This article will provide an overview of some legal considerations and law applicable to Web3.
As Web3 matures, even staunch supporters of decentralization recognize the need for some regulation around its core technology in order to establish trust between users and boost its adoption. Decentralization fact a double-edged sword, particularly when no central regulatory body exists to make sure that Web3 users are following the law. Through decentralization, Web3 has in fact the potential to transfer control of data and digital assets from big technology companies and governments to individual users.
Because of the lack of a centralized authority, governments and businesses must understand how to manage the risks involved. For companies to build solutions using Web3 technologies, it is crucial that they comply with existing laws and regulations.
From cryptocurrencies to non-fungible tokens (NFTs), to developments within the metaverse, the Web3-based blockchain is poised to become a bedrock for the way we interact with technology in the foreseeable future. Web3 technologies like NFTs, Cryptocurrency, The DAOs, and Metaverses will be adopted on an increasing scale by individuals, businesses, and governments today and over the next few decades.
Synonymous with the growth of Web3 is also the rise of the emerging ecosystem known as decentralized finance (DeFi), which uses cryptocurrency and blockchain technology to handle financial transactions.
Before getting involved in this space, all businesses -- small or big, existing or startup -- need to be aware of the infinite legal issues that could come with it. As such, securities laws are fraught with complicated terms, and legal liability for violations can be devastating.
As Web3 takes root, intellectual property and data security issues will become more important. Down the line, developers will need legal advice to avoid having their new digital assets classified as securities, or being blindsided by other emerging entanglements.
Since Web3 is a relatively new area, laws are constantly being created to regulate it. Legal issues around it include:
The Global Legal Blockchain Consortium was created to create standards for the regulation of blockchain use in the law, with respect to things such as data integrity, data security, and data privacy. It allows interoperability between big business law departments and law firms, using blockchain to enhance legacy systems.
To summarize, it is merely a matter of when not if, law firms start using smart legal contracts and other Web3 technologies on a large scale. Since many Web3 businesses are involved with the monetization of intellectual properties or use of data, they should look to hire legal and compliance professionals who have experience with intellectual property and data privacy in order to make a seamless transition into this space.
