Blockchain seems a world away from where the financial services industry, investors, and IT play. But, the truth is that just like the internet was in the mid-90s, it may be reaching your firm sooner than you think.
So what is blockchain (in LEGO language)?
There are many articles and deep reading on the topic authored by many experts. Here is a simplistic take on this using an old favourite – LEGO. Imagine an unlimited LEGO base, where you add blocks on top of the other, but before the next block is added, all the players need to agree on the block added. Once blocks are added on top of another; it is difficult to change the LEGO blocks in a stack, as opposed to a situation where one player can easily change the blocks.
Information added to a blockchain, independently verified and stored without the ability for anyone to easily corrupt this information. Again this is a very simplistic explanation of a complex concept and framework.
Why do law firms need to know about blockchain?
As referenced in the National Blockchain Roadmap – “Gartner predicts that blockchain will generate an annual business value of over US$175 billion by 2025 and in excess of US$3 trillion by 2030. By 2023, blockchain will support the global movement and tracking of US$2 trillion worth of goods and services annually.” With those sorts of numbers, there could be some significant implications for law firms in the laws they help shape, systems used, the ecosystem they work in, how firms support their clients, and how payments are made.
How may blockchain impact law firms in the future?
Law firms around the world have already started to reap the benefits of blockchain. Here are some areas that may impact law firms in the future.
Accepting cryptocurrency as payment
Australian firms such as Piper Alderman, Chamberlains, and a raft of other firms already accept cryptocurrency such as bitcoin payments from clients. So what implications does this have for software suppliers of accounting and practice management systems?
Law firms supporting clients
Given the increasingly large number of transactions on the blockchain and likely disputes, this will generate demand for support from law firms in this area. Examples of law firms offering these types of services for clients can be found on Crypto News Australia.
Given the high demand for lawyers with specialties around M&A and other commercial areas, firms will tap into the pool of location-independent legal consultants (legal nomads). So that payment is more straightforward, and there are fewer transaction fees, payments will be made in cryptocurrency. So, for example, a lawyer hired in a South American country by an Australian firm. The easiest option will be to pay the consultant in cryptocurrency. Of course, advice would be needed from experts on each jurisdiction and any issues posed.
Efficiencies in providing legal services and processes
Blockchain software firm ConsenSys have listed several use cases for the legal industry, such as:
- Smart contracts; where terms and conditions can be codified, the process is automated, and an immutable record of the transaction for all parties to see. There would be a significant reduction in costs for each party.
- Electronic signing; where the cost of signing contracts can be in cents vs dollars
- Intellectual property; which allows creators of IP, whether that be content or a product, to upload, register, and time-stamp their original work on a public ledger to create a proof of ownership
- Registering, buying and selling property; property owners could elect to register and sell their properties on the Blockchain in a transparent and immutable way. As a result, there may be a cost reduction in transacting sales.
How the pandemic may be the catalyst to drive blockchain adoption
The pandemic has necessitated some significant changes in the way that legal work is performed. With the move from paper to electronic, face-to-face to virtual, and the explosion of collaboration tools in the legal industry. Around the world as governments have had to legislate to allow digital signing temporarily, in some cases, which have become a permanent fixture. Recently in Australia, there have been changes in allowing ASIC documents to be signed electronically.
Is the change to online and virtual the opening that blockchain needs to become even more embedded in the legal industry? One of the challenges is the onboarding of business and individuals on the blockchain – will vaccine passports, KYC requirements, or other events be the catalyst for this? With blockchain, like any forthcoming changes, obtaining the best advice from experts and planning is vital.
Look out for future articles where we interview blockchain specialists, legal technology providers, and leading law firms specialising in blockchain and cryptocurrencies.