SmartOne Legal : From a Legal Standpoint

Introduction of SmartOne Legal

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It can be quite confusing to an ordinary man to understand what cryptocurrency is and it becomes even more challenging when there is a clear distinction between the legality of cryptocurrency and the application of blockchain in the legal realm.

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Blockchain is a list of record that is maintained by way of an open ledger. The blockchain is the technology behind digital currency, but the blockchain is more than that. For instance, the blockchain can operate a system of automation without reliance on a traditional contract. Hence, the term smart contract. This article is written from a perspective of a lawyer.

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Why Would the Previous Legal Framework Falter?

There is a lack of understanding as to why some countries despite legalising cryptocurrency has banned ICO which is the inception to any cryptocurrency. In every country the banking and financial sector is regulated by an act called Financial Markets and Services Act. There may be slight variance in naming this legislation from country to country but it generally regulates the banking and financial sector. In the United States, Bitcoin (BTC) is traded as a commodity and classified for tax purposes as an asset. It is difficult to see how our traditional view of an asset can be interpreted to fall within the scope of the financial market. But the operation of cryptocurrency is in pari materia with our normal fiat. Hence it is caught by the regulatory objectives of the Financial Market and Services Act which regulates exchanges and other activities connect with the financial market. It is a wide net.

Where the Confusion Starts

A cryptocurrency is by definition not a currency, but it still falls within a regulatory framework which is meant for the normal fiat. Then the confusion gets deeper, we are all aware that conceptually the introduction of Bitcoin (BTC) is meant to be a decentralised ledger. The nature of its operation through the blockchain would mean that it will slip pass the central bank’s regulation and the manner of which a decentralised ledger operates is the fact that it is not geographically confined. But legislations are jurisdiction based.

So, how does the use of SmartOne provide a legal solution? South Korea has Financial Supervisory Services (FSS) and such transfer must be through a permitted Fintech company that complies with the regulation. There are very specific conditions that must be met by the Fintech company that operates the foreign exchange such as a low debt/asset ratio and its paid up capital. If these regulation applies, it must be implemented through careful advice.

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How Far Can SmartOne Provide a Legal Solution

It may be inaccurate to confine legal solutions to the realm of the cryptocurrency alone. The technology behind cryptocurrency has wider application. One of the jurisprudence to the implementation of law is the fact that human has limited altruism. It simply means that you cannot always trust human hence law is introduced such as contracts, the set of regulation to compel obligations and undertakings.

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However these traditional problems could be solved through the implementation of a series of automation. For instance, that upon signing of a contract with the agreed conditions, a buyer’s obligation to pay is automated the moment delivery takes place. The purchase price would be locked from the seller’s wallet once the contract is entered into and paid upon delivery. Here, the seller partakes in no risk of non-payment. The application of smart contract does not involve the intervention of the banks to act as a credible intermediary and it is commission free. The parties merely pay for the transaction costs.

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The publication of this post is for the purpose of the contest organised by @originalworks and sponsored by SmartOne Legal.