As emerging technologies like Web3 become a significant part of Asia’s M&A landscape, law firms are under pressure to upgrade their capabilities and offerings to cater to the same. Leaders say that in order to do this, not only do lawyers need to track existing laws and regulations, but also understand the technologies that underpin them.
HOW IS YOUR FIRM EXPANDING ITS OFFERING TO SHOWCASE ITS EXPERTISE IN EMERGING TECHNOLOGIES SUCH AS BLOCKCHAIN, DEFI AND WEB3 THAT ARE TRANSFORMING THE M&A MARKET?
CHARUWAN CHAROONCHITSATHIAN, partner, Tilleke & Gibbins
In the era of Web3 technologies, such as decentralised finance (DeFi), non-fungible tokens (NFTs), blockchain, decentralised autonomous organisations (DAOs) and the metaverse, adoption of these technologies by individuals, companies, and government organisations will play a significant role in the coming decade. It is inevitable that every industry, including legal practice, will need to adapt if they don’t want to get left behind.
Since there are a variety of laws and regulations related to Web3 technologies, and these are constantly changing and developing with the technology, it is important for lawyers to understand how the law is likely to change, as well as how to apply existing laws and regulations to the specific Web3 technologies within each M&A transaction.
Lawyers also need to understand the technolo-gies themselves in order to identify the possible legal issues and risks that can arise, such as licensing and joint ownership of digital assets. It is also important for M&A lawyers to be able to distinguish the difference between traditional M&A transactions and Web3 M&A transactions. Preparation of M&A documents involving Web3 technologies requires attention to the use of new definitions in drafting terms and conditions, and expertise in the mechanics of execution and closing transactions that involve them.
Only law firms that can adapt, understand, and leverage this new way of doing business through Web3 technologies will be able to tap the potential for tremendous growth that they present.
We have a dedicated technology practice group which brings together commercial, IP, and disputes lawyers who each have extensive knowledge and expertise in these emerging business areas. Our experts provide regulatory advice and analysis on how the governments in our jurisdictions will regulate Web3 technologies - not just how they are doing so now, but how they are likely to do so in future - to help future-proof transactions with a substantial technology element. We handle key issues and developments shaping the technology sector today, including emerging and swiftly evolving areas such as artificial intelligence, blockchain, crowdfunding, cybersecurity, data privacy and protection, DeFi, digital currencies, embedded technologies, FinTech, IT infrastructure, the internet of things, NFTs, OTT services, software-as-a-service, and more.
Our experts understand the business operations of clients in this sector, have a deep understanding of the technologies that form the core of their businesses and can provide practical, forward-thinking solutions for Web3 M&A transactions. We help our clients to strategically position, protect, and commercialise valuable innovations, going well beyond mere compliance with the local laws and regulations applicable to innovative tech space offerings to act as a true strategic partner.
KENNETH OH, senior partner and co-head of the fintech/blockchain practice, Dentons Rodyk
Dentons Rodyk has been actively engaged in legal advisory for blockchain, DeFi and Web3 sectors since 2017 - supporting numerous initiatives in these sectors on their cross-border rollout including in areas of legal risk management, compliance, tax, data privacy and intellectual property protection.
With M&A activity in blockchain, DeFi and Web3 on the increase, we have drawn on this extensive cross-border experience as well as our familiarity with technical implementations and token economies or other value propositions of blockchain, DeFi and Web3 initiatives, to refine our M&A playbook, documentation and due diligence processes.
Such refinement has included having documentation accommodate settlement and smart contract escrow of digital assets-denominated purchase consideration; provide for digital assets-specific warranties relating to non-encumbrance, taxation and anti-money laundering and protocol-specific warranties relating to protocol integrity and audit; detail completion mechanics for effective transfer of control of smart contracts or onchain treasury and implementation of post-completion wallet signing matrix and controls, as well as having due diligence processes refined for focus on areas such as wallet ownership and security.
With blockchain, DeFi and Web3 invariably cross-border, we have also resourced multi-jurisdic-tion legal expertise from within Dentons global law firm to provide cross-border M&A support particularly in compliance and taxation.
Our lawyers understand and stay updated on developments in blockchain, DeFi and Web3 so that we have minimal learning curve and are well-positioned to provide practical M&A legal advice that take into account the nuances of, and evolving regulatory landscape for, blockchain, DeFi and Web3.
RISHI ANAND, partner, DSK Legal
The emergence of business structures involving blockchain and Web3 has considerably evolved the market. To keep pace with the emerging trends in the tech sector, a deeper understanding of the relevant technology is required by the relevant stakeholders. Regulations are not truly able to keep up with the ever-evolving technologies, and existing regulations continue to be applied to regulate and govern the transactions involving an interplay of M&A and the technologies involved.
In such a dynamic market, we assist our clients in exploiting opportunities and managing risks. May it be standardising documents, using automated tools for legal research, or using AI for diligence, we create value for our clients by bringing to the table access to the appropriate knowledge and resources from a range of legal disciplines including transactional, technology and IP.
MACHIUANNA CHU, partner, Deacons
While M&As in traditional industries sectors have yet to pick up steam as the pandemic brought restrictions on people movement in the region, investment in the blockchain sector seems to have immunity from the economic woes and supply chain disruptions on the world stage. Interest in blockchain, FinTech, cryptocurrencies and metaverse surges especially for companies that have found ground-breaking decentralised web3 concepts. There is a continued rise of interest in this space from enthusiastic institutional investors, industry players and family offices. An increasing number of institutional investors established teams specialising in blockchain investments.
NFTs have emerged as a widely accepted form for transfer of value, especially in the art scene, and they seem to have stood out from the general scepticism about cryptos in the region. The market sees vigorous exploration of the wider adoption of NFTs in blockchain infrastructures for conferring of on-chain or off-chain rights and assets.
It is, however, yet to be seen how NFTs and blockchain developments effectively persuade investors with ESG priorities due to the energy-intensive nature of network validation. Given blockchain investment is still in its nascent stage, blockchain governance, legal and regulatory compliance, transparency, and reliability are invariably some of the major focuses in investors’ due diligence.
STEFANIE YUEN THIO, joint managing partner, TSMP
TSMP has had a front-row seat to these developments as they impact the M&A and legal market. We acted for a blockchain company in its structuring and early fundraising and represented an Australian fund manager in the listing of its digital asset-based platform in Singapore. At the cutting edge of these developments is what happens when things go wrong.
TSMP’s joint managing partner and head of disputes, Thio Shen Yi, SC, acts for crypto exchanges, crypto funds, blockchain and DeFi enterprises as well as crypto entrepreneurs. The firm also admitted US-qualified Mark Jacobsen as a partner, who brings expertise in financial institutions compliance and online payments.
