Blockchain technology has begun to disrupt almost every industry in the world. The importance of blockchain technology in many aspects of social and business life cannot be understated. Blockchain technology, which serves as the foundation for digital currencies like bitcoin as well as a range of other uses, has proliferated among professionals even outside of the IT sector. Data management, supply chain management, mobility services, banking and financial services sector, capital markets for trade settlement, the insurance industry for underwriting, healthcare and life sciences are just a few examples of Blockchain-based applications and initiatives. It has made a significant impact in the top legal industry which is relevant to how firms are serving clients as well as how law practices are run. Blockchain is storing and validating records of transactions to maintain an accurate chain of legitimate activities.
What is Blockchain Technology?
Blockchain Technology is a type of distributed ledger technology that records transactions by storing information of the sender and receiver of a digital coin or token, the amount or number involved in the transaction, and the transaction’s exact date and time.[1] It is a distributed network of servers where information is mirrored on all participating computers and verified through laborious calculations. To ensure security, blockchains make considerable use of cryptography. Blockchain is said to be more secure and resilient against hacking and other manipulations than other centralised servers. Blockchain Technology is successful mainly because it solves the problem of double spending, it replicates the digital copies of a digital coin and thus prevents its multiple uses. Blockchain can only be implemented where participants are controlling the major part of the computing system together as there is no single entity that has control over the whole system.
Existing Legal Framework
The legal and judicial frameworks have both benefited from the application of Blockchain Technology. Smart contracts, corporate filings, criminal cases, dispute resolution, document notarizations, industry organisations, intellectual property rights, land registries and property deeds, law firm operations, and public service records have all been affected by blockchain technology in the legal domain.
In India, there is currently no legislation that regulates and keeps a check on blockchain technology and its numerous applications. However, the existing sector-specific regulators may have the authority to govern the use of blockchain-related technologies, depending on the many sectoral applications. The Securities Exchange Board of India ("SEBI"), for example, regulates the use of blockchain technology in capital markets, while the Reserve Bank of India ("RBI") regulates cryptocurrency, and the Insurance Regulatory and Development Authority of India regulates insurance-related applications ("IRDAI"). The legal profession's use of technology has progressed through time.
Although the growth has been slow, there is no doubt that technological advancements in the legal industry have increased efficiency, decreased errors, and further made the procedures of the judicial system more comprehensible. It was during the unprecedented pandemic that the digitization of the legal industry took place for the first time. From paper filings to virtual court hearings, everything was welcomed by the legal sector despite limitations. It was the Supreme Court’s e-committee headed by Hon’ble Justice DY Chandrachud which made it possible. Our courts were able to continue operating even throughout the pandemic all because of the implementation of a contingency plan by the e-committee.[2]
However, blockchain is one such technology that is yet to be fully utilised.
Estonia, China, the United Kingdom, Ghana, Ukraine, Canada, and Sweden, among others, have already incorporated blockchain into their legal systems. Combining the use of blockchain in the legal sector will give a boost to the current "e-justice" paradigm, which will not only decrease costs, time, and carbon footprints, but also ensure improved security, transparency, and authenticity, strengthening public trust in the judicial system.
Supreme Court of India on the legal status of Cryptocurrency
The Hon’ble Supreme Court of India in Internet and Mobile Association of India v. Reserve Bank of India[3] has brought the attention of the legal sector to the distributed ledger technology that provided the fundamental foundation of Cryptocurrencies (bitcoin, dogecoin). The Court held that the RBI did have the necessary powers to regulate virtual currencies in its role to secure India’s economy. Banks and other financial institutions which are regulated by RBI are no longer prohibited from provisioning bank related services in relation to dealing of cryptocurrencies. This was derived as the RBI could not clearly tell the damages that the economy would face if cryptocurrency was not banned and therefore the Supreme Court declared restrictions to be unenforceable.
Meanwhile, The Department of Economic Affairs, Ministry of Finance has drafted the 'Banning of Cryptocurrency & Regulation of Official Digital Currency Bill, 2019' (“Draft Bill”). The Draft Bill intends to outlaw a wide variety of cryptocurrency-related activities in India. The bill highlights difficulties such as holding, selling, disposing of, or any type of cryptocurrency exchange. The specified prohibition only applies to dealing in cryptocurrencies; it does not apply to the usage of distributed ledger technology or the use of cryptocurrencies for research purposes. Under the Draft Bill, Mining, holding, selling, issuing, transferring, or using cryptocurrencies is punishable with a fine or imprisonment of up to 10 years, or both. As per the draft bill, the central government, in cooperation with the RBI, considers approving the digital rupee as legal money.[4]
In the second part of this article, we analyse how blockchain technology has impacted several disciplines of law, as well as the downsides that we must contend with and the technology's future prospects.
[1].Legal Tech: How Blockchain Can Easily Transform The Legal Profession; https://www.abclegal.com/blog/legal-tech-blockchain
[2]. Editorial, Filing of cases in SC will undergo radical change: Justice DY Chandrachud, Hindustan Times, May 3rd 2020
[3]. Internet and Mobile Association of India v. Reserve Bank of India, 2020 SCC Online SC 275.
