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Large law firms are serving as the de facto regulators of still-evolving blockchain technology applications while government enforcement agencies and industry best practices catch up, Vinay Gupta, CEO of Mattereum.com, told Bloomberg Law.
The London-based executive said law firms are on the front lines of figuring out legal questions surrounding the technology, which is being implemented in legal contracts, equity instruments, and many other areas. It may take another five to 10 years of technical development before blockchains and their related cryptocurrencies, coins, and tokens can be more precisely regulated, Gupta said in a recent video interview.
“It’s the beginning of a process, and everybody knows that we’re going to see years and years and years of technological innovation, all of which will have to be kind of factored into regulation and legal practice,” Gupta told Bloomberg Law.
Blockchain platforms allow multiple parties that don’t necessarily need to trust one another to make transactions in real time without the need for an intermediary, like a bank or government. Transactions are recorded on a transparent, auditable database chain that is designed to resist collusion or hacking.
Gupta focused on the potentially sweeping benefits of blockchain technology, especially in opening new paths to funding startups through digital tokens and cryptocurrencies.
In 2017, the use of initial coin offerings, or ICOs, exploded as a way for individuals and companies to raise funds, similar to an initial public offering or crowdfunding campaign, by selling digital coins or tokens on a blockchain. But fraudulent token developers, drawn to the markets, have tried to sell tokens without complying with securities rules, or by offering bogus services.
Gupta, who has a global perspective on blockchain development in government and industry, helped coordinate the 2015 release of Ethereum, a now internationally known blockchain that has been used to launch hundreds of new cryptocurrencies, tokens and applications and allowed entrepreneurs to raise billions of dollars. He serves on the U.K.-funded innovation initiative Digital Catapult and runs the funding firm Hexayurt Capital as well as Mattereum.com, both projects advancing the use of blockchain-enabled legal agreements, or smart contracts.
Gupta, who also helped design the blockchain strategy for the city of Dubai, which aims to be the world’s first blockchain-powered government, suggested a new regulatory model that allows engineers or computer scientists to qualify as accredited investors. That way, technically knowledgeable individuals could help root out fraudulent schemes and focus investment dollars on the most promising innovations, even if they are difficult for traditional venture capitalists to understand.
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