Blockchain Technology and Smart Contracts

The ELI is currently exploring the possibility of embarking on a project on Blockchain Technology and Smart Contracts. These are technologies that have a huge potential to fundamentally change many areas of private law transactions. Blockchain technology is already used to produce digital currency and to replace some back-office functions of banks and insurance providers.

Its application in land registration and numerous other fields are constantly being considered. Within a few years, blockchain technology, and its distributed ledger system, could be the basis of the registration of vast values in real property and currency. It would be irresponsible not to scrutinise the legal basis for these applications and consider how the law can enshrine sufficient operational security and whether minimum standards should be regulated, either at national or European level.

At the same time, blockchain technology is starting to offer interesting opportunities for private transactions in the form of smart contracts. Such contracts eliminate the need for trust and good faith, but can easily be frustrated at the slightest change of contractual circumstances. Whether the current system of private law can readily cope with these novel forms of ‘self-executing’ agreements, or whether new solutions are required, are fundamental questions.