Legal Aspects of Blockchain, Tokens and DLT Technology

1.- Financial Regulation:

Regulation (EU) 2022/858 of the European Parliament establishes a pilot scheme for market infrastructures based on decentralised registration technology (DLT) and addresses several key points related to this technology. The basic points addressed by this regulation are summarised below:

1. Purpose of the Pilot Regime: The regulation sets out the purpose of creating a pilot regime for DLT-based market infrastructures with the objective of assessing the potential of this technology in financial markets and improving efficiency and innovation in the sector.
2. Definition of DLT Market Infrastructures: The regulation defines what is meant by DLT-based market infrastructures. This includes systems or services that use DLT technologies to facilitate the issuance, trading and settlement of financial instruments.
3. Authorisation Requirements: Establishes that DLT market infrastructures must meet certain requirements and obtain authorisation before operating as part of the pilot regime. These requirements include cyber security, governance and other aspects related to the safe and efficient operation of these infrastructures.
4. Governance and Internal Control Requirements: The regulation states that DLT market infrastructures must implement appropriate governance and internal control policies to ensure the safe and efficient operation of the platform.
5. Investor and Participant Protection: Focuses on the protection of investors and participants in DLT market infrastructures, ensuring that regulations are complied with and providing a secure environment for financial transactions.
6. Transparency and Communication: Establishes the need for transparency in the operation of DLT market infrastructures and requires adequate communication of relevant information to stakeholders.
7. Interoperability: Promotes interoperability between DLT market infrastructures and other market infrastructure systems, which can increase efficiency and connectivity between different market participants.
8. Evaluation and Ongoing Monitoring: The regulation provides for the evaluation and ongoing monitoring of DLT market infrastructures to ensure their compliance with the requirements and their proper functioning in the pilot regime.
9. Duration of the Pilot Regime: Establishes a pilot regime period with a defined duration during which the results and effectiveness of the DLT market infrastructures will be evaluated.
10. Reporting and Disclosure: Requires DLT market infrastructures to provide regular reports and disclosures to authorities and stakeholders.

It is important to recall that the regulation aims to promote the adoption of DLT technologies in the EU financial sector and to establish a regulatory framework for their safe and efficient operation.

2.- Intellectual Property:

• The ownership of digital assets and blockchain-based applications is an important legal issue. Smart contracts and digital assets may be protected by intellectual property rights, such as patents and copyrights.
• Smart contracts must comply with local laws and contract regulations to be legally binding.

3.- Privacy and Personal Data:

• The management of personal data in decentralised registries is a major concern. Privacy regulations, such as the General Data Protection Regulation (GDPR) in the European Union, set strict rules for the management of personal data.
• Decentralised registries that store personal data must comply with these regulations and guarantee users’ privacy.

4.- Regulatory Compliance:

• Decentralised records and blockchain-based applications often need to comply with industry-specific regulations, such as healthcare, finance, and supply chain. This may include the need to comply with FDA, SEC, or industry-specific regulations.

5.- Smart Contracts and Legal Enforcement:

• Smart contracts are computer programmes that are automatically executed when certain conditions are met. Their execution must comply with local and national laws to be legally valid.

6.- Jurisdiction and Dispute Resolution:

• The decentralised nature of these technologies can pose challenges in terms of jurisdiction and dispute resolution. When legal issues arise, it can be difficult to determine which jurisdiction has authority.

7.- Interoperability and Standards:

• The development of common standards and regulations is a major challenge for the mass adoption of these technologies. Interoperability between different blockchains and DLTs is also an important aspect.

Interoperability and standards between different blockchains are important legal and technical issues in the world of blockchain technology. The main legal issues related to interoperability and standards between different blockchains are detailed below:

1. 1. Legal Recognition of Interoperable Contracts: For smart contracts and transactions between different blockchains to be legally valid, it is essential that legal frameworks recognise these digital agreements. Governments and jurisdictions should consider accepting smart contracts as a legal means to conduct transactions and ensure that they are enforced in the real world.
   2. Digital Identity Standards: Interoperability between blockchains requires standardisation of digital identity to enable authentication and authorisation of users across multiple networks. Digital identity standards can help ensure privacy and security of users and facilitate interoperability.
   3. Cross-border compliance: Transactions that cross borders are often subject to different regulations and laws in different jurisdictions. Interoperability can pose legal challenges in terms of compliance, such as verifying the provenance of digital assets and complying with local regulations.
   4. Legal Liability in the Event of Disputes: When disputes arise in interblockchain transactions, it is important to determine which jurisdiction and legal framework will apply to resolve the dispute. Smart contracts and dispute resolution solutions must be compatible with local laws and international regulations.
   5. Data Protection and Privacy: Interoperability between blockchains may involve the transfer of data between different networks. To comply with privacy regulations, it is essential to ensure that personal data is handled securely and that data protection laws are respected in all transactions.
   6. Technical standards: In addition to legal aspects, interoperability between blockchains also depends on technical standardisation. The creation and adoption of technical standards, such as interoperability protocols and common programming languages, are essential to ensure that different blockchains can communicate and cooperate effectively.
   7. Agreements and Collaborations: Agreements and collaborations between different blockchain projects, companies and governments are essential to establish the necessary legal and technical frameworks for interoperability. These agreements may include the creation of consortia and alliances to define common standards and practices.
   8. Regulation and Oversight: Regulators need to be aware of developments in the blockchain interoperability space and can play a role in creating specific regulations to ensure safe and equitable operation of interoperable systems.

Interoperability and standards in blockchain are essential to realise the full potential of this technology and to enable cooperation between different networks. Legal and technical regulation plays an important role in creating an interoperable and secure blockchain environment.

8.- Custody of Digital Assets:

• The safe custody of digital assets is a critical legal issue, and companies offering custody services must comply with specific regulations.

These legal issues vary by jurisdiction and are constantly evolving as regulations adapt to blockchain and DLT technology. Companies operating in this space must have specialist legal advice to ensure compliance and mitigate the associated legal risks.

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