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Clifford Chance

Clifford Chance

Tech

Understanding the challenges tech presents for business

Tech presents new challenges for businesses - including regulation, growing competition from start-ups and ethical issues raised by artificial intelligence. It affects all aspects of the law.

Our experts provide joined-up advice on the impact of technology on antitrust and data; M&A and investments; intellectual property and litigation; AI and fintech; cyber and regulatory investigations.

Artificial Intelligence

Moving Forward on Explainable AI - New Guidance from the UK ICO and Turing Institute

Artificial intelligence is being extensively used across sectors and around the world, but without comprehensive legal frameworks and appropriate governance and compliance programmes in place, regulators are starting to fill the gap.

One area of focus for regulators and a problem for organisations has been the need for greater transparency and "explainability" for artificial intelligence (AI) systems. As a result, a range of academic, industry and government initiatives have sought to give practical context to new legal requirements and help organisations to counter accusations that AI systems are opaque or act as a "black box". The latest of these, is guidance from Project explAIn, a collaboration between the UK Information Commissioner's Office (ICO) and the Alan Turing Institute, published in May 2020 following an industry consultation. This aims to provide practical advice on explaining decisions made by AI systems, in a manner that meets legal requirements, as well as technical and governance best practice. Here we consider some of the existing legal requirements for explainability in the UK and explore the key takeaways from this guidance. Read more about Moving Forward on Explainable AI.

Artificial Intelligence Risk: What does 2020 hold?

Artificial intelligence (AI) creates huge opportunities for businesses globally across all sectors. However, the use of AI also brings the potential for significant legal, ethical and reputational exposure. Recently we have seen global regulators grappling with these risks, with the announcement of a vast number of legal developments, including the publication of legislation and ethical guidelines. Civil courts have been active too, with several recent judgments addressing liability for AI.

In this review we consider some of the emerging global themes and highlight recent international developments. We also explore what 2020 is likely to mean for the global regulatory outlook and the steps businesses should be taking now to minimise the risks arising from their use of AI. Read more about Artificial Intelligence Risk and what 2020 holds.

China, tech and the need for global standards

Protectionism and a looming tech war between China and the West may dominate current headlines, but there is an urgent need to work together to develop global frameworks around innovation and the safety of technology, Jeroen Ouwehand, Global Senior Partner, said at a conference on China’s economic future hosted by Chatham House. In this extract from his speech, Ouwehand discusses digital borders, data flows and ethics and artificial intelligence. Read more about China, tech and the need for global standards.

Blockchain

Blockchain, trade finance and sanctions issues

Blockchain has the potential to alter the global financial system but has implications for sanctions regimes. Read more about Blockchain, trade finance and sanctions issues.

Data and Privacy

Data Litigation: A Toolkit for Defendants

The risks to businesses of civil claims arising out of data breaches have been underplayed. Data litigation is on the rise and the exposures are potentially significant. In this briefing, we explore the key defences to such claims and the arguments available - in light of the emerging case law - to challenge the large amounts being claimed by data subjects in damages. Read more about Data Litigation - A toolkit for defendants.

Data Collective Actions: The costs of losing control

Data breaches are an increasing focus for English litigation, and collective actions are on the rise as public concern grows about how our data is used. All companies – not just big tech firms – use data, and therefore risk being faced with these claims. Businesses with deep pockets are the most likely to be sued. In this briefing, the first in a series, we explore the potential claims that firms may face following a data breach. Read more about data collective actions - the costs of losing control.

China, Tech and the need for global standards

Protectionism and a looming tech war between China and the West may dominate current headlines, but there is an urgent need to work together to develop global frameworks around innovation and the safety of technology, Jeroen Ouwehand, Global Senior Partner, said at a conference on China’s economic future hosted by Chatham House. In this extract from his speech, Ouwehand discusses digital borders, data flows and ethics and artificial intelligence. Read more about China, Tech and the need for global standards.

Smart Data: UK Government consults on data sharing in regulated markets

This briefing provides an overview of the Smart Data consultation and explains how businesses can effectively engage with the Government to share their views on the topic. Read more about Smart Data: UK Government consults on data sharing in regulated markets.

Digital Assets

FinCEN and DOJ signal increased scrutiny of cryptocurrencies

US authorities are closely scrutinizing the anti-money laundering (AML), terrorist financing, and sanctions compliance risks associated with the use of cryptocurrencies. While US authorities including the Financial Crimes Enforcement Network of the US Treasury (FinCEN) and the US Department of Justice (DOJ) have been tracking the rise in use (and potential for misuse) of cryptocurrencies for years, 2020 saw a flurry of new developments that indicate that cryptoassets are now center stage.

Recent guidance and enforcement actions against companies and private individuals make clear the need for US and non-US cryptocurrency sponsors, trading platforms and other intermediaries that facilitate cryptocurrency transactions involving US persons to adhere to applicable US legal and regulatory requirements, including registration. Read more about FinCEN and DOJ signal increased scrutiny of cryptocurrencies.

Security Token Offerings – the shape of regulation across Asia-Pacific

Security token offerings or STOs, the issuance of digital tokens using blockchain or distributed ledger technology, are increasingly being seen as an alternative to mainstream debt and equity fundraisings. An evolution of the (supposedly) unregulated initial coin offerings or ICOs, STOs are typically structured to sit within securities law frameworks. This means much greater certainty for both fundraisers and investors, resulting in enhanced liquidity. In this report we consider how STOs are structured and some of the benefits and challenges, and explore the evolving regulatory landscape for STOs across key financial centres in Asia-Pacific. Read more about Security Token Offerings – the shape of regulation across Asia-Pacific.

Security Token Offerings - a European perspective on regulation

Security token offerings, the issuance of digital tokens using blockchain or distributed ledger technology, are increasingly being seen as an alternative to mainstream debt and equity fundraisings. An evolution of the (supposedly) unregulated initial coin offerings or ICOs, security token offerings or STOs are typically structured to sit within securities law frameworks. This means much greater certainty for both fundraisers and investors, resulting in enhanced liquidity. In this report we consider how STOs are structured and some of the benefits and challenges, and explore the evolving regulatory landscape for STOs across Europe. Read more about Security Token Offerings - a European perspective on regulation.

Central Bank Digital Currencies and Stablecoins – how might they work in practice?

This report considers how adoption of a global stablecoin or a retail CBDC would look in practice, and explore the legal structures that might be employed. Read more about Central Bank Digital Currencies and Stablecoins – how might they work in practice?

Do we now have crypto certainty under English law?

The UK Jurisdiction Taskforce of the LawTech Delivery Panel has confirmed that cryptoassets are property which can be owned and smart contracts can be legally enforecable. Read more about crypto certainty under English law.

Stablecoins: A snapshot of global regulation

Facebook’s proposed stablecoin, Libra, is dominating the headlines. However, growing interest means increased regulatory and political scrutiny. As digital assets transcend national borders, what does this mean for those interested in issuing or participating in a stablecoin project? Read more about Stablecoins: A snapshot of global regulation.

Stablecoin - a global overview of regulatory requirements in Asia Pacific, Europe, the UAE and the US

Facebook’s proposed stablecoin, Libra, is dominating the headlines. However, growing interest means increased regulatory and political scrutiny around the globe. As digital assets transcend national borders, what does this mean for those interested in issuing or participating in a stablecoin project? What are the regulatory questions and other challenges that need to be considered? We take a look at the global picture in this comprehensive analysis. Read more about Stablecoin - a global overview of regulatory requirements in Asia Pacific, Europe, the UAE and the US

Busting Bitcoin's anonymity - the implications for financial institutions

A deliberate design feature of Bitcoin is that it enables users to buy or sell anything without revealing their identity. Yet, paradoxically, all Bitcoin transactions are stored publicly and permanently on blockchain. Now, as seen in recent cases, enterprising US prosecutors and private plaintiffs’ lawyers are using software called blockchain explorer to crack Bitcoin’s anonymity. The US Treasury Financial Crimes Enforcement Network (FinCEN) also appears to suggest that financial institutions and crypto businesses should consider how explorer software could help them meet their own anti-money laundering (AML) and sanctions obligations. Read more on Busting Bitcoin's anonymity - the implications for financial institutions.

Facebook's Libra currency - will unexpected tax complications scare off users?

The essence of Libra is that Facebook hopes consumers across the world will spend money in a new cryptocurrency. Its value will track a basket of fiat currencies, meaning that the value of a Libra against a particular fiat currency will inevitably fluctuate. That creates a problem for consumers: each time they transact, they’ll be making a capital gain or loss. In most countries gains will be taxable, meaning consumers will have to file a detailed tax return showing all their transactions and the exchange rate at the time, and pay any tax due. This seems to us to be a significant barrier to wide adoption. Read more about whether unexpected tax complications will scare off Facebook's Libra currency users?

Facebook's Libra - an exciting but challenging road ahead

Facebook's global digital currency Libra, backed by some of the biggest names in financial services and tech including Visa, Mastercard, Uber and Spotify, is to be launched in 2020. We look at the regulatory, legal, practical and political challenges of getting this kind of project off the ground. Read more about the exciting but challenging road ahead for Facebook's Libra.

Fintech

As DEFI Matures, US Financial Regulatory Questions Loom Large

This article explores what DeFi is, review the recent SEC and CFTC actions against Abra, explore some of the red flags that DeFi platforms should be aware of and discuss steps that platforms can take to avoid inadvertently violating US regulatory requirements. Read more about As DEFI Matures, US Financial Regulatory Questions Loom Large.

Fintech in 2020: five trends to watch

Technology’s transformation of financial services will rapidly continue over the next decade. Following the bold predictions we made last year, we predict five developments for fintech in 2020. Read more about Fintech in 2020: five trends to watch

Payments Industry Trends in a Hyperconnected World

The payments industry is undergoing significant changes, driven by technological innovation, new regulations and the broader macro-economic environment. We identify some key trends that are emerging.

Digital and card payments are on the rise as use of cash declines. Recent years have also seen a proliferation of fintechs offering innovative payment services and solutions. At the same time, there has been a focus on the role of competition in payment services, with Open Banking initiatives requiring payment account providers to provide account and data access to new market players. Whilst the initial focus has been on retail payments, opportunities for similar innovation in other segments of the payments market, such as with SME and wholesale clients are rapidly emerging. Read more about Payments Industry Trends in a Hyperconnected World.

A vision for the future of the UK financial system: the van Steenis report – how financial services might evolve in response to technological, social and environmental changes

The Bank of England published a report in June 2019 on the future of the UK financial system and what that means for the Bank. The report, authored by Huw van Steenis, examines how financial services might evolve over the medium term in response to technological, social and environmental changes and how the Bank should respond. It sets out an ambitious vision for the future of the UK financial system and the role of the Bank as a leader of global regulatory standards supporting a global economy.

The van Steenis report identifies wide-ranging drivers of change that are shaping the UK economy, from big data and cyber-crime to climate change and an ageing population. It considers the role of finance in this changing environment and how a responsible and resilient finance industry can serve and support these changes. Finally, the report sets out recommendations for the Bank of England, identifying areas where it could take action to enable innovation, empower competition and build resilience in the financial system. Read more about the van Steenis report.

Fintech: International trends and regulatory responses

Technological innovation, the rise of fintech firms and the entry of big tech companies, such as Facebook and Amazon into financial services, are all driving the shift towards a digital economy.

As new financial products and services emerge, policy makers and regulators have to keep up with the pace of change and address new risks. At an international level, whilst they recognise the need for a coordinated response to these developments, so far, this has been largely limited to addressing money laundering and terrorist financing risks. Read more about Fintech: International trends and regulatory responses.

Proptech

Accelerating the Pace of Change - Commercial Real Estate Transaction Survey

Covid-19 created a tipping point for proptech, putting it front and centre in addressing the requirements of a commercial real estate industry that needed to continue working under lockdown. At the height of the first lockdown, Clifford Chance and Concrete VC surveyed the UK real estate industry to find out what the new normal for real estate transactions might look like.

The survey sought to understand which technologies and new approaches would increase in use and importance, and which would fade away. With over 80% of respondents either at C-Suite or senior level, and with over 40% representing large organisations, the results showed that proptech will play a critical role going forward but also identified which of the more traditional tools will remain at the heart of the industry. The survey also identified the key barriers to wider adoption of technology across the industry. Read more about Accelerating the Pace of Change - Commercial Real Estate Transaction Survey.

Smart Contracts

The Law Commission's report on electronic signatures: Paving the way for digitisation?

The recently published Law Commission's report Electronic execution of documents (the Report) confirms that the existing English law on execution of documents allows for the use of electronic signatures and no change in law is needed. The publication of the Report is welcome as interest in electronic signatures has grown over recent years, particularly because, as our daily environment becomes increasingly digitised, there is an expectation that putting pen to paper should not be necessary to sign legally binding documents. It remains to be seen whether the Report, which endorses the conclusions of the Law Society 2016 Practice Note on the topic, will encourage more businesses, governments and institutions to use electronic signatures on a widespread basis. This briefing examines the Report and its recommendations, highlights other factors that must be considered when using electronic signatures and looks in more detail at electronic signing (or e-signing) platforms. Read more about the Law Commission's report on electronic signatures.