Smart contracts: to regulate or not? Global perspectives

Abstract

Smart contracts continue to formulate the backbone of blockchain transactions. After the foundation of the Ethereum protocol, the Initial Coin Offerings, Security Token Offerings, and Non-Fungible Tokens have all relied on smart contracts, with enormous market volume. The broad scope of smart contracts’ (potential) application is undisputed, yet many countries have been silent on the regulation of smart contracts. These same countries, however, have already set some standards regarding crypto assets and crypto asset service providers. We can include Switzerland and the European Union, that has already prepared a draft Regulation for Markets in Crypto Assets, in this first group. Some jurisdictions, such as the UK and the US, have already concluded that common law principles suffice to tackle with smart contracts. The third group, including Italy, has defined smart contracts but has no comprehensive regulatory framework. There is a final group of countries that have chosen not to regulate any aspects of the distributed ledger technology (yet). It is without a doubt that the use of smart contracts will cause problems regarding formation, contract performance, applicable law, jurisdiction, protection of consumers, and personal data.