Smart contracts in the EU - A dive into blockchains' new way of doing business.

Abstract

For more than a decade now, worldwide governments have stayed blissfully aloof from the advent of the crypto world, dealing with already existing concerns while foolishly missing the indelible mark the blockchain was leaving behind. What was just an idea of creating a decentralized financial ledger, free from the hands of middlemen, has now evolved into two giants: Bitcoin and Ethereum. Starting with Bitcoin’s implementation, and later with Ethereum’s enormous array of applications, the financial markets have experienced the birth of an environment becoming a fully grown ecosystem under the laws of the blockchain technology.

But the blockchain brought much more than a simple ledger… In 2008, with the advent of Ethereum, the magnitude of the hashed world saw vastly increase its own frontiers. Where the Bitcoin environment was becoming more and more an upper-class asset, the EVM breached through juridical systems allowing for a new way of doing commerce. When Nick Szabo coined the term “smart contract”, back in 1996, he was showing to the world how law and technology not only could work together, but how they could do it more efficiently and in a more transparent way.

In the European Union, legal frameworks such as the CRD, MiFID and PSD helped settle the ground for contract and investment laws, binding parties to comply to a set of “directed rules”, seemingly opening the doors to possible future harmonization while leaving member states freedom to implement such rules within their legal systems. During this last decade, however, jurists all over the world started discussing the legal advantages provided by blockchain technologies, always carefully maintaining a watchful eye on anything that could drive this transformation into illegal pursuits.

Now that we are more and more closely seeing these technologies enter our juridical systems, this paper aims at providing an in-depth knowledge on the functionalities of blockchain technology, with a particular focus on smart contracts, providing both a technical and legal spectrum on the advantages connected to their use and the legal frameworks covering their adoptability.

At the end of the day, legal barriers are the most severe cost of doing business across many jurisdictions; smart contracts can cut through.