“We work with enterprise blockchain, and we do emergent technology. The enterprise blockchain is a part of that, but really, we work with sensible founders with meaningful and viable use cases on blockchain. And we think there’s actually a lot of viability. We don’t really participate in the speculation or that kind of aspect of the market,” Mr Myint explained.  

“The people we work with are builders, and they want to build, and we’ll say almost universally they want to build safely, and they really do focus on customer protection, and that’s the space we occupy about safe building on blockchain technology. And that’s based on quite an extensive history in the last few decades in traditional, as some would call it, traditional law at major international firms.”

The crypto market is also currently experiencing “something of a reckoning”, according to Ms Blycha.

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“When we started having digital assets, the primary way people saw digital assets was as having no value. If people saw naughts and ones and they looked at in-game assets and they looked at other cryptocurrencies as not really having any value and because of that, they were not regulated. That’s the original position that many people took, that things in cyber space weren’t real,” she said.

“Over the last year or so, we’ve now understood that crypto assets are property, so they have legal meaning. And because of that, we are now starting to also see quite clear indications from the regulators that crypto assets are absolutely regulated.” 

“But where we are in terms of reckoning is that so many of the people who have participated in crypto markets, they’re all still living in something of the past. Even though they have got regulation, they haven’t actually been participating or active consumers of traditional regulation even though they should be already,” Ms Blycha went on.

“And because of that, lots of people are putting real-world assets, real money, into buying these crypto assets. And because of that, a lot of people have been exposed, but those markets haven’t had the same requirements that we’re used to seeing by domestic and overseas operators who operate licenced markets. And that’s basically what’s happening now, this reckoning where the markets are coming undone.”

However, regulation within this space has proved to be tricky — and whilst securities regulators across the globe have made it clear that crypto assets are regulated, the fact that they are composed of code and data has made the space more difficult to regulate.

“When it comes to digital assets, they are assets that can be programmed, and because they can be programmed, they accrue data. What that means is that when you think of owning a vase, you own a vase and you can transfer a vase or trade a vase. Imagine if the vase started changing shape the longer that you owned it. It becomes legally very difficult to define the four walls of what the vase is,” Ms Blycha said.

“Crypto assets, we call this problem the problem of dynamism, which is the law for property requires that you can identify the property that you have rights against the world at large. Whereas in this instance, you have to be able to try to work out, well, what do I actually own? And it’s something that’s changing shape. That makes it a little bit tricky to identify the legal rights in respect of it.”

Moreover, more functions can be added to digital assets as they grow, changing the nature of what it actually is — as well as the fact that crypto assets can be led, owned and controlled by code.

“The law is predicated on the need to point the finger at someone or humans or people having custody. But with the absent landlord, the person who has custody, which many people in this industry say is the reason they don’t need to get regulated is because they say code’s in charge and code doesn’t need to be regulated, which is clearly problematic and not a very good answer for consumers,” Ms Blycha explained.

“[Also] with these currencies and these assets, they tend to jump verticals and horizontals, which means that they could be acting in a way which is banking and finance, but they also could be acting in a way where they’re really something that’s just seen as a gaming asset and having gaming/gambling features. [Additionally] the reason that crypto assets are difficult to regulate is [that] the people who built them are not people who are used to playing in traditional financial markets.”

Therefore, one of the challenges for lawyers in this space is adapting old laws to these new ways of working, explained Mr Myint.

“It’s not creating a brand-new law. You have the ancient Roman concept of accessio, or accession, which is when an asset becomes merged into another asset. When a painter puts paint on a canvas, they own the painting. You have specification, or specificatio, in the Roman doctrine, which is like the ingredients of a cake are made into a cake. You have commingling. Now that’s another common concept, but it’s very old, but it does persist, or commixtio,” he explained.

“They’re very old doctrines and old laws which are sitting there in relation to the nature of these property rights. But then we’re trying to adopt them and move them together with these new technological dynamic chameleons.”

These challenges, however, can “definitely be overcome”, added Ms Blycha, who said it’s all part of being a lawyer in the tech space.

“If you want to be a really good emerging tech lawyer, you need to sort of like taking a necklace and unknotting lots of knots. That’s basically what legally we have here. And as an emerging tech lawyer, you often sit at a place where there’s no clear law, but you help articulate what the law could be. And you use traditional principles that have already been around,” she said.

“But in this instance, what we are looking at is a whole economy of global digitalisation. And because we have a whole economy of digitalisation, these assets aren’t going away.”

The transcript of this podcast episode was slightly edited for publishing purposes. To listen to the full conversation with James Myint and Natasha Blycha, click below: