Beyond Bitcoin: Issues in Regulating Blockchain Transactions

The buzz surrounding Bitcoin has reached a fever pitch. Yet in academic legal discussions, disproportionate emphasis is placed on bitcoins (that is, virtual currency), and little mention is made of blockchain technology—the true innovation behind the Bitcoin protocol. Simply, blockchain technology solves an elusive networking problem by enabling “trustless” transactions: value exchanges over computer networks that can be verified, monitored, and enforced without central institutions (for example, banks). This has broad implications for how we transact over electronic networks. This Note integrates current research from leading computer scientists and cryptographers to elevate the legal community’s understanding of blockchain technology and, ultimately, to inform policymakers and practitioners as they consider different regulatory schemes. An examination of the economic properties of a blockchain-based currency suggests the technology’s true value lies in its potential to facilitate more efficient digital-asset transfers. For example, applications of special interest to the legal community include more efficient document and authorship verification, title transfers, and contract enforcement. Though a regulatory patchwork around virtual currencies has begun to form, its careful analysis reveals much uncertainty with respect to these alternative applications

Racing to Regulation: A Comparative Analysis of Virtual Currency Regulation in Alaska And the Proposed Alaska Money Services Act Carlos Manzano

The emergence of virtual currencies has revolutionized the financial industry by creating an alternative form of payment that seeks to insulate individuals from government and bank influence. Yet, federal regulation of virtual currency has remained limited. Many state legislators have rushed to fill the gap by enacting laws regulating virtual currency use and transmission. This state-by-state approach has led to significant variation between state regulatory regimes, creating a regulatory spectrum of lenient to strict regulatory approaches. In March 2017, Alaska House Representatives Zach Fansler and Sam Kito proposed the Alaska Money Services Act to require licensing for virtual currency activity. The bill’s proposed requirements lean towards the strict side of the regulatory spectrum, bringing the potential to drive virtual currency businesses away from Alaska. This Note proposes that Alaska legislators enact virtual currency legislation that adequately balances technological innovation with consumer protection through several recommendations, including: (1) enacting virtual currency-specific legislation rather than importing regulation into existing and outdated laws, (2) clearly defining the legislation’s scope, (3) collaborating with stakeholders in enacting legislation, (4) including an on-ramp to ensure emerging startups are not overly burdened, (5) tailoring the level of regulation to the level of risk a virtual currency business poses to Alaska consumers by tiering requirements to transmission volume, (6) requiring only relevant information in the application, and (7) reducing agency discretion to revoke licenses

Cross-Border Securitization: Without Law, But Not Lawless

The Article discusses two puzzles posed by cross-border securitization. First, why do the innovators in this area give away their creations through publications and other means rather than attempt to extract licensing fees by registering copyrights, patents, and trade names? The Article shows that innovators benefit from giving away their innovations through fees of the first clients or future clients to a greater extent than through licensing fees. Second, how can securitization markets develop under fragmented and unpredictable laws? The Article argues that cross-border securitization is flourishing under a law merchant, which is later incorporated into domestic laws. In fact, innovations and standardization of law are developing in tandem and the same professionals that innovate are those that work on standardization of the law. The Article concludes that cross-border securitization serves as a case study of legal change from the bottom up, rather than from the top down

Mitigating the Legal Challenges Associated with Blockchain Smart Contracts: The Potential of Hybrid On-Chain/Off-Chain Contracts

Tantamount with the increasing application of blockchain technologies around the world, the use of blockchain-based smart contracts has rapidly risen. In a “smart contract,” computer protocols automatically facilitate, verify, and enforce arrangements made between parties on a blockchain. Such smart contracts offer a variety of commercial benefits, notably immutability and increased efficiency facilitated by removing the need for a trusted intermediary. However, as discussed in recent legal scholarship, it is difficult for smart contracts to uphold certain fundamental principles of contract law. Translating concepts of individual intention and responsibility into the decentralized space of blockchain is problematic. Aggregating such individual intention into the combined will and intention of the blockchain entity is at best challenging, and at worst unfeasible. Further, while traditional contracts accommodate change and allow for the amendment of terms in response to evolving circumstances, blockchain smart contracts do not. As the difficulties of blockchain smart contracts become apparent, attention is turning to hybrid smart contracts. “Hybrid” smart contracts are commonly described in legal discourse as arrangements that consist of both a traditional contract (natural language) and a blockchain-based smart contract (formal computer code) component. In comparison, computer science scholarship provides a more complex and nuanced articulation, framing hybrid smart contracts as arrangements that combine code running inside the blockchain (on-chain) with data and computations from outside the blockchain (off-chain). The link between these on-chain and off-chain operations is created through a decentralized oracle network. Such hybrid contracts maintain the immutability of blockchain, and the trustless contracting this facilitates, with the flexibility that comes from connecting to real-world, real-time data sources. In such a context, the objective of this Essay is to examine the nature and operation of hybrid smart contracts, integrating both legal and computer science discourse, and to critically analyze whether such arrangements have the potential to mitigate some of the legal challenges that have been identified with respect to fully on-chain smart contracts

Tokenization of Assets: Security Tokens in Liechtenstein and Switzerland

Technological innovations invariably lead to legal questions being raised; the sphere of digitalization of physical documents and securities by use of blockchain and other distributed ledger technologies does not constitute an exception. While solutions for many questions can be found within the existing legal framework, some developments call for legislative measures. This paper examines the hurdles in connection with the issuance and transfer of securities by virtue of a mere digital transaction and the approaches of the Liechtenstein and Swiss legislator to overcome them. Both have recognized that entries in distributed ledgers may fulfill the same main functions as the possession of a physical document. While the focus of the selective legal adaptations in Switzerland is on the use of DLT and securities law, the Liechtenstein legislator strives towards a holistic legal and regulatory framework for the entire token economy by introduction of a new set of rules.    Le innovazioni tecnologiche portano inevitabilmente a sollevare questioni legali; l’ambito della digitalizzazione dei documenti fisici e dei titoli attraverso l'uso di blockchain e di altre tecnologie a registro distribuito non costituisce un'eccezione. Mentre le soluzioni per molte questioni possono essere trovate all'interno del quadro giuridico esistente, alcuni cambiamenti richiedono misure legislative. Questo paper esamina gli ostacoli esistenti in relazione all'emissione e al trasferimento di titoli in forza di una semplice transazione digitale e gli approcci del legislatore del Liechtenstein e di quello svizzero per superarli. Entrambi hanno riconosciuto che le caratteristiche dei registri distribuiti possono adempiere alle stesse principali funzioni del possesso di un documento fisico. Mentre in Svizzera si tratta di un adattamento normativo selettivo riferito all'uso della DLT e al diritto dei titoli, il legislatore del Liechtenstein cerca di creare un quadro giuridico e normativo olistico per l'intera economia token attraverso l'introduzione di un nuovo set di regole

De-Gentrified Black Genius: Blockchain, Copyright, and the Disintermediation of Creativity

In a 2016 acceptance speech during the Black Entertainment Television (BET) Awards, actor and activist Jesse Williams used the phrase “gentrifying our genius” to refer to the insidious process of misappropriating the cultural and artistic productions of Black creators, inventors, and innovators. In that speech, he poignantly and unapologetically condemned racial discrimination and cultural misappropriation. This Article chronicles the nefarious history of the creative disempowerment of creators of color and then imagines an empowering future for those who successfully exploit their creations by fully leveraging copyright ownership and transfer termination. To that end, I reference the considerable scholarship of Professor K.J. Greene, which explores and challenges cultural misappropriation of Black musicians and composers, and build upon my own scholarship that explores the copyright transfer termination right as a potential legal tool for social and economic justice for creatives of color. I also reference an empirical study titled U.S. Copyright Termination Notices 1977–2020: Introducing New Datasets, to explore data and extrapolations regarding likely impacts of § 203 terminations since 2013. In this Article, I explore the paths of artists who leveraged opportunity through assignments and licenses and, later, artists who exercised their termination rights to secure a better deal with the original transferee, terminated and entered into contracts with other transferees, or went it alone and exploited their copyrights on their own. The termination right clearly benefits all copyright creators; however, members of marginalized and disenfranchised communities may stand to benefit even more from the second bite of the copyright apple. I assert that utilizing blockchain’s decentralized technology, smart contracts, and non-fungible token standards can better protect Black artists against disenfranchisement at the hands of a codified system of intentional friction to discourage or deny the reclamation of rights. Accordingly, in Part II, I examine the history in America and throughout the African diaspora of cultural misappropriation and critique the gentrification of Black creative genius. I explore gentrification as it is applied more broadly to real property and then discuss its application to intellectual property, generally, and copyright specifically. In Part III, I discuss the subject matter of copyright protection and the nature and mechanics of the transfer termination right. Specifically, I examine the history, purpose, and congressional intent of the right, as well as the method and the complexities of timing of notice and termination. In Part IV, I examine the pre-window fervor and speculation of stakeholder commentators around the likely impact of § 203 terminations prior to 2013. I examine the actual impact since 2013 and a forecast of likely trends, as described in the termination notices study, written by Joshua Yuvaraj, Rebecca Giblin, Daniel Russo-Batterham & Genevieve Grant. Finally, in Part V, I discuss the role that blockchain technology, smart contract code, and non-fungible token standards could play in automating codified protections. Removing the educational and legalistic barriers to exercising one’s termination rights and automating the transfer termination process could ensure that all artists have actual—not theoretical—rights, especially disenfranchised creatives victimized first by powerful industry intermediaries and then by the copyright regime created by those same industry stakeholders (and blessed by Congress) to protect industry, rather than creator, interests

How to Regulate Blockchain’s Real-Life Applications: Lessons from the California Blockchain Working Group

How should legislators write a law regulating a brand-new technology that they may not yet fully understand? With the advent of blockchain and other advanced computational technologies, this generation of legislators faces more complex questions than their predecessors. Drawing on the author’s experience as a member of California’s Blockchain Work-ing Group, this Article offers guidance to lawmakers, lawyers, and industry leaders seek-ing to draft effective laws regulating real-life applications of blockchain technology. This cutting-edge Article will do two things for its readers: (1) encourage them to be informed participants in conversations relating to federal and state blockchain regulation, and (2) offer a snapshot of these regulatory processes early in the development of blockchain technology, which will prove to be useful in coming years. Blockchain technology and its applications will continue developing quickly, regardless of how governments frame regulation. Everyone—including industry players, members of the public, and govern-ments themselves—will benefit if lawmakers can strike the right balance between inno-vation and public protection