Solicitors Regulation Authority publishes report on crypto technologies risks and opportunities
Report reviews how distributed ledger technologies might impact the legal sector
The UK Solicitors Regulation Authority (SRA) published a new Risk Outlook report on 2 February on how distributed ledger technologies, such as blockchain-based cryptocurrencies, might impact the legal services sector.
The SRA report identities some of the challenges, risks and opportunities posed by these technologies, and advises firms to assess the potential benefits and risks of each new technology prior to investing in such systems, as well as the potential impact on their clients. Firms are also encouraged to consider and prepare for potential developments applicable to each technology and how the firm might be impacted if such developments come to fruition.
The report provides examples of how these systems are being used by the industry. Some firms in the legal sector are already said to be using blockchain technology to improve efficiency and verify transactions. More specifically such technologies are being utilised in document management systems, document notarisation, chain of custody and property rights. The Land Registry is used as an example of an organisation that has already begun adopting blockchain technology as standard practice.
The distributed ledger technologies relevant to legal services are listed as: blockchain, digital signature, cryptocurrency, smart contracts, non-fungible tokens (NFT), and decentralised autonomous organisations (DAOs). The opportunities listed in the report include: speed and cost savings, and traceability. The SRA lists the barriers and threats as the following: trustworthiness, money laundering and fraud, establishing jurisdiction, and value instability.
Paul Philip, SRA Chief Executive, commented: “Our new Risk Outlook report examines the potential of these fast-developing new technologies to change how legal services are delivered and looks at the opportunities, the challenges and the risks. Some firms are at the front of the queue when it comes to adopting new ways of working while others need to be aware of what's happening so they can properly support their clients and manage the impact on their business. These are complex and topical areas, particularly around cryptocurrencies, so our timely Risk Outlook will help firms to get to grips with the key issues and provides further resources for those who want to know more.”
Meanwhile, HM Treasury announced plans on 1 February to regulate crypto-asset activities in order to protect consumers and businesses. The government’s proposals focus on a number of crypto-asset activities, including exchange activities, custody activities and lending activities, which the government intends to bring into the regulatory perimeter for financial services. The plans are open for consultation and feedback is being accepted until 30 April.