Smart Contracts Are No Problem for the World’s Legal Systems, so Long as They Behave Like Legal Contracts

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Cryptocurrencies have been a headache (if not a nightmare) for the law. Ever since Ross Ulbrichtlaunched the Silk Road online marketplace in February 2011, Bitcoin and its ilk have been disrupting the ability of authorities to police the globe, and to ensure that norms, regulations and laws are being observed. For a while, it was believed by some that smart contracts — essentially if-then instructions written into and executed by a blockchain — would do something very similar to the law itself, coming into potential conflict with the globe's legal systems and their jurisdiction over our behavior.

Given the pseudonymous or sometimes anonymous nature of blockchain and cryptocurrencies, there will always remain the possibility that one or more of the parties to a smart contract won't be identifiable. And as Lisa Cheng, the founder of smart contract service provider Vanbex, adds, this will require some adaptation on the part of the law and on that of smart contract platforms.

"There will always be difficulty in applying laws to anonymous parties; in general, people will not enter into anonymous agreements (via blockchain or any other method) and expect the law to protect them. But yes, smart contracts can be used in a way that would make legal enforcement difficult or impossible — the solution is for trusted smart contract platforms to control these sorts of uses."

As Cheng suggests, anyone who wants to be able to uphold their rights won't enter into a smart contract anonymously, and most likely won't enter into a smart contract with an anonymous party (although this possibly won't always be avoidable)...

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