“Smart contracts, digitised assets and electronic documents promise to revolutionise the way we do business, digitising existing processes and in some cases introducing entirely new concepts. There are, however, lingering uncertainties about whether and how English law can accommodate these”. – Professor Sarah Green, Law Commissioner.
The Law Commission will analyse the law relating to digital assets and smart contracts to identify gaps in the law and offer reforms to accommodate the new technologies playing a role in our modern-day commercial engagements.
The intangibility of a simple digitised document means it cannot, on current understanding, be “possessed” and therefore cannot constitute a document of title under the Bills of Exchange Act 1882.
It is therefore quite clear that in a world which is moving rapidly towards complete digitisation of trade and transactions, legislation implemented more than a century ago is preventing businesses from achieving an optimal electronic environment.
The Law Commission has been asked by Government to make recommendations for reform to ensure that the law is capable of accommodating both cryptoassets and other digital assets in a way which allows the possibilities of this technology to flourish.
Emerging technologies such as distributed ledgers have made it possible for the performance of contracts to be automated.
Gone are the days where all contracts are in hard copy. However, the situation raises questions such as: when would contract in code be legally binding? And, how are smart contracts to be interpreted by the court?
“Cryptoassets and smart contracts are transforming the way we do business, and we want to ensure UK firms are able to fully benefit”. – Robert Buckland QC MP, Justice Secretary.
The project on smart contracts was announced by the Law Commission as part of its 13th Programme of Law Reform in December 2017, but was paused pending the outcome of the government-backed LawTech Delivery Panel’s work in the same area.
It is clear that the law must maintain an open mind to the demand for change if it is to maintains its reputation for sophistication, coherence, and efficacy, and so that businesses can be confident in their use of smart contracts.
Following the publication of the Legal Statement on the Status of Cryptoassets and Smart Contracts by the Panel’s UK Jurisdiction Taskforce, The Law Commission will analyse the law relating to digital assets and smart contracts and identify necessary reforms to the law with a view to publishing their first consultation paper in 2021.
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