Australian law brushes over Web3 legislation: Naomi Griffin, partner, Clifford Chance

Legislation around trade and commerce in Web3 needs more specificity according to Clifford Chance partner Naomi Griffin.

Griffin told Digital Nation Australia that the current regulatory framework governing Web3 is the same framework that governs any other commercial activity.

“If they are selling a product in Web3 or in the metaverse and they are saying ‘It has these particular features’, then they are required to ensure that they are not saying things which are misleading or deceptive, which would put them in breach of the Australian Consumer Law, for example,” said Griffin.

“If they are selling something and they're transferring a payment, they'd be governed by the same requirements around contracting and honouring those contractual obligations which are enforceable in a court.”

However, Griffin believes that these broad sweeping laws are not specific enough, when it comes to regulating the emerging technologies of Web3.

She highlights Property Law as an example, where NFTs do not currently fit into the current description of property, which exists around the concepts of a right to possession or a right to control.

“Because an NFT is an intangible, you can't possess it. You can't hold in your hand. And then the right to control is NFTs are slightly different to say, a share because it's not one particular person transacting with another. There's this distributed ledger idea around it means that it's not one person on their own who has control,” she said.

“The law is sort of brushing over the issue of, ‘Well, what is this thing and how are we going to govern it?’ So, lawmakers at the moment are thinking about, ‘Well, what do we call it? How do we govern it? Do we treat it like a financial product? What do we treat it as and what sort of legislation it is?’”

As regulation evolves, there are two potential outcomes – Australia may look to create its own Digital Assets Act, similar to the UK’s plans, or it may seek to amend existing legislation.

According to Griffin, whichever outcome occurs for Australia, it is likely to happen within the next year.

Until then, ASIC has already made recent moves to suggest that they regard themselves as capable of regulating Web3, including intervening in the cases of Holon and Coin.

“Whilst we'd say the regulation hasn't necessarily been adapted to perfectly identify say an NFT or crypto asset as something capable of regulation by ASIC, ASIC has just sort of got on with it and said, ‘Well, we're going to regulate it anyway’. So that's where we're at in Australia, but we could actually get some greater specificity around how they're proposing to deal with it.”