Almost everyone has heard of Bitcoin, but what are things like DeFi and NFTs?
And why should solicitors ensure they are up to date with all these new crypto terms?
The person with the answers is Creo Legal Founding Director David Chung, who’ll be delivering a session at QLS Symposium on 11 March entitled ‘Crypto, DeFi, NFTs and the Metaverse – practical legal implications’.
This session, a component of the commercial pathway, will provide attendees with an understanding of the broad concepts (both legal and commercial) that exist within the crypto industry, and enable them to identify the key legal issues associated with crypto-related matters.
“Crypto is a term generally used to refer to the cryptocurrency industry,” David said. “The underlying technology, blockchain technology, has the potential to be incorporated into every part of society as it exists today.
“If that potential is fulfilled, every social interaction or commercial transaction may involve the use of this technology.
“Blockchain technology has been described as giving rise to the ‘New Internet’. Could any lawyer today practise without knowing how to use the Internet? It is not the technology itself, but its applications, which must be well understood by solicitors.”
David said that cryptocurrencies were simply digital media of exchange – digital money. They were the first, and most well known, applications of blockchain technology, similar to email being one of the earliest and most used applications of the Internet.
“Blockchain technology is used to create a trustless and immutable accounting system for cryptocurrencies over which there is no centralised governing authority (such as a central bank),” he said. “Many cryptocurrencies perform poorly as stores of value, and for that reason the preferred terminology is crypto token.”
He said that the term Decentralised Finance (DeFi) referred to peer-to-peer financial systems and services which were similar to traditional finance, except that there were no financial intermediaries such as banks and other institutions.
“DeFi has created a single global marketplace for composable financial products,” David said. “In that and many other ways, DeFi has already expanded well beyond what traditional finance offers.
“Non-Fungible Tokens (NFTs) are a form of crypto token which are not designed to be used as media of exchange. They are not fungible, that is, not interchangeable, with other crypto tokens. In essence, they are provably scarce items of digital property.
“They currently take the form of creative works of art which, due to their scarcity, have achieved extremely high market valuations. Eventually, NFTs will be adopted by industry and used to represent interests in real-world assets, such as real estate, businesses, financial products, and personal property.”
While that may be the way of the future, David described current case law as “sparse, to say the least”.
“Most civil cases have primarily arisen in the context of property and taxation disputes,” he said. “However, undoubtedly the body of case law will grow rapidly in the years to come, with major catalysts being the introduction of crypto-specific legislation in the realm of securities regulation and taxation.”
Regulation, at least in the Australian context, was also somewhat sparse to date.
“The only crypto-specific legislation existing today is contained within the Anti-Money Laundering and Counter-Terrorism Financing Act 2006 (Cth),” he said. “Many crypto tokens may be considered securities or financial products under the Corporations Act 2001 (Cth) and would be regulated as such. However, beyond those areas, crypto is completely unregulated.
“This certainly must change for the industry to grow.”
To keep up with these changes, don’t miss David’s QLS Symposium session. Learn more at the QLS Symposium website.