of transactions in a variety of areas. DLTs employs a shared, verified database that multiple users can view and use to record transactions permanently. Blockchain is a form of DLTs that uses cryptographic algorithms to validate transactions, which are recorded in “blocks” that ensure no record is duplicated or altered. DLTs eliminate the need for a trusted administrator of a centralized database manager. Instead, copies of data are maintained by multiple nodes across a peer-to-peer network.
Virtual currencies are DLTs that act as code-based mediums of exchange, stores of value and units of account. Virtual currencies, such as bitcoin or Ethereum, are intended to act as a substitute for traditional fiat currency. Some businesses have begun accepting these currencies for goods and services, and globally accessible markets and exchanges have been established to trade and speculate in virtual currencies. Various regulators are considering the appropriate regulation of virtual currencies. While this remains an area in flux, market participants must be cognizant of existing money transmitter, anti-money laundering, securities and commodities laws around the globe.
Smart contracts are code-based agreements that use software to automate the execution and/or enforcement of rights and obligations between parties. Smart contract code may be integrated into a DLT to externalize control of the arrangement, take advantage of standardized terms, and automate execution and payment.
Because the possible applications of DLTs and the decentralized applications (or “dapps”) that contain smart contracts are so diverse, they potentially touch on a broad range of substantive legal areas. Many DLTs, like virtual currencies, are by their nature global, which means that their developers, operators and users must consider the laws of multiple jurisdictions.
Mayer Brown’s global platform is well poised to help clients navigate the complex and novel legal issues presented by DLTs and smart contracts. Our lawyers collectively have the breadth and depth of knowledge to identify, analyze and address the issues presented in nearly every area of substantive law. Some of the key areas we advise on include:
- Technology Transactions
- Trade Receivables Finance
- Real Estate and Mortgages
- Bank and Insurance Regulatory
- Anti-Money Laundering Compliance
- Payments Solutions
- Money Transmitter Compliance
- Customer Protection
- Securities and Commodities
- Initial Coin Offerings
- Secondary Market Trading
- Digital Asset Custody
- Commodity Delivery
- Intellectual Property
DLTs and particularly Blockchain are making waves across the financial services sector and will affect a broad range of legal areas. Mayer Brown is positioned to help clients face this disruption with confidence.