There are no fewer than three different functions which electronic records transferable on a blockchain may perform with the necessary support of applicable laws. The Model Law on Electronic Transferable Records currently drafted by UNCITRAL is only applicable to a type of electronic transferable record which fulfills one of them.
According to the latest draft published in an official document (A/CN.9/WG.IV/WP.135), for the purpose of the Model Law, an “electronic transferable record” [is an electronic record that contains all of the information that would make a paper-based transferable document or instrument effective and ... "(Draft Article 3). The same article defines “paper-based transferable document or instrument” as "a transferable document or instrument issued on paper that entitles the holder to claim the performance of the obligation [indicated] in the document or instrument and ...". It will be possible to use a blockchain to transfer an electronic record which contains all of the information that would make a paper-based bill of lading, for example, effective. Such a record would would constitute an "electronic transferable record" within the meaning of the draft Model Law.
Cryptocurrencies, on the other hand, do not represent entitlement to claim the performance of any obligation. Unlike the traditional forms of electronic money, there is nobody who owes obligation to the holder of cryptocurrencies. If right conditions exist, the market will find an inherent value in cryptocurrencies (or some of them) and recognises them as substitutes for money. Cryptocurrencies are electronic records and transferable on a blockchain. But they do not fall within the definition of the Model Law.
A blockchain may also be used to transfer an electronic record indicating proprietary interests (such as security interests) in tangible or intangible properties. My suggestion for substituting a blockchain-based ledger for the registry of the Cape Town Convention (See my earlier post) relates to this type of usage. Such electronic transferable records do not represent entitlement to claim the performance of any obligation. Hence, they do not come within the definition of the Model Law.
The current Model Law project, therefore, leaves a vast area of use cases of the blockchain technology untouched. I think that UNCITRAL can be instrumental in harnessing the technology in all its applications.
According to the latest draft published in an official document (A/CN.9/WG.IV/WP.135), for the purpose of the Model Law, an “electronic transferable record” [is an electronic record that contains all of the information that would make a paper-based transferable document or instrument effective and ... "(Draft Article 3). The same article defines “paper-based transferable document or instrument” as "a transferable document or instrument issued on paper that entitles the holder to claim the performance of the obligation [indicated] in the document or instrument and ...". It will be possible to use a blockchain to transfer an electronic record which contains all of the information that would make a paper-based bill of lading, for example, effective. Such a record would would constitute an "electronic transferable record" within the meaning of the draft Model Law.
Cryptocurrencies, on the other hand, do not represent entitlement to claim the performance of any obligation. Unlike the traditional forms of electronic money, there is nobody who owes obligation to the holder of cryptocurrencies. If right conditions exist, the market will find an inherent value in cryptocurrencies (or some of them) and recognises them as substitutes for money. Cryptocurrencies are electronic records and transferable on a blockchain. But they do not fall within the definition of the Model Law.
A blockchain may also be used to transfer an electronic record indicating proprietary interests (such as security interests) in tangible or intangible properties. My suggestion for substituting a blockchain-based ledger for the registry of the Cape Town Convention (See my earlier post) relates to this type of usage. Such electronic transferable records do not represent entitlement to claim the performance of any obligation. Hence, they do not come within the definition of the Model Law.
The current Model Law project, therefore, leaves a vast area of use cases of the blockchain technology untouched. I think that UNCITRAL can be instrumental in harnessing the technology in all its applications.
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