The Solicitors Regulation Authority of England and Wales (SRA) has released a report on the benefits of blockchain, smart contracts, and NFTs, as well as the risks of cryptocurrencies.
Its experts summarize that nearly all law firms are already using blockchain and distributed ledger technology (DLT) to better share information and store documents securely. Thanks to data immutability, blockchain guarantees trust between members of the network without the need for intermediaries, and according to SRA experts, smart contracts significantly speed up many legal transactions. Typically, blockchains are used by law firms for document management systems (DMS), notarization of documents, and deeds of title.
Regulators are still working on implementing digital signatures with the potential to prevent document forgery. Any changes to the information after the digital signature has been set up will invalidate it. Information is encrypted using a key known only to the signer. Authentic sources will only decrypt documents that were first encrypted with the signer’s private key, thus increasing confidence in the authenticity of the document.
The SRA reminded that due to their exclusivity, non-exchangeable tokens can be used to represent not only digital art, but also real assets such as property rights.
With regard to the use of cryptocurrencies, the SRA warns about extreme volatility. This poses a great danger when saving clients’ assets, especially when dealing with real estate. Besides, the SRA is hesitant about the safety of virtual currency exchanges, which are likely to be exposed to the risk of bankruptcy or hacking attacks. Regulators are concerned that anonymous cryptocurrencies increase the risk of money laundering, funding terrorism, and evading sanctions.
Previously, UK lawyers established Crypto Fraud and Asset Recovery (CFAAR) to assist traders affected by cryptocurrency fraud.