According to a recent MIT Technology Review publication, two global leaders in online legal services are turning to the blockchain to provide the necessary tools that their current services lack. While online legal services typically allow users to create and sign legal contracts, the real-world enforcement of contractual conditions remains a separate issue.
LegalZoom and Rocket Lawyer Using Blockchain Technology Explained
LegalZoom and Rocket Lawyer— two of the biggest players when it comes to online legal services— are currently experimenting with blockchain smart contracts.
Smart contracts feature a pre-defined agreement where conditions are algorithmically enforced when certain criteria are met.
Both LegalZoom and Rocket Lawyer currently offer online legal services, which allow users to create legally binding agreements. The action(s) required by such agreements however, is typically managed offline. This is precisely where smart contracts could step-in and allow for on-chain enforcement of legal action.
So far, Rocket Lawyer has launched a private beta phase featuring a program called Rocket Wallet. They describe the program as a “legal contract execution and payment on the Ethereum blockchain”. Rocket Lawyer has also partnered with blockchain startup OpenLaw and Ethereum-focused investment firm ConsenSys. They hope to have a public product available by the end of 2019.
LegalZoom has partnered with Clause to “provide smart legal contracts to consumers and small businesses”.
OpenLaw co-founder Aaron Wright describes the aforementioned projects as a “legal protocol” for blockchains. While blockchains allow for the borderless transfer of assets, he believes they will only play a role in the real world if they include legal contracts which can govern the many types of transactions they encompass.
What Smart Legal Contracts Mean for Security Tokens
Governance is an important element in the latest wave of blockchain technology— security tokens.
While most blockchain advocates prioritize decentralization, security tokens openly declare themselves securities. They are therefore required to abide by the applicable securities laws and regulations surrounding the tokenized asset, its investors, and the entity performing the tokenization. For compliant security token standards, such compliance has to include some degree of centralization— either through the tokenization platform or from the company performing the tokenization itself.
Deciphering the best approach to regulatory compliant security tokens— while still unlocking liquidity for a traditionally illiquid asset class— has remained a large question for the security token industry.
Many spectators wonder how the balance for decentralization yet transparent regulatory enforcement will play out for the emerging industry.
With reputable online legal services turning to the blockchain for ‘real world legal enforcement’, concerns involving the compliance of tokenized securities are likely to decline.
What do you think of LegalZoom and Rocket Lawyer’s interest in smart contracts for automated legal services? Does blockchain have the power to bring real world legal enforcement? What do you think this means for the security token industry? Let us know what you think in the comments section below.
Image courtesy of lex futurus.
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