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DIFC Seeking To Establish 'Court Of The Blockchain'

DIFC Seeking To Establish 'Court Of The Blockchain'

Hoping to establish itself as a pioneer in the use and development of blockchain technology, the Dubai International Financial Center has announced its Courts are to work towards the creation of the first "Court of the Blockchain," involving work on how blockchain technology can be used to enforce court rulings and separately on the resolution and mitigation of disputes concerning blockchain-enabled contracts.

In short, a blockchain is a decentralized digital ledger (also known as distributed ledger technology, or DLT) commonly used to track virtual currency transactions and holdings. It is a continuously growing list of records, or "blocks," which are linked and secured using encrypted data, and includes the complete history of all the transactions that have occurred along the chain.

The nature of blockchain is such that it is highly secure, and its decentralized nature is key to this. There is no central database within which records of transactions are held. Each "node," or computer on the network, receives a copy of the blockchain. Therefore, tampering with the information held on the blockchain is very difficult, if not impossible.

DLT technology is not restricted to virtual currencies. It has the potential to be used for a range of purposes, from financial services – for instance, the settlement of financial trades – to cross-border transactions, public administration, and even elections. Indeed, with its inherent incorruptibility, blockchain is now being talked about as a panacea for the administration of value-added tax. This is because the blockchain would, theoretically, hold not only all the data about transactions between buyers and vendors, but also the record of taxes accounted for. And it is entirely plausible that a VAT blockchain framework could be designed so that VAT due on a transaction is automatically transferred to the tax authority, such as under a split-payment mechanism. If implemented, such a system is likely to dramatically reduced rates of VAT fraud, especially in the European Union, where high rates of VAT evasion have a strong cross-border element.

According to the DIFC, its Courts are now working with Smart Dubai on a number of blockchain-related projects in the legal sector. They are to jointly work on handling disputes arising out of private and public blockchains. This will include improvements to blockchain-based smart contracts, which are currently irrevocable and there is no technical means to unwind a transaction. They will seek to create smart contracts across the blockchain that incorporate logic and allow for various forms of exceptions and conditions for seamless and more efficient dispute resolution.

By Courtesy of Lowtax.net

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