Welcome to Degen Lawyer's Newsletter, where we bring you your weekly dose of legal insights, and regulatory updates in the emerging tech and law space. Our expert lawyers serve up curated analysis, hot takes, and expert commentary, sprinkled with a healthy dose of wacky and meme-worthy content. Enjoy!

In this week’s edition:

News in short:

1. UK regulations for a digital securities sandbox

   The U.K has published regulations for a digital securities sandbox, which will be used for testing how traditional securities can be traded using blockchain technology. This lets companies and regulators experiment under relaxed rules, aiming to figure out how to best regulate this new field. Companies can tokenise real assets like stocks or bonds, while regulators can adjust rules to fit the technology. This sandbox comes from the new Financial Services Act and shows the UK’s proactive approach to crytpo regulation. Blockchain and Securities has been a hotly contested issue, hopefully this sandbox will help give some directions.

2.  India to come up with new law on Telecommunications.

   The Telecommunications Bill, 2023, introduced in India’s Lok Sabha, aims to replace India’s outdated telecom laws. The bill seeks to replace licenses with authorisations for operators and services like calls and messages. Additionally, mandatory biometric authentication will be sought from customers to curb spam. This comprehensive rewrite of India’s telecom laws comes as a fresh breath to the industry, with aims to modernise India’s telecom landscape.

3. Advertisers can indeed listen in on phone conversations:

   A report by the Cox Media Group (CMG) reveals that advertising companies can tap into ambient conversations of users via built-in microphones in smartphones, smart TVs. As per the company, by "Active Listening" advertisers get the information they need to pinpoint potential customers by analysing casual conversations in real-time. Yup, our fears where very much accurate.

   

Article of the week

Basic Legal Consideration of a Web 3 Company

With Bitcoin rallying and many predicting (finally) the end of the Crypto Winter, several Web 3 companies will begin making moves, this week we’re going to break down the basic legal considerations of all Web 3 companies. This is just a broad outline that all projects must take into account regardless of the stage of the project.

1. Legal Entities in Web 3

There’s a startling lack of use of legal entities to do business in Web3 and the metaverse. Whether you as an artist are creating NFTs or selling virtual spaces the major benefit of working with legal entities for Web3 ventures is liability protection. If something happens with the project and the owners are faced with a claim, there is a wall between the business’ liability and the owner’s personal assets.

2. Terms and Conditions and Privacy Policies

Whatever your product, whether it is an NFT project or a DeFi platform it is vital that terms and conditions are properly drafted. Terms set out the basic nature of relationship between a project and their customers. Having properly drafted terms can prevent confusion at the very least and at best can prevent litigation and cases of consumer alleging fraud or misrepresentation. 

Privacy Policy set out how the data collected by a user is to be utilized, this is mandatory under various privacy regimes. Irrespective of where a project is registered it is important to comply with these regimes as customers are residents of these jurisdictions.

3. IP and Fair Use in Web 3

If you create original content, then you have a copyright on that content and you have the right to decide what to do with this content. This right extends to a piece of art, software algorithm, string of code in a smart contract etc. Essentially all the building blocks of the Web 3 space. So, unless its open source, you need to ask permission for using IP protected material. This is where a lot of confusion regarding “fair use” and its ambit creeps up. 

Fair Use Doctrine revolves around purposes of allowed use – this is only when it comes to criticism, comment, news reporting, and teaching and a few other exceptions. For anything other than these purposes, such as commercial purposes and/or sales of your products or services, your use does not fall under the Fair Use Doctrine and you’re likely violating someone's intellectual property rights.

From a customer’s point of view, When you buy NFTs, 99 times out of 100, you don’t also acquire the IP rights behind that NFT and the digital art. Check out our previous thread on this topic to know more.

4. NFT and Security

As the Web3/digital currency/NFT spaces mature, there are some questions involving security law and NFTs. Is your NFT a security? Are the drops that you're participating in violating SEC rules and regulations or other security laws. This is a multi-faceted and complicated issue and must be analysed to avoid falling afoul of regulators.

5. Legalities around DAO’s

Legality around DAO are still evolving. Organizations that want to create a DAO to do something good for the community should also consider creating a legal entity first and then wrapping the DAO with an LLC or corporation before moving forward with the DAO project. Different projects require different legal structures and in most cases consideration of different jurisdictions. Read our threads on DAO’s below.

This is only the tip of the iceberg, please contact a lawyer for drafting your terms of use, privacy policy as well as figuring out issues of IP, securities and legal wrappers. Figuring this out early may avoid a lot of pain and financial and legal woes down the road.

Did You Know?

The first ever item to be bought using blockchain was a pizza! On 22nd May, 2010, Laszllo Hanyecz paid Jeremy Sturdivant 10,000 bitcoins for two Papa John’s Pizzas, which were delivered to Hanyecz’s home. This transaction is widely celebrated, given that it is the first use of Bitcoin in a commercial transaction, wherein Bitcoin acted as a medium of exchange. Those bitcoins would be worth more than 400 million dollars today! Few more deliveries like that, and our delivery boy could have been able to buy Papa John’s today!

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