For many, blockchain is the sole remit of the financial services sector. Which other sectors will be affected?
The application of blockchain technology within the financial services sector is where it all started. The solution of a distributed ledger allowing for peer to peer transactions, proposed by the famous Satoshi Nakamoto, was a result of the financial crises and a way to eliminate dependence on intermediaries in the banking and investments sector who did not act properly. This development hit all financial intermediaries soon after 2008 as they were most at risk of disintermediation. So fintech emerged as the most obvious use case in which many invested and took initiatives. However, this is not the only use case and we see other important developments in logistics relating to transport, non profit projects, health and education records, identity and self sovereignty (allowing us to recapture our personal privacy from the big data companies), regulatory and supervisory processes like anti-money laundering, compliance, legal tech, land registry services and many more. It’s an explosion of innovation which is really impressive.
In what ways is blockchain disrupting the legal profession?
At the moment, disruption is very limited and it could indeed be creating opportunities instead. In the long run, it will have dramatic effects in certain areas of law which could be automated, such as documentation for standard contracts, automated execution of contracts, such as in leases since lawyers will no longer be needed to advise parties (thanks to an easy ‘tick the box’ system) and rents will be paid through the system, without the need for banks to intervene, and tax will be paid in real time through automated calculation technology. What will be left are the more complex disputes, where you need court enforcement which cannot easily be automated. Laws will start being drafted differently knowing there are pre-existing models, confirmed by courts, leaving little space for argument. Lawyers are already seeing the need to learn code only to reflect the law. If the laws come with predefined code already in place, you won’t even need lawyers for that. So, in some areas, the long-term threats are real.
How are you, as GANADO Advocates, catering for this disruption, through your service offering?
GANADO Advocates has been at the forefront of fintech and blockchain developments on the island. We have been working closely with regulatory entities and industry leaders to become fully equipped with legal knowledge in this new sphere and we have also been heavily involved in the drafting of the recently-enacted legislative framework. This shows that fintech is one of the budding areas to which our firm has given considerable priority. The blockchain team has been active within this area from its early days, and has since been assisting clients, local and international, with blockchain-based projects and cryptocurrency enquiries. Furthermore, the same team smoothly interacts and collaborates with other departments within the firm, especially on specific corporate and employment matters as well as on issues relating to investment services. By getting involved, we learn how best to protect our clients and build capacity to advise them in a fast-changing scenario.
As a legal firm, do you also need to build your HR team, and internal knowledge, to be able to cater for blockchain?
In this fast-changing environment, which is constantly presenting unprecedented challenges, it is crucial for our lawyers and professionals to have a good understanding of blockchain technology, be aware of what the fintech and blockchain team are involved in and continue to follow developments in the area. For example, frequent meetings with start-ups and tech entrepreneurs help lawyers appreciate and grasp more the underlying dynamics of the fintech service or product. It is imperative for fintech lawyers to understand how the innovative technology has transformed the traditional legal rights and obligations of both users and service providers, to offer the best possible service to clients. We organise internal training sessions led by lawyers, professionals and special guests on different topics for all GANADO members to support their continuous learning and personal development.
In terms of regulation, how will you be affected?
The biggest development in the area of regulation is what is called “RegTech”. This is using blockchain to carry out regulatory processes from application reviews to money laundering compliance. Technology will work as designed and it can use data from all available sources. It cannot be bribed, threatened or fooled nor can it choose not to decide. It will operate objectively and while it can be manipulated in design, once approved after testing, it will operate efficiently to standard. Our law now imposes systems audits as a condition for certification of any blockchain technology arrangement subject to an application process that enhances its credibility.
You will be present at the Malta Blockchain Summit. In what ways will you be engaging with the attendees?
Myself and other members of the GANADO blockchain team will be attending the Blockchain for Regulatory session on 1st November and will be present on the expo floor throughout the two days of the summit. Dr Leonard Bonello, partner heading the firm’s fintech and blockchain practice, will be speaking on a panel discussion entitled ‘Banking on Bitcoin, Can banks evolve and embrace?’ during the Blockchain for Tokenomics and Cryptocurrencies session on 2nd November at 3.50pm. MBS attendees can contact the attending team via LinkedIn and our Telegram channel GANADO Advocates Blockchain, where our lawyers will be sharing live updates and their contact details throughout the course of the summit.
This interview with Dr Max Ganado was first published in The Times of Malta on Thursday 1st November 2018.