The increasing use of Blockchain pushes for Law Reform regarding the use of Smart Contracts
The UK Commission has recently launched research projects in order to bring legal clarity and certainty to the use of blockchain-based smart contracts. The Commission has already carried out some preliminary research on the topic before agreeing to extend projects and even dedicated a section to EDCC’s, otherwise known as smart contracts, due to the relatable advances and new coverage in recent months. The agency seeks to make sure that work, “ensures the law is sufficiently certain and flexible to apply in a global, digital context and to highlight any topics which lack clarity or certainty.”
The Commission believes that smart contracts have the capability of increasing trust and certainty, whilst increasing transaction efficiency among businesses in the UK. The paper suggests it is important to ensure that, “English courts and law remain a competitive choice for business. Therefore, there is a compelling case for a Law Commission scoping study to review the current English legal framework as it applies to smart contracts.” The effort for this new research follows a report published by Law Commission in December 2017, detailing fourteen new areas which were in need of reform during a year-long public consultation process. This publication included aspects of anti-money laundering (AML) law, as the law commission believes the existing regulation incentivises a high volume of suspicious activity reports that lack significant intelligence value.
Due to the publicity around crypto-related money laundering crimes it is possible that such offences are blamed on regulatory bodies, due to their inaction in this matter, meaning research and subsequent reform is needed promptly. The reform seeks to ensure that they make sure the law supports cutting edge technical innovation such as automated vehicles and smart contracts. The proposed reform will allow the use of smart contracts to increase and businesses to become more confident in using them as the benefits from Smart Contracts are identified.
The Commission also stated that this research process could take nine to eighteen months to complete and also stated that there are many questions regarding the smart contract and how this would interact with contract law concepts such as implied terms or contracts which are held to have been void from the outset. This raises issues about data protection law which must be considered further by the commission to allow fair and useful research to be carried out.
Meanwhile, similarly in Spain, Manuel Martin, co-founder, project lead and blockchain expert at Orvium, has expressed his support for a proposal on the government to introduce new blockchain startup governance legislation. This indicates the global recognition for new legal studies in the area of smart contracts within blockchain with the aim of improving internal processes and providing traceability and transparency in decision making within the jurisdiction.