Understanding the Role of Lawyers in a Web3 World

Understanding the Role of Lawyers in a Web3 World

11.9.2022

By Sherry Levin Wallach

To be leaders and innovators, lawyers must continue to embrace novel technologies and new ways of conducting legal practice. In our ever-evolving world, attorneys must stay at the forefront of change to be best prepared to represent our clients and advance the legal profession.

If the pandemic years have taught us anything, we must keep our minds open to explore, learn and adapt while protecting the sanctity of the legal profession and maintaining our ethics.

When I took office as NYSBA’s president, I determined that my term would focus on investing in the future of our profession and our remarkable association. That means studying and evaluating new data, technologies and trends to understand their implications on how we practice law.

I have sought to do this through the task forces I have initiated. Each is different, but they all seek to conduct cutting-edge research that we can employ to create better and fairer outcomes for those whom we represent. At the same time, we want to ensure that the profession rises to the challenges presented by our constantly evolving world.

One of the task forces is concerned with criminal law: the Modernization of Criminal Practice. Another is focused on mental health and trauma-impacted representation. Our Task Force on the U.S. Territories focuses on justice by examining the status of territory residents with an eye toward ensuring that all U.S. citizens are considered equal under the law. And still another task force is evaluating the ethics of local public sector lawyering.

One, however, looks squarely at an area that affects all of us: the Task Force on Emerging Digital Finance and Currency. This edition of the Bar Journal looks at the issues that the task force is studying: blockchain, cryptocurrency, non-fungible tokens (NFTs), digital finance and the nascent world of the metaverse and Web3. These new technologies are already beginning to change everything we do as lawyers and as people.

A blockchain is a decentralized ledger where information is stored; cryptocurrency refers to the myriad digital tokens and currencies available, one of which is bitcoin; and non-fungible tokens are cryptographic assets on a blockchain with unique identification codes and metadata that distinguish them from each other.

The technologies a blockchain uses to collect and store information and the way digital assets are created and exchanged have far-reaching implications. Web3 is a new iteration of the worldwide web, which incorporates blockchains and other technologies, including digital currencies and other non-fungible tokens, such as digital works of art. Web3 is the platform that hosts the metaverse, the virtual world where people can gather to work, play, socialize or collaborate.

These may seem like esoteric concepts, but these technologies already are facts of our lives. And to understand them, we must begin to think about the world in new ways. Their real-life effect cannot be overestimated.

To make matters more complicated, particularly for lawyers, the regulatory landscape is uncertain. State governments are scrambling to devise systems to regulate the industry, but they do not want to discourage the business and other forms of commerce it brings. There also is the issue that cryptocurrency and other digital assets do not exist within state boundaries.

The federal government is beginning to step in. This past June, U.S. Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) introduced the Responsible Financial Innovation Act, which would create a federal regulatory framework for digital assets. One aim is to sort out which digital assets would be considered commodities and which would be deemed securities. Environmental groups have weighed in, urging legislatures to act on their concerns about the energy-intensive nature of blockchain.

We will be in flux for a long time, but waiting for regulation is not an option. The future is here. Cryptocurrency, non-fungible tokens and other digital assets already factor into entertainment law, trusts and estates, real estate and tax practices. Even if we do not currently handle matters involving digital assets, we will do so in the future. Lawyers have already begun to accept payment for services in bitcoin, and it will not be long before payments of fines and court fees can be done in this manner. What place might crypto have in an escrow account?

What do we do to prepare? We do what we do best; we act as lawyers. We are lifelong learners and educators. Our oath and our commitment to our clients require us to teach about these new technologies and the issues they raise. It is incumbent on us to have an understanding of the technologies and the issues in order to best advise our clients and bring our practices into the Web3 universe.

To help enhance your knowledge of the stakes, issues and possibilities of this new world, the Task Force on Emerging Digital Finance and Currency has brought together thoughtful articles for the Journal: Marc Beckman, a consultant to the task force, leads with “The Business of Law: On the Verge of Disruption,” where he defines the elements that make up the digital world and enumerates how these technologies will play into various practice areas. In an interview with Liz Benjamin, task force Co-chair Jacqueline Jamin Drohan discusses “Leading the Way for Lawyers on Crypto,” and task force Vice-Chair Dr. Carlos Mauricio Sakata Mirandola tells us about “Crypto Revolution.” If you haven’t read it already, I also recommend task force liaison Hilary Jochmans’ “Taking a Hard Look at Crypto,” which appeared in the July/August issue of the Journal. And I urge you to review NYSBA’s program archives, which offer a range of informative webinars on these topics.

Some of our members may recall that in their early years as lawyers they spoke with clients on landlines and typed up contracts, making copies using carbon paper. Over the past 50 years, there has been a sea change in how law is practiced. Computers and cellphones upended how we thought about communication and how we did research. Then the pandemic came, which brought the virtual world to the practice of law. Even lawyers who grew up with Zoom and other online meeting technologies found the abrupt shift to all-virtual contact disconcerting.

For the many of us who bridge those generations, we have seen the rapid advance of technology and how each new step has required that we learn new ways to practice. We can rightly be proud of how quickly we adjusted to each change in or disruption to the practice of law and how we were able to do so without compromising our client information or representation. It never is easy to take on new ways of doing things, but it never is as difficult as we fear. And here, too, we will embrace the new tools that will enable us to increase our efficiency and help us better serve our clients.

The New York State Bar Association is known in the legal world for being on the cutting-edge of our profession, and it is my honor to share with you the recognition of our work by NYU’s School of Professional Studies. I have been appointed to NYU’s newly formed NYU Metaverse Collaborative Advisory Board. The 10-member board is bringing together representatives from the student body, industry, the research sector and the legal profession to educate about the impact of these new technologies. With our core values of justice, fairness and doing the public good, and the strong ethical framework of our profession, lawyers are critical to this effort.

I look forward to keeping our members apprised of new developments in Web3. And I look forward to hearing from you about your experiences and thoughts as we continue to work together.