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The biggest challenges CBDCs present for lawyers
As central bank digital currencies continue to gain prominence globally, a partner at a national law firm delved into the challenges this emerging technology poses for legal professionals worldwide.
Grace Robbie
Speaking on a recent episode of The Lawyers Weekly Show, Liam Hennessy, a partner at Clyde & Co, highlighted several key obstacles that legal professionals and service providers encounter as central bank digital currencies (CBDCs) gain prominence.
One of the primary challenges Hennessy outlined is the additional complexity that digital assets introduced to the already intricate landscape of financial services regulation.
“My core skill set is financial services regulation, which has some inherent complexity, and I’ve spent many years trying to learn that. And then that becomes even more complex when you overlay digital assets on top of it and all the things that can be done,” he said.
Hennessy elaborated on how this complexity poses a considerable challenge for service providers, particularly in Australia, where a limited pool of experts specialise in central bank digital currencies (CBDCs) and digital assets exist.
“One of the challenges for service providers in Australia is grappling with all of that complexity as time moves on. There is not a deep bench in Australia who are focusing on these areas, but as time moves on and as more traditional institutions and new institutions adopt it, people will need to grapple with that complexity,” he said.
Hennessy also emphasised that CBDCs’ global nature introduces an additional layer of complexity for legal professionals, who must navigate the digital landscape’s inherently cross-border dimensions.
“Some of the other unique challenges of this area, and whether it’s a CBDC that we’re trying to make operate in Mallorca when you go there for your next holiday, or some other challenge, is the fact of how global this market is.
“You need to be able to understand what’s happening in the UK, Europe, US and other areas, which adds an additional layer of complexity,” he said.
Another challenge posed by the emergence of CBDCs is that, as this technology continues to advance, the fiduciary responsibilities of legal professionals are becoming increasingly significant.
“Finally, my sense is that our fiduciary duties are more acute than ever in this space. We really need lawyers to go back to Ethics 101 and Fiduciary Duties 101.
“Because when we are talking about levels of information asymmetry here, and such broad concepts that can have a real impact on people’s lives, service providers really need to not only have their technical skills up to scratch, but they need to have their ethical skills up to scratch,” he said.
Hennessy advised that legal professionals and service providers in this field must be prepared to adapt swiftly and invest in the requisite knowledge to effectively navigate this evolving landscape to serve their clients best.
“The clients in this space, global in nature, are working with appreciable complexity and are working in a space where the regulations are evolving. So I think to appropriately service the clients in this space, you really need to put a lot of investment into your technical uplift,” he said.
