In a few short years, blockchain has become a crucial technology. Much like the Cloud, it is rapidly democratizing in ways that will undoubtedly need to be paired with thoughtful legal framework in order for confidence in this new economic space to develop.
At a time when digital transformation is an issue no company can afford to ignore, blockchain occupies a special place and constitutes a technological revolution poised to profoundly transforms both the environments and habits of firms everywhere.
A technological revolution similar to that of the Cloud
At first brush, the principle underlying blockchains may seem abstruse: if compelled to describe it in a few words, one might liken it to an interconnected and shared database. “A vast, shared Excel spreadsheet,” some say. Except that this spreadsheet can hold a wide variety of data and perform automated tasks, all in a traceable, secure and tamper-proof manner. Blockchain is a distributed ledger technology which, whatever its field of application, allows for very fast implementation. Using a combination of encryption and peer-to-peer networking, it ensures a high level of reliability for the data it holds, thanks in particular to its timestamping function, an immutability of records and transactions, and the unlimited data retention period. For example, it is the ideal tool for organizing, sharing and collaborating among companies, eschewing the need for thousands of e-mails and attachments.
Long misunderstood, blockchain technology seems to increasingly be following in the footsteps of Cloud Computing, whose rise to prominence raised a number of concerns. Technological dependency on the supplier, risks associated with non-reversibility or data lock-in, service outages. Some companies may have initially been reluctant at the idea of “losing control” of their data, fearing they were being dispossessed of administrative and physical oversight of their information systems. However, today there reign a general consensus in which Cloud providers’ offerings and users’ expectations are balanced: trust has been established. Likewise, today’s blockchain is gradually building the foundations of trust so necessary for the success of any industrial revolution that profoundly alters traditional economic, contractual and organisational models.
Solving concrete problems and enabling new services
The revolution is already well underway: beyond the crypto-currencies that are its most emblematic avatar, blockchain has already found concrete applications in many sectors. Financial and insurance companies have been at the forefront, including major players such as AXA and HSBC, which have chosen to rely on blockchain in automating the payment of certain insurance premiums or setting up the back-office for their asset management activities.
In certain sectors, blockchain is first and foremost employed to address issues of traceability and product authentication. In others, automating the creation and sending of reports is the focus. In the realm of law, blockchain timestamping is a considerable asset, particularly in the field of unregistered intellectual property rights. Many companies today offer services in this area to promote anticipatory preparation of evidence to guarantee the anteriority of a work, to allow the allocation of rights in the case of collective works or to create smart contracts.
Awaiting legal recognition
The penetration of blockchain will also accelerate in the coming years thanks to a gradual evolution of the legal framework surrounding this technology. Already in 2019, an amendment was proposed to France’s “Pacte” bill to grant specific evidentiary force to data recorded via any public or private blockchain. However, these ambitious provisions were not retained in the final text of the law.
At present, while our positive law provides a framework that is relatively favourable to cryptoeconomics 1, there is no specific legislative or regulatory text applicable to blockchain technology in France that would guarantee legal surety for other types of applications.
Nonetheless, the legal scope and value of the blockchain has been extensively considered, whether with respect to signatures, timestamps or imprints, in France and in the European Union more broadly. The European Commission recently published a roadmap for evaluating the elDAS 2 Regulation, to be presented to the Parliament by 1 July 2020 at the latest. This could be an opportunity for legislators to revise the Regulation and establish a body of rules aimed at providing a legal framework for the blockchain, in particular to establish much-needed requirements in terms of security and legal matters, as well as to provide guarantees to ensure the reliability of transactions and of the blockchain itself. And thus to give it an evidential value adapted to its specific characteristics. The European Parliament and the CNIL
3 have also taken up the subject to consider interactions between the blockchain and the GDPR (General Data Protection Regulation).
It is nevertheless entirely possible to use constituent elements of the blockchain (timestamps, signatures, imprints) as legitimate forms of proof at trials in areas where proof may be provided “by any means,” though it should be noted that to date, this form of proof has yet to be recognized by a court decision in France.
Several countries are already ahead of France in this respect. Italy has dipped its toe in the waters by recognizing the legal value of time-stamping, while the State of Tennessee, in the United States, already considers cryptographic signatures produced and stored by the blockchain in electronic form as constituting an electronic signature. In China, a judge has gone so far as to recognise this form of proof in the context of a copyright infringement dispute, insisting on the importance of having “a neutral and open approach to use of the blockchain,” (HangZhou Court, June 28, 2018).
In short, the blockchain holds all the cards needed to become a crucial technological solution in the coming years. Its full legal recognition remains the last hurdle to extending its benefits to all economic agents and fully establishing the trust this new economy needs to flourish.
1 See, for example, Article L.223-12 of the French Monetary and Financial Code, which assimilates the registration of transfer for mini-bonds in the blockchain to a private deed.
2 Regulation (EU) No 910/2014 of the European Parliament and European Council of 23 July 2014 on electronic identification and trusted services for electronic transactions in the internal market and repealing Directive 1999/93/EC.
3 The CNIL, or Commission Nationale de l’Informatique et des Libertés is a public entity charged with protecting personal data, supporting innovation and preserving individual liberties with respect to information technologies.
To learn more about Stratumn and Trace, our blockchain-based solution, contact us.
Jérôme Lefebvre is the CEO at Stratumn.
Laura Ziegler is an associate lawyer at BCTG Avocats.