Functional Equivalence: An Exploration Through Shortcomings to Solutions

Abstract

Since the emergence of cyberspace there have been different legal principles evolving, such as functional equivalence and technology-neutrality, with the aim to ease the regulator´s challenge of coping with the new paradigm of virtual, digital and electronic. Currently our societies have reached the doorstep of another similar disruption: infrastructures decentralized on the basis of blockchain and distributed ledger technology, or so-called cryptoeconomics. It is time to turn to cyberspace-related principles for inspiration on how to solve similar concerns, such as applying existing regulation(s) to new technological disruption. This article looks at different understandings of the functional equivalence principle, its shortcomings and the guidance it provides to regulators and courts in dealing with the challenges related to technological innovation including that of cryptoeconomics.

Digital Transformation of Signatures: Suggesting Functional Symmetry Approach for Loan Agreements

“…Secondly, e-signature regulation seems to be falling into a 'digitization' trap where traditional processes and procedures are digitized by default-without examining whether these initial precedents were efficient. This approach mirrors that of Veerpalu's [2] where functional symmetry and corresponding signatory equivalence is judged by the ability to achieve a similar outcome, albeit through different processes.…”

“…Actually, this is not quite true. The EIDAS regulation states that a qualified electronic signature shall have the equivalent legal effect of a handwritten signature (Article 25 (2)). Yet, the recital 49 goes on to explain that 'it is for national law to define the legal effect of electronic signatures'.…”

“…We build upon the notion of functional symmetry that implies, as put by Savin [1], that 'like should be regulated alike' (i.e., similar functions shall entail similar regulatory requirements). Following Veerpalu's research on functional symmetry [2], we claim that to ensure actual equivalence, a signature needs to be seen as a set of procedures rather that an instrument.…”

“…This article aims to identify a relevant approach to ensure the functional symmetry of electronic and handwritten signatures in terms of digital transformations. From a methodological perspective, Veerpalu's [2] research provides the valuable rationale to develop functional regulation for the innovative processes and services. Therefore, the research methodology is based on a comparative analysis of the existing handwritten and electronic signature regulation and synthesis of the outcome-focused approaches to achieving similar results in similar circumstances of online lending.…”

Regulatory Sandboxes Under the Draft Eu Artificial Intelligence Act: An Opportunity for Smes?

“…Nevertheless, the process is flexible enough to let the innovators experiment and try out their innovations in real-world conditions, in a relaxed regulatory environment, whereas regulators get a direct insight into the development of innovations, and their design, and can better understand how emerging technologies, products, and services operate in the real world. 48 A sandbox is not a novel concept in the world of computer science, where it denotes "an isolated environment meant for testing and/or preventing malicious programs from damaging a computer system or critical system resources". 49 Its testing function and risk mitigation are key features that bring this concept into the realm of regulation, where it becomes "a process and a tool for regulation", comparable to a laboratory where innovations are tested against the existing regulatory framework, through a process involving participating business entities and a regulator.…”