Mankind is on the brink of the Fourth Industrial Revolution. At least, this is what the recent World Economic Forum in Davos is about. The story goes that the Third Industrial Revolution that started in the 60’s, actually broke out because of IT. They say that the driving force of the Fourth Industrial Revolution is “a fusion of technologies that is blurring the lines between the physical, digital, and biological spheres”.
The transition period will probably last a while. It’s quite possible that it will be long-playing, like Brexit, which means that we’ll finally face the glorious moment when we’re no longer young and beautiful. The good news is, we will definitely manage to improve our tax regulations, and maybe even develop the new labor and commercial codes. The bad news is, instead of picking up the pace and jumping into the last carriage, we still keep on going around in a circle.
The world is constantly changing, and this process in nonlinear. No one can tell how innovations will change people’s behavior – it’s a wild card play. Today we would give our eye teeth to see how lawyers are finally replaced by artificial intelligence. But what if tomorrow some neural network creates a language where words and word combinations would have only one meaning. So, are we going to need any lawyers at all?
We usually listen to radio while driving. In driverless cars, we’ll no longer need to watch the road and hold the wheel. Well, you get what I am driving at, don’t you?
It’s hard to make any global forecasts after Brexit. Artificial intelligence is a tricky bastard. We book our tours to Mars instead of some cheap and luxury all-inclusives and use virtual reality gadgets that are able read our thoughts, but we can’t forecast what’s going to happen in 2017. If it turns out that the accuracy of any forecast is least 16,6%, then I’m Marty McFly.
Now I can’t even imagine my work without OpenDataBot. This Telegram bot finds information about companies and more importantly, I receive updates on changes in registration records or new litigation records regarding the companies I signed for. This app was developed by 908.vc after one of portfolio companies had been brutally attacked by raiders.
The government will continue opening the databases, since actually, there’s no other option. The government is a bad developer, and a bad product owner. But to tell the truth, the government doesn’t have to be good at any of this. The government owns the data and only has to give API to those who are willing and ready to invest time and money in product development. The more data is open, the more there will be convenient services for working with legislation databases, court, land titling, trademark, and other registers.
The legal status of bitcoin hasn’t been yet defined in any country of the world. Generally, public authorities come out with something like “we’ll see how cryptocurrencies work and then figure out what to do with their legal status”. In 2015, the National Bank of Ukraine used to criticize bitcoin, while in 2016, the attitude became more reasonable.
Ukraine is one of the top 10 users of bitcoin nodes in the world. Just relax, I copy-pasted this info from the Wikipedia. Nearly 40% of bitcoin deals were made on exchange markets of Ukrainian origin.
In 2016, the National Bank of Ukraine seriously considered issuing crypto-UAH, i.e. the centralized cryptocurrency based on blockchain. The funny thing is, some public servants declared their profits in bitcoin (in 2016, online tax declaration became mandatory for all Ukrainian civil servants).
I don’t think that this year, our lawmakers will finally manage to pass any law regarding the legal status of bitcoin. However, it’s quite possible that the National Bank will adopt such regulation, so cryptocurrencies will finally come out of the shade.
Crowd investing vs. IPO
For now, the Ukrainian banking system is dead in the water. While this situation is a huge problem for some of us, it’s the hell of an opportunity for others: the money withdrawn from savings accounts could be brought back to our economic system through micro-investing.
In early 2016, the US government raised the threshold for venture investment without a license. In the meantime, the first-ever ICO, i.e. the Initial Coin Offering, took place in Ukraine. It’s like an IPO, only with crypto-tokens being issued instead of shares during any over-regulated public offering procedure. In this ICO, Kuna crypto-exchange gathered a little less than 300 bitcoins (300 000 USD or so, according to the current rate) in exchange for 10% of shares.
This year, at least one of our clients is going to use the similar procedure to bring in investments – crowd investing. We don’t know yet whether or not cryptocurrencies will be used for this purpose, but we know for sure that there will be no place for traditional and over-elaborate tools for investments amounting up to 500k USD.
I hope that in 2017, there will be some more good examples of micro-investing, which will result in the development of regulations for such tools. However, this is the worst-case scenario. According to the optimistic scenario, special regulations for ICO and crowd investing will be developed any time soon.
I cannot yet define this trend clearly, so here is just what I see.
In 2016, there was a number of high-profile criminal cases against IT businesses, accompanied by searches and seizures. Every such rummage turned into a hot-button issue on the social media: at first, such news appeared in AIN.ua (one of the most popular online business media outlets in Ukraine) or other similar web-based media, then top bloggers chimed in with comments, and finally, public officials joined these discussions after a fivescore of “Shares” on facebook.
Doesn’t it look like a jury? In fact, top bloggers act as if they were the jurors: they generate public opinion as to whether the company actually committed this crime or not. And you must never underestimate the “jurors”, because as a rule, copies of such search orders are also published on the social media, so even people with no law degree can often draw the most precise conclusion concerning the depth of legal expertise of investigating judges.
But again, that’s just what I see. This year, the said trend will be developing, and perhaps, it will develop into something bigger.
Investments, R&D offices, Searches and Seizures
Ukraine has a strong potential for IT development. Currently, Ukraine is a kind of a “resource colony”, since the major part of foreign currency revenue in Ukraine comes from outsourcing.
However, every year there are more and more news about the growing numbers of investments in Ukrainian product development companies (we read such news even more often than news about searches and seizures in IT outsourcing companies). So, chances are, the number of Ukrainian product development companies selling their products for better margins is going to increase.
However, when I say “Ukrainian product development company”, I mean a company incorporated in the UK or in Delaware, USA, but not any LLC (or something of the kind) incorporated in Ukraine. The reasons are obvious: we have totally barbaric corporate law and currency exchange regulations, and to crown it all, we have no justice system in Ukraine (No offence! You know what I mean).
They say that if crayfish live in the river, the water is definitely clean there. I really hope that such crayfish will finally appear in Ukraine in 2017. I have every reason to hope for it: regulations have been polished off to some extent, and there were twice as less searches and seizures in IT companies in 2016, as compared to 2015. If either PayPal or Microsoft established their R&D offices in Ukraine (I mean exactly R&D, not any representative offices), or Facebook or Google brought their servers here, IT companies would get a real shot in the arm.
I think that something like that will finally happen this year. Probably, it will happen somewhere in Lviv, and even law enforcement and prosecutors won’t be able to stop this process using all their traditional tricks like searches and seizures, as well as charges for low-balling the price for a land parcel by 1%.
Lawmaking as a Service
I was engaged in lawmaking only once. Truth be told, it was a bad experience: the President had scarcely signed the law restricting computer equipment seizures by law enforcement, when there was a search and seizure of servers in NIC.UA.
However, this isn’t the point. The point is, now business is involved in lawmaking more than ever before. E-commerce law was the first shot – it was made for business by business representatives, and MPs were only the tool for its lobbying. The said law is intended to support freelancers. It was developed by business representatives Mykyta Polataiko (Sayenko Kharenko law firm), Kateryna Bozhkova (Upwork representative in Ukraine), and Victoria Ptashnyk, the Member of Parliament.
This year, the government is going to expect the business to come out with ideas concerning deregulation and simplification of legislation. I hope that we will finally do away with those restrictions over investing abroad that made out of whole cloth.
One last thing. It’s not any forecast, it’s my big dream. I wish Ukrainian legal market players could finally realize that our competition is over. What lies ahead is Ukrainian lawyers competing with the Big 4, American and British billionaire law firms, each of which can afford to teach Ukrainian law to artificial intelligence. That’s why I hope that in the near future, Ukrainian law firms will join their efforts to start developing Ukrainian legal tech projects.
Dima Gadomsky, Attorney-at-Law, CEO at Axon Partners