UK Law Commission notes that Blockchain-based smart contracts have legal validity

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UK Law Commission notes that Blockchain-based smart contracts have legal validity By Angel Di Matteo @shadowargel

In this regard, the Commission clarifies that these instruments do not conflict with the laws in force in the United Kingdom, so they recommend that the parties involved be clear about the properties and risks inherent in their use.


The UK Law Commission, the entity in charge of monitoring the applicable laws in English territory, indicated that neither the country nor Wales need legal reform to address smart contracts within the cryptocurrency sector.

Smart contracts are legally valid in the UK

This was stated by the commission in a statement published today, where it indicated that smart contracts built with technology Blockchain or DLT They are perfectly legal under the laws of the United Kingdom and Wales, so they recommended entities and individuals interested in employing them to be very attentive to the risks inherent in the respective code.

The investigation carried out by the aforementioned commission came about due to the observations made by the Working Group of the Jurisdiction of the United Kingdom in 2019, at which time it indicated that smart contracts do qualify as enforceable agreements based on the laws local, in addition to qualifying cryptoassets as negotiable properties. At that time, the group was investigating precisely whether it was necessary to make some type of legal adjustment to address these instruments.

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In this regard, the UK Law Commission indicated:

“The analysis … demonstrates the flexibility of common law to adapt to technological developments, particularly in the context of smart legal contracts … It confirms that the jurisdiction of England and Wales provides an ideal platform for business and innovation.”

And add:

“As smart legal contracts become more prevalent, the Commission anticipates that the market will develop established practices and model clauses that parties can use to simplify the process of negotiating and drafting their smart legal contracts.”

Smart contracts and legal considerations

The clarification by the Commission comes in the midst of the constant debates about the relevance of smart contracts today, especially about whether they will have participation later in terms of legal processes and agreements where they can be used.

Until now, smart contracts have a lot of relevance within the ecosystem of digital currencies, especially in the sector DeFi, as they are the basis of many automated financial processes that award rewards to participants. However, for years the usefulness of these instruments has been explored outside of said sector, trying to see their usefulness in traditional areas such as real estate, academia, tenders and many others.

As a point in favor, it is understood that smart contracts, being lines of code, are not susceptible to the conditions in which people’s judgment can compromise compliance with established agreements. But on the other hand, there is the fact of rigidity and precision with which the agreement must be designed so that it is consistent with what is to be agreed upon, without risks for the parties involved.

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While this is the applicable decision for the United Kingdom, it remains to be seen whether these same considerations would apply in other legislation with similar concerns.

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Source: Cointelegraph

Version by Angel Di Matteo / DailyBitcoin

Picture of Unsplash

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