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. EU strikes a deal on the first set of comprehensive rules governing AI

   EU Parliament has reached a provisional deal with its member states on the world’s first comprehensive AI regulations! The framework includes safeguards on AI use and manipulations, restrictions on facial recognition and strong penalties for violators. It aims to ensure safe & trustworthy AI development while boosting EU leadership. High-risk applications of AI will require certification & medium-risk applications will have to fulfil transparency obligations. Mass-scale facial recognition and behavioural control using AI will be banned. This deal marks a new era of AI reg. and could shape this volatile and transformative industry for years to come.

2. Pro Blockchain Bill Clears US House - One step closer to being Law.

   The U.S. House Committee unanimously approved the Deploying American Blockchains Act, pushing for government support for blockchain technology. It marks progress for pro-crypto legislation. IT will now be voted on by the House. This marks a shift in the industry, which was so far marred with skepticism and suspicion.

3. Ukraine to implement FATF crypto standards to avoid FATF grey list.

   Ukraine is set to implement crypto standards developed by the Financial Action Task Force (FATF). According to the Ministry of Digital Transformation. The draft law, is a comprehensive regulatory framework for cryptocurrencies, requiring crypto exchanges to register with the government, conduct customer due diligence and report suspicious transactions. After Turkey, Ukraine rushed to regulate crypto to avoid the grey list. Looks like FATF is the one international organisation with some teeth.

Article of the week

Blockchain in Dispute Resolution - The Future of Disputes?

The rise of e-commerce has brought about a new breed of disputes: small-scale, often transnational. Traditional resolution methods like courts and arbitration are ill-equipped to handle these due to high costs and lengthy procedures. Despite its initial promise, Online Dispute Resolution (ODR) faces significant challenges. Estimates suggest that 3-5% of online transactions end in disputes. For instance, eBay, which handles millions of disputes yearly, has long been criticised for bias against sellers due to inherent flaws in its processes. Even when sellers won disputes, eBay delayed releasing the disputed funds, impacting their liquidity and capital. ODR systems lacked legal certainty and easy enforceability, prompting the exploration of emerging technologies like blockchain to address these issues and reshape online dispute resolution.

This is where blockchain-powered ODR, known as Blockchain Dispute Resolution (BDR), comes in as a valuable alternative.

As BDR platforms gain traction, the number of disputes handled is expected to skyrocket. This is particularly relevant in developing nations like India, where the overburdened judicial system could benefit greatly from the speed and efficiency of BDR.

Setting the stage for BDR

Blockchain has rapidly emerged as a powerful tool across various industries. Its evolution, alongside the development of smart contracts, has opened doors for a new era in Online Dispute Resolution (ODR)

Blockchain Dispute Resolution (BDR), leveraging game theory and blockchain technology, offers a breath of fresh air, promising a faster, cost-effective & transparent way to resolve disputes.

The BDR Process in a nutshell

The BDR process is a time-bound dispute resolution system where participants submit written arguments and evidence. Jurors, who have purchased special tokens, read the materials and vote for the winning party. Votes are cast with tokens, which are locked until the process is complete. Some schemes require jurors to hold a minimum number of tokens or demonstrate expertise to vote. Additionally, some mechanisms require jurors to explain their vote. Typically, jurors with more tokens have more voting power.

After the voting period, the party with the majority wins and receives the disputed assets. Winning voters get their tokens back plus additional rewards from losing voters. Losing voters lose their tokens, which are redistributed to the winners. This incentivizes jurors to carefully consider evidence and cast informed votes.

BDR leverages anonymity to encourage jurors to consider evidence objectively and reach a consensus. Malicious attempts to game the system are economically self-defeating, as jurors who vote inconsistently with the majority lose their tokens. Conversely, honest users earn tokens by aligning their votes with the consensus.

Smart contracts streamline BDR by automating rule verification and execution. Upon detecting a breach, the smart contract triggers the dispute resolution process. The process unfolds automatically, with the smart contract enforcing the final decision. This removes the need for third-party intervention and ensures transparency and fairness.

Regulatory challenges to BDR

The fledgling realm of blockchain and smart contracts faces an evolving regulatory landscape, posing hurdles for widespread adoption. Balancing innovation with user protection remains a constant challenge for regulators worldwide.

Data privacy, consumer protection, and anti-money laundering in the context of blockchain transactions are other key regulatory challenges. Additionally, the technology's cross-border nature further complicates matters due to differing legal frameworks across jurisdictions.

Clear, comprehensive regulations are vital to instil trust and legal certainty in blockchain-based systems. Regulatory bodies are actively collaborating with industry players to establish frameworks that ensure compliance while nurturing innovation.

Despite these hurdles, the potential of this technology is undeniable. It's crucial to view BDR as a complement to existing ODR methods, not a replacement. By harnessing the potential of blockchain technology, BDR can contribute to a more efficient and accessible justice system, especially in countries with limited resources. While early adoption phases may involve navigating grey areas in enforcement frameworks, the growing popularity of blockchain technology will inevitably lead to its recognition, paving the way for faster, more convenient, and accessible justice for everyone, regardless of location.

Did You Know?

With all the buzz around the first-ever AI legislation, we take a look back to the first AI program. This was written and used in 1955 by Allen Newell and Herbert Simon. This dynamic duo developed ‘Logic Theorist’, which was deliberately programmed to perform ‘automated reasoning’ and is now heralded as one of the earliest milestones in AI, being the first AI program. This AI program proved 38 out of the first 52 theorems in Russel and Whitehead’s ‘Principia Mathematica’. All of our laws and science stem from seemingly minute, yet historically determinative steps. It’s like how the famous saying goes - small step for man but a giant leap for mankind! Especially with the AI Tech, we never know what the next big leap is going to be (P.S. AGI isn’t far off, I’m preparing my doomsday bunker)

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