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Legal Issues Newly Arising from the Blockchain Technology

Blockchain technology will become one of the key drivers of global economic growth and is expected to revolutionize the finance industry on a total scale. In particular, it plays a decisive role in the development of FinTech because with this technology, financial institutions will be able to dramatically cut costs and decrease complexity in such fields as cross-border payments, securities trading and compliance of laws/regulations. Should the technology expand into other traditional industries in the future, potential revolutions might also be triggered in those industries. Therefore, the importance of blockchain technology is self-evident. Both experts and scholars predict that in the future, blockchain technology will change business, government and the society in a profound manner, which of course will give rise to legal issues associated with the technology.
The critical component of a blockchain is a massive globally distributed ledger or a database that is accessible to everyone and maintained across numerous computers in such a secure and private way that allows various types of valuable information to be created and stored via mass collaboration and clever codes so as to ensure integrity and trust among strangers and to substantially lower transaction costs. Smart contract, for instance, is a type of contract structured based on blockchain technology where terms and conditions are drafted using program codes; this new drafting approach will greatly reduce costs involved in the signing, execution and payment of contracts.
Therefore, the application of this technology will inevitably involve a number of existing and newly arising legal issues. To be specific, one of the characteristics of a blockchain is its anonymity, and the legal issues involved here are the verification and disclosure of a user’s information and the legitimacy of disclosing and storing such information. For instance, are users forced to provide personal information when using a blockchain? Is there any law that expressly regulates application of a blockchain for services? Will the Personal Information Protection Act apply if any personal information is publicly disclosed, and should relevant laws and regulations be amended to accommodate this new technology? In addition, a blockchain secures information and its non-repudiation by creating digital signatures using asymmetric encryption algorithms, and there are doubts as to whether the technology satisfies the definition of a digital signature provided in the Electronic Signature Act. Moreover, the aforementioned smart contract might differ from traditional contracts in terms of its creation, signature, application and governance of contract breach. There might still be questions about how to apply existing laws and regulations to this new form of contract.
Besides all those mentioned above, intellectual property rights issues also arise in relation to the technical content and operation method of a blockchain. For instance, as far as patenting is concerned, there may be legal issues regarding whether the invention of the blockchain technology should be categorized as software or a business method, and regardless of which category a blockchain falls under, whether the technology is considered an eligible invention for patent registration has long been questioned. Even though many countries around the world have adopted an open mind towards these two subject matters, different levels of strictness are being applied to examine each application. Therefore, patent applicants still encounter difficulty in writing patent specifications and properly arranging their claims in a manner that not only meets the examination standards of different countries with regard to eligible invention, but also clearly stating the scope of rights to be protected by applicable patent laws while at the same time ensure the novelty, non-obviousness, full disclosure and clarity of submitted patent application.
Given the fact that application of a blockchain has become a crucial challenge to our society and the significant effect it has on the government, industries and the public should it progress further, it is inevitable for us to face this challenge and explore effective legal solutions to solve material legal issues arising from the application of this evolving technology so as to protect the rights of consumers and ensure transaction security.