Conceptualizing Cryptolaw

Sweden transfers its real property recording system to the blockchain, a software protocol that enables public, cryptographically secure transaction verification without reliance upon a trusted third party. Dubai plans to issue blockchain-based government documents. The United States Department of Health and Human Services investigates blockchain-based systems for managing health data. Illinois explores blockchain-based applications for use in the Illinois government. News of governments and public-private partnerships developing blockchain-based legal applications increasingly splash across the headlines; however the law-makers using blockchain and other Distributed Ledger Technology (DLT) systems to implement legal processes do not systematically consider the broader implications of their actions on the law. This is particularly problematic because the law itself will undergo a significant transformation after transferring such legal processes to blockchain and other DLT systems. Using comparative legal methodology, this Article reveals how moving legal and government process to DLT-based systems will change legal discourse about the fundamental elements of legal systems, including substantive law, legal structures, and legal culture.

Imagine, for example, if states shifted the Uniform Commercial Code’s Article 9 filing system to the blockchain. State filing systems, including the filing office, would be unnecessary. Similarly, substantive rules relating to defective filings, failed searches, and lapsed filings would be rendered moot because the technology would ward against such failings. Information relating to transactions could more easily travel across state lines, following debtors as they move or change names. Such changes would significantly affect the current secured transactions legal landscape by simplifying substantive law, eliminating or significantly changing enforcement and adjudicatory structures, and shifting the locus of legal culture from lawyers in the field to the technologists building the system.

Current literature examining the impact of advances in technology on the law focuses on predictive technology and big data, arguing that such technology enables more efficient and more precise approaches to creating and implementing law. Some of the existing literature considers the impact of these changes on the way law is created, suggesting that gains from technology in precision and clarity may come at the cost of transparency and discriminatory effects. However, none of this literature considers the impact of DLT-based legal processes on the foundational elements of the law, even though governments are currently moving legal processes to DLT. This Article fills this important gap in the literature by uncovering the powerful ways crypto-legal structures will disrupt our understanding, experience, and adjudication of law. Furthermore, this Article turns the current academic literature relating to DLT and cryptocurrencies on its head. Most of the current academic discussion of DLT focuses on how to regulate the technology and its uses. This Article instead considers whether and to what extent DLT will alter the way we think about regulation and law more generally.

Specifically, this Article re-theorizes crytpolaw as new jurisprudence regarding the implementation and delivery of law through smart contracting, semi-autonomous, and intelligently developing computer code. This Article refers to the computer code built to implement law through DLT as “crypto-legal structures.” As governments build crypto-legal structures, the computer code should be treated as a foreign legal system. Doing so enables regulators to bake certain elements of regulatory theory into the code, making regulatory objectives more transparent to relevant industry actors and offering public benchmarks for assessing which entities are responsible corporate citizens. Treating computer code as foreign law also enables the use of comparative law as a methodological paradigm for considering the broader impact crypto-legal structures will have on law, including the disruption of substantive law, legal structures and legal culture. As crypto-legal structures interact with each other and with those governed by the law, cryptolaw will emerge as a new legal discourse and philosophy that anticipates the broader implications, challenges and consequences of technology’s increasing capacity to enable more transparent, efficient, and self-executing law.