What is Blockchain?

The chain of blocks stocks and transmits information transparently and securely. It functions without trusted intermediaries. This technology, created by an unknown person under the name of Satoshi Nakamoto, appeared in 2008 with the Bitcoin. This decentralised database contains the entirety of exchanges carried out by its users since its creation.

It creates trust because of its security. On the one hand, no modification of blocks can be made. On the other hand, this transparent tool does not give access to the data to just anyone. In addition, it renders the transactions rapid and offers new opportunities by calling into question the role of trusted intermediaries, such as banks.

Technology that entices traditional institutions

The European Investment Bank (EIB) has well understood that it could not do without this tool if it wished to remain competitive in the face of the increasing power of e-currencies. For this reason, on 28 April 2021 it announced the launch, in collaboration with Société Générale, Goldman Sachs and Santander, a bond issue of 100 million euros over two years, using the Ethereum blockchain platform.

Blockchain, more than e-currency

The chains of blocks came to the general public’s attention with e-currencies such as Bitcoin or Ethereum. The development of these currencies interests even the non-banking sectors. Facebook shows its interest with its stablecoin Diem, formerly Libra. While one may have the impression that blockchains are used solely cryptocurrencies, that is hardly the case.

This technology serves in particular in the tracking of assets. The supermarket chain Carrefour was a pioneer with its food blockchain. But, used as an evidence tool, it can become a solution in fighting  counterfeiting. Aura Blockchain, created by LVMH, Prada and Cartier, proposes with the Non-Fungible Token (NFT), an authenticity label for their products. Through this new means of communication with customers, it will gain access to the product’s history and such evidence. Hublot, a brand held by LVMH, uses it to propose a digital guarantee of its watches, accessible by taking a photo.

It is also used for the certification of ownership titles. The recent creation of the NFT allows the digital purchase of a thing, an asset or even part of an arm of a tennis player.

It can also be used to electronically and automatically realize commitments made between several parties. These smart contracts are not contracts, but rather an aid for the smooth performance of contracts really entered into. They are useful for the performance of insurance contracts, such as Axa wanted to do with Fizzy.

A legal framework that is still unclear

Blockchain’s legal framework remains uncertain in the Grand Duchy. Only the Law of 1 March 2019 amending the amended Law of 1 August 2001 on the circulation of securities, and the Law of 22 January 2021 amending the amended Law of 5 April 1993 on the financial sector, and the Law of 6 April 2013 on dematerialised securities, have applicable provisions without creating new ones. That does not prevent the application of Regulation (EU) 2016/679 of the European Parliament and of the Council of 27 April 2016 on the protection of natural persons with regard to the processing of personal data and on the free movement of such data. If the chain of blocks contains personal data, it will be subject thereto.

For more information or assistance with your blockchain, contact our Digital team at +3522625621 or send us an email at contact@dsm.legal.