UK law gives legal weight to tech underpinning web3 innovations | The Crypto Mile
The UK's new Electronic Trade Documents Act provides digital trade documents with the same legal recognition as traditional paper versions.
It also establishes a legal precedent in English common law, which involves "making intangible assets possessable".
This precedent could potentially have significant implications for the digital asset space, as stated by one of the key architects of the law.
Speaking on this week's episode of Yahoo Finance UK's The Crypto Mile, Lord Chris Holmes called the new legislation "the most important law you've never heard of."
Digitising the paper-intensive trade documentation system "could save $6.5bn in direct costs and enable $40bn in global trade", according to a report by McKinsey.
Digitising the legacy trade document system
Until this law came into effect, trade documents, such as Bills of Lading and Bills of Exchange, had to be hard copies. For centuries the UK's domestic and international trade has been legitimised by official paper documentation.
This has generated extensive paperwork that has an environmental impact, and could be seen to lack security and efficiency.
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However, with the Electronic Trade Documents Act becoming law in the UK, Holmes envisions both an environmental and economic opportunity to use digital innovations to legitimise the holding and transacting of trade documents in electronic format.
"We've had the same system in place for centuries, and if not broken it is clogged up with billions of bits of paper," he said.
Establishing a precedent that could have far-reaching consequences
Holmes said the law establishes a precedent, giving digital trade documents legal equivalency with the legacy paper versions.
This legal development opens the door to digitisation of all areas of government administration.
It also makes the UK a leader in advancing the principles of web3, which is described as an internet of ownership and value transfer as well as information transfer.
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To establish legally enforceable ownership and value for both digital assets and digital documents, they must be integrated with existing laws within jurisdictions in the physical world.
Holmes said this provides opportunities to harness the benefits of distributed ledger technology (DLT) and artificial intelligence (AI).
"It is the first time that we have legislated for these new technologies," Holmes said.
Enhancing the administrative systems of government
"There are scores of examples where we can bring to bear the benefits of distributed ledger technologies, and we need to put these into similar statutory forms," Holmes said.
He said the new law could benefit state infrastructure.
"Let's take one big department for example, the Department for Work and Pensions (DWP), a huge payments department that has to ensure that billions of pounds of payments come out of that department and get into the hands of the benefit recipients."
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He suggested that blockchain-based solutions through smartphones could make DWP systems "more effective, more secure, with zero fraud and zero friction."
He added that the digitisation of these processes could benefit recipients, "who are currently all too often seen as passive recipients by the state could be enabled and empowered to become active in that process."
The Electronic Trade Documents law could have far-reaching consequences for international trade. With the UK being the first G7 nation to enact such legislation, other jurisdictions may follow suit.
Legal frameworks that facilitate the digitisation of trade have the potential to spread into other sectors, advancing the innovations that were spawned in the blockchain sector.
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