Crypto Legal from DigiSoc examines the legal, regulatory, and governance landscape surrounding cryptocurrency and digital assets within digital society contexts. It covers UK and EU regulatory positions on crypto-assets as property, stablecoin frameworks, AML/KYC obligations, and the intersection of Web3 economics with metaverse commerce. The field addresses how legacy legal systems must adapt to support low-friction, globally scalable value exchange in virtual social spaces.
Semantic Classification
Content
As adoption of these technologies increases it will be necessary for people, and AI actors, to pass economic value between themselves. These ‘goods and services’ interactions, within the digital and virtual social spaces should be underpinned by a trust system, which scales globally and presents low friction. Current secure international payment rails are poorly suited to such interactions; indeed it is likely with legacy systems, that parties would be forced to leave the metaverse application, and instead navigate their banking applications to exchange value with overseas entities in a secure fashion. This might conceivably take several days.
In Gartners 2022 hype cycle report one of their three “trend themes” says: [“The future of digital experience is immersive. A collection of emerging technologies supports such experiences through dynamic virtual representations, environments and ecosystems of customers and people, as well as new modes of user engagement. With these technologies, individuals can control their own identities and data and experience virtual ecosystems that can be integrated with digital currencies. These technologies help reach customers in new ways to strengthen or open new revenue streams. The technologies to watch that deliver evolving and expanding immersive experiences are metaverse, non-fungible tokens (NFTs), super apps and Web3, decentralized identity, digital humans, digital twin of the customer and internal talent marketplaces.“]
Of their recent investments KPMG global said: [“We’ve invested in a strong cryptoassets practice and we will continue to enhance and build on our capabilities across Decentralized Finance (DeFi), Non-Fungible Tokens (NFTs) and the Metaverse, to name a few”] . This is not to say that all fund managers are so positive. PGIM who manage over a trillion pounds globally have come out very strongly against the technology, with a slew of reports to warn off investors (Figure 1.5).
It’s possible that for such huge organisations it makes better business sense to take a punt on hype bubbles like this, than to do a proper due diligence with a team of internal staff who understand their business. These endorsements should be taken with a large pinch of salt. As Alex Johnson says: [“At some point in the future, it’s possible that the digital worlds being built today will have aggregated sufficient user attention and engagement that financial services companies will need to invest in the metaverse as an acquisition and customer service channel. But we’re not there yet. Until the metaverse is a little less empty, resist the temptation to colonize it with branches and billboards.“]
Meanwhile, Meta (ex Facebook) are launching their own META Web3 and metaverse token after abandoning Libre, their global cryptocurrency. Libre became Diem, then was quietly acquired by Silvergate bank, who likely integrated it into their SEN settlement network. Following the collase of Silvergate the bank was sold on without the SEN network, marking an ignominious end to the technology which possibly started the the rush to central bank digital currencies. Google have formed a strategic partnership with Coinbase, and recently blogged: [“Web3 also opens up new opportunities for creators. We believe new technologies like blockchain and NFTs can allow creators to build deeper relationships with their fans. Together, they’ll be able to collaborate on new projects and make money in ways not previously possible. For example, giving a verifiable way for fans to own unique videos, photos, art, and even experiences from their favourite creators could be a compelling prospect for creators and their audiences. There’s a lot to consider in making sure we approach these new technologies responsibly, but we think there’s incredible potential as well. Finally, we couldn’t have a piece about innovation without touching on the metaverse! We’re thinking big about how to make viewing more immersive. ”]
It’s already the case that the recent bubble of hype is dwindling, but the enormous investment into teams and startups will potentially bear fruit in the next couple of years, and this perhaps has implications for small and medium-sized enterprises.
It’s fortunate timing for this book that the UK government has signalled enthusiasm for so called ‘stablecoins’ at the same time that the Bitcoin network is being upgraded to transmit these GBP equivalent tokens around. This gives us a very good idea what it is we can build into our application stack. In the UK the government has stated it’s ambition to be a global cryptoasset technology hub, and announced, then scrapped plans for the Royal Mint to issue a (novelty) NFT. Fuller, Economic Secretary to the Treasury said in a speech: [“We want to become the country of choice for those looking to create, innovate and build in the crypto space […] By making this country a hospitable place for crypto technologies, we can attract investment, generate new jobs, benefit from tax revenues, create a wave of ground breaking new products and services, and bridge the current position of UK financial services into a new era.“]
Their outline plans for ‘robust regulation’ were published after these seemingly supportive moves, and with the public consultation drawing to a close they have signalled their willingness to differentiate from Europe within a year. Like the assertion by major global businesses it is too early to tell how ‘sticky’ these claims are. Indeed the findings of a recent treasury committee looking at the sector suggest that there is much work to do, with 85% of companies failing to comply with [existing] law. The UK legal system is clear in it’s view that all crypto assets are ‘property’.
A Law Commission consultation on “digital assets” has proposed a new [third category] of property:
[it is composed of data represented in an electronic medium, including in the form of computer code, electronic, digital or analogue signals;] [it exists independently of persons and exists independently of the legal system;] [it is rivalrous such that use by one prejudices the ability of others;]
Consensus seems to be that this is a thorough paper, and demonstrates strong knowledge of digital assets by the authors.
