Материал: Том 1 №1

Цифровоеправо.Том1, №1, 2020, с.12–23 М.Гутброд/Цифроваятрансформациявэкономикеиправе

affected by the coronavirus crisis. However, the mentioned changes are also likely to change the fundamentalviewsandbeliefsthathavebeenconsiderednaturaluptonow.

About Evaluation and Regulation of the Emergence of Global Giants

Onecouldfindtheagglomerationofwealthwithafewsuper-rich,whichhasbeenaconsequenceof the rise of the new economy, deplorable. I would rather welcome the fact that it is no longer only the familiesofmagnatesofthepastthatarepartoftheclassofthesuper-rich,andalsowelcomethefact that creativity is being well rewarded. In any instance, it is difficult to see a viable alternative to the inequality mentioned: whatever regulation is implemented, unless it is as radical as the communist system, is likely to not substantially change this wealth distribution; furthermore regulation, particularly ifisasradicalasduringthecommunistsystem,islikelytoprovideasubstantiallyhurdletocreativity.

Among the proposals for regulation directed at the new economy are a forced split-up of companies, in particular where platforms have obtained large market shares. However, the effects of such a split up are doubtful because, for instance, a split up may well, instead of two fiercely competing platforms,leadtotheplatformasawholeloosingsignificanceascomparedtootherplatforms.Itis probablyforthisreasonthat,althoughIT-giantshavehadsubstantialpositionsinmarketsovertime, uptonowthissplituphasnotbeentried.

There are some examples of companies with a substantial market position having been prohibited from factually forcing consumers to use all products offered by one single company. However, such rules, which impose dominant products to allow the connection of less important elements of other producers, seem to also not have much effect, since seamlessly integrated platforms are much easiertousethanproductsfromdifferentproducers.

A more recent proposal appears suggests allowing the owner of data to demand the transfer of datatootheroperators.

Furthermore, regulation — which could strengthen smaller market participants — would be to establish quality rules. Doing so could, in particular, favour smaller players, as in virtual business, sinceinmanynewbusinessesthereliabilityoftheoperatorplaysasignificantrolefortheconsumer3.

Accordingly, the bigger platforms typically set high standards of quality in order to attract the public, and potentially other platforms could more easily get users’ traction if rules were to require them to maintain a similarly high standard. Such standards could be implemented by oversight, but also potentially by self-enforcement, with organisations uniting the platforms monitoring compliance anddistributingratings.

Another regulatory concern is that the initial success of a service could push smaller players like traditional retailers out of business, but this initially successful service could lack the flexibility to bind consumers for the long term. For smaller retailers to re-emerge, substantial effort would be needed,andregulationcouldprovideachallengeforavoidingtherelateddisruption.

To give examples on a more operative level, cities have struggled to deal with the short-term parking of suddenly emerging delivery services on full roads, and the disposal of goods returned fromonlinepurchaseshascreatedconcerns.

Obviously, for those social networks that include exchange of opinion, a big concern is their influenceonpublicopinion,andthepotentialthatthisinfluenceisusedinapartialmanner.Inthiscontext,I

3The importance of brands in online purchases is confirmed by the research. See Universität zu Köln. (2019, July 3). Online sind starke Marken noch wichtiger als im Laden [Strong brands are even more important online than in stores]. https://wiso.uni-koeln.de/de/aktuelles-und-neuigkeiten/news-einzelansicht/online-sind-starke-marken-noch- wichtiger-als-im-laden

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Digital Law Journal.Vol.1, No.1, 2020,p.12–23

Max Gutbrod / Digital Transformation in Economy and Law

willonlybrieflymentionhatespeech,anddiscussionsonwhethertoimplementprohibitionsofactions inthecontextofsuchhatespeechcontainedincriminallawthroughstatesupervision,self-regulation, orputtingthefocusonthepartiestoactundercivillaw,withliftinginsuchacaseispreferable.

Turning to the effects of digitalisation on the workforce, it seems that, for the less remunerated, the change in patterns. and the fact that there is no longer one employer responsible for their life, poses a challenge. Accordingly, it becomes more important for the state in particular to provide solutions for an adequate defence of the working conditions of the lower-income classes, and the sameappliestoadequatelydealingwithpensioninsuranceissues.

Sectors in Economy Changed by Digitalisation

In the following, I will attempt an overview of the sectors of the economy that will be affected by digitalization, and how this change is happening:

Digitalisation Facilitating Connections That Otherwise Would Not Have Been Possible

Bynow,weareacquaintedwithtechnologygiantsthatallowplayersthatarelocal,likedriversor owners of apartments, to substantially increase their reach. This increased reach allows the classes of purchasers to be broadened, and presumably also increases supply (encouraging people to becometaxidriversandrentingouttheirotherwiseprivatelyusedapartments)thatpreviouslydidnot exist. When conceptualizing where this aggregation and ability to make connections that previously were not easily available can provide for change, certain areas come to mind; these include the better use of parking space — for instance ensuring that office parking space can be utilized in non-­ office hours without interfering with the office use4 — and the better use of food that is otherwise wasted5. At the same time, both projects seem to indicate that the challenge for further platforms will be to more deeply integrate these areas into reality; for instance following free parking space, gates to this parking space and parking time, or, respectively, the shelf life of food and the dangers involvedinusingthisfood.

Crypto Currencies

Increased Attraction Due To the Coronavirus Crisis. On the one hand, in the current environment, an alternative to current currencies seems to become more interesting than before. This is because government support measures are bound to weaken existing currencies. Importantly, the current tendency to implement enormous support packages without a least a tentative understanding of the timing of the crisis, and the tendency to conserve the existing economy for whatever period is needed instead of focusing on adapting the economy, seem likely to contribute to concerns about thestabilityofcurrencies.Giventheincreasedroleofgovernmentsinthecurrentcrisis,theirsense of urgency, the endorsement they are receiving when dealing with the consequences of the virus, andtheirincreasingnationalism,theycouldalsomorestronglyacttoprohibitvirtualcurrencies.

Intheend,ofcourse,virtualcurrenciesareveryunlikelytobecomeameansofpaymentthatany legal regulation will further — or even tentatively — permit. At the same time, it seems very difficult nowadays to make it impossible to exchange virtual currencies into respective national currencies.

Prohibitions to become part of a system, in the context of what technically is similar to the issuance

4See about parkingbnb at Facebook. Parkingnbnb. (2020, January 3). Parkingnbnb soft launch in Hong Kong. This [Video]. Facebook.https://www.facebook.com/watch/?v=598015701015522

5See such an initiative described in Tiarcenter. (2019, November 12). Foodsharing in Russia. https://tiarcenter.com/en/ foodsharing-in-russia/

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ofrights(thesocalledICOs)haveexistedforsometime6, and such prohibitions seem to have proven inefficient.Accordingly,Idonotbelievethatprohibitionswillpreventvirtualcurrenciesfromgaining tractioninthepost-crisisperiod.

Also,cryptocurrenciescouldbenefitfromthelowenergypricesduringandimmediatelyafterthe crisis,asthecostofoperatingthesenetworkscoulddecrease,andinparticularthe“mining”(which allows participation in the systems and is their vital constituent7)couldbecomemoreaffordable.

At the same time, it seems even more important than before for cryptocurrency systems to ensure transparency. Such transparency deserves a discussion of its own, and only a small part of what is requiredfortransparencywillbediscussedwhen,immediatelybelow,regulationisdiscussed.Inaddition, I would like to here add the importance of one key element of regulation outside the narrow cryptocurrency area: namely, insider regulation for all trade that is public in any manner, which is indispensabletocreateconfidencewiththeinvestorcommunityatlarge,andensurethatchangesin pricesaretakenadvantageofbyasmallcircleofpersons.

About Regulation of Cryptocurrencies. At least in an overall assessment, since such systems have emerged, the regulation of systems that allow the issue of cryptocurrencies has been relatively patchy. As already mentioned in the previous section, one focus of regulators has been to limit offerings of participations in such systems. The difficulty in such regulation is that, typically, limitations of such offerings in the one country can be avoided by using instruments that allow money transfersintoothercountries.Anecdotalevidencesuggeststhattheturnoverwithcreditcardsfrom non US-countries linked to the ICOs that were popular at the time has increased since the US implementedarulethatinvestorsweresubjecttoKYCrules.Accordingly,rulesandregulatoryactionsthat haveadeepereffectonthesesystemsarelikelytohavemorerelevanceforthelongterm.

An example of such regulatory actions is prosecution for activities that are suspected of being fraudulent.Atleastinsomecases,fromtheoutside,theimpressionisthatsuchprosecutionisbased on developments that were not easily predictable by the very founders of the system. Also, such development — at least partially — seemed unsurprising to investors acquainted with the structure typically chosen and the problems typically faced by similar projects. Given the specifics of the projects, it would not seem overly likely that they invest into projects without knowing what issues tendtobeinvolvedinthese.Accordingly,theresultoftheprosecutionforfraudulentactiondoesnot appeartobeoverlyadequatefortheprojects.

Furthermore,crypto-projectsandtheirfoundershavebeenprosecutedbecauseoftheabsenceof licensesfor,forinstance,operationsthataresimilartowhatisconsideredbankingintherespective jurisdictions.Atthesametime,thedangerofconfusionwithbankingoperations—atleastfromthe perspectiveofthetypicalconsumer—isminimal.

Foundations have been established to ensure the development of a certain system or product, anddisputeshavearisenastothelimitationsofsuchfoundationsabilitiestoact.Ontheotherhand, from the perspective of the very systems and founders, it has not been easy to clearly establish such limitations,becauseofthelackofclarityattheoutsetoftheproject.

Despite all that I have said in defense of cryptocurrency projects and their founders, there seems little doubt that many projects have been not been backed by any credible developments, and that

6TypicallyenactedbyprohibitionstoinvestintoICOslikethefamousChineseprohibitioninRussell,J.(2017, September 4). China has banned ICOs. Techcrunch.https://techcrunch.com/2017/09/04/chinas-central-bank-has-banned-icos/

7By way of explanation: Tuwiner, J. (2020, March 19). What is Bitcoin Mining and How Does it Work? Buy Bitcoin Worldwide. https://www.buybitcoinworldwide.com/mining/

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Digital Law Journal.Vol.1, No.1, 2020,p.12–23

Max Gutbrod / Digital Transformation in Economy and Law

the general evaluation of them being fraudulent has a good basis. Also, without any doubt, cryptocurrenciescanbeusedformoneylaundering.

AllofthisseemstoleadtoaresultverysimilartotheonedescribedforIT-giants(seeabove1.2 — TheEmergenceofNewGiants),withthefewprojectsthathavefocusedoncompliance—forinstance by filing prospectuses or by obtaining licenses at an early stage and using the money they raised wisely — having a substantial competitive advantage as compared to the projects that follow. On the other hand, given that we seem to be at a relatively early stage of development of these types of blockchain projects, there appears to be considerable room for better using the technological progress they bring to the economy at large. For this to be possible, it would be desirable that regulation be more adequate to deal with the specifics of projects than the regulation broadly summarizedabove.Thebestmanner,withoutgoingintotoomuchdetail,todosowouldberegulationthat follows functional approaches and that monitors the consistency of how such projects are implemented. For instance, the use of funds and the ongoing improvement of transparency — in line with thestagesofdevelopmentofrelevanttechnology—couldbefocusedupon.

By contrast, the regulation of a single aspect, such as the definition of a “crypto-asset” (which in reality, presumably, is the position that participation in the system gives with rights of participation, including through mining and controls, for instance when it comes to systems being split — the socalled fork being the consequence, and making the crypto-asset similar to a share in a joint stock company) is likely to complicate comprehensive regulation and deflect attention from defining the needsthatregulationtriggers.

Replacement of Traditional Corporations by Digitalization?

There are instances where innovators seem to have the ability to disrupt the industry, with Tesla being the proof that this can happen for the automotive industry. At the same time, in the aforementionedautomotiveindustry,itseemsunlikelythatalltheincumbentsarereplaced.Rather,what could be observed for some time in the pharmaceutical industry seems characteristic for the type ofongoingprocesswewillbeseeinginthefuture—namelythatincumbentsrejuvenatethemselves and adapt, including by (in one manner or another) cooperating with startups that can be more innovative but also be attracted by the comparatively easy finance an acquisition by an incumbent canbringwithitself.

Consequences of the Coronavirus Crisis for Digitalisation

Of course, because of the current crisis, it is likely that investments that would otherwise have been used for digitalization will be abandoned, reduced, or at least delayed for some time. In contrast, however, it is noteworthy that one element of the future of employment — namely distant working — has already been significantly furthered by the current crisis8, and there is ongoing contemplation on how to replace the social interaction that has been reduced by the various quarantine regimes with virtual lunches or virtual conversations whilst walking, so that multitasking becomes impossible.

Also,oncerecoverybegins(inparticularifrecoveryleadstosteepgrowthatleastinsomesectors), corporates may well want to quickly implement new, more efficient, procedures. For instance, the typicalreservationagainsthiringtechnologiesthattheydidnotputemphasisonsoftskillscouldbe

8Moreindetail,forinstance:TheSlowHunch.(2020,March).Post-COVID: Which Behaviors Will Stick? https://www.nickgrossman.is/2 0 2 0 /post-covid-which-behaviors-will-stick/

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overcome by focussing on how to test them if a larger demand of workforce arises (also see briefly below 2.5 —HR).

Digital Transformation of Existing Organizations

As alluded to above (see 1.4 — Replacement of Traditional Corporations by Digitalization?) currently successful companies are likely to adapt themselves to the challenges of digitalization, and below I will attempt to give a description how this process of adapting to the new realities could looklike.

Methodology for Conceptualizing

In order to understand where digitalisation can lead to, I find it useful to review the recent past. As we all know, the paperwork involved with accounting ledgers has long since been replaced by automation, which is symbolized by global giants like SAP and Oracle. Such global giants have expanded into adjacent areas, and other cycles of automation have been happening again and again. Also, it is interesting to remind ourselves of the difficulty linked with implementing the aforementioned automation of accounting; transferring other processes from the traditional manner in which theywerehandledtoanewmethodinandofitselfpresentssimilarproblems.

Platforms

Digitalisation seems to be relatively easy to gain traction, where current processes can be referred to as horizontal, and which (for instance) consist of a multitude of similar communications (forinstancelettersore-mails)goingtodifferentaddressees9.Anexampleofthistypeofhorizontal connection is platforms for bidding10.

Volume Business

For quite some time, and in many cases, technology has transformed voluminous and routine processescompanieshaveundertakenintotechnicalones.Forinstance,itisnotnewthatduediligence for compliance purposes with a flexible design of keywords has been undertaken by systems; this includes some analysis of the results, as well as due diligence for specific clauses and the instance changeofcontrolclauses.

Whilst, as mentioned, such automation has successfully worked already, comparing this to accounting programs (about them see 2.1 — Methodology for Conceptualizing) leads to the conclusion that projects of this type have limitations. This is because of their limited reach, and because their interaction with the other programs used in companies will not be seamless. In turn, this analysis will prompt projects to try to be more ambitious in trying to include all potential functionalities11.

9The projects mainly discussed in 1.3.1. — Digitalisation Facilitating Connections That Otherwise Would Not Have Been Possible—arehorizontalinthissense.

10See 4c:Legalasanexampleofaplatformofbeautycontests.

11AprojectthathasthistypeofambitionisTrood.(n.d.).What and how we do.https://trood.com/en/what-and-how-we-do/

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