The British Law Commission, tasked with overseeing British law and recommending reforms, said England and Wales did not need legal reform of smart legal contracts in the digital asset space.
In Thursday’s announcement, the commission said that smart contracts created using distributed ledger technology are allowed under the current legal framework in England and Wales. The Legal Committee only recommended a “gradual development of common law” as needed for existing structures, but also encouraged all parties to smart contracts to explain the risks associated with “code performance” and any other prerequisites.
The group said the findings are based on the findings of the UK Judicial Group, which in 2019 recognized smart contracts as binding agreements under local law and also classified cryptocurrencies as tradable property. However, the group added that it is committed to working with the UK government on a project to investigate any potential conflict between new technology laws by 2022.
“The analysis of the Legal Commission shows the flexibility of common law to allow technological development, especially in the context of smart legal contracts,” it said. “This confirms that the jurisdiction of England and Wales provides an ideal platform for business and innovation.”
“With the increasing proliferation of smart legal contracts, the Commission expects the market to develop well-established practices and model terms that the parties can use to simplify the negotiation process and prepare their smart legal contracts.”
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The definition of rules and laws applicable to emerging markets, including cryptocurrencies and blockchains, has been largely limited to individual authorities, despite the obvious need for a structure for cross-border transactions and other activities affecting more than one country. Some in both the public and private sectors argue that strong regulatory oversight and tough measures will ultimately benefit the crypto area, while others argue that regulators should adapt existing structures to digital assets, and not the other way around.