Demystifying Technology. Do Smart Contracts Require a New Legal Framework? Regulatory Fragmentation, Self-Regulation, Public Regulation
University of Pennsylvania Journal of Law & Public Affairs, Forthcoming
49 Pages Posted: 20 Aug 2018 Last revised: 11 May 2019
Date Written: May 17, 2018
This Article explores the problem of systematization that new technologies, in particular blockchain-related technologies, entail. From a commercial law perspective, it discusses whether the rules provided in the commercial context for the conclusion of contracts between two “human” parties may be safely extended to blockchain smart contracts.
After analyzing blockchain (distributed ledger technology), and smart contracts and their main properties, this Articles considers the Uniform Commercial Code, with a focus on Article 2, as well as the regulation promulgated for internet contracts in the aftermath of the Internet Era. Furthermore, it considers the multiplication of state-level regulatory initiatives aimed at defining blockchain and smart contracts and the consequent risk of regulatory fragmentation. This Article suggests that the option to apply the existing regulatory framework to the new emerging commercial practices is the best solution, and emphasizes the need for uniform principles as a precondition for commercial practices to prosper. From this perspective, this article takes into consideration important historical precedents, such as the Law of Merchants (Lex Mercatoria), and its new form, the so-called Lex Cryptographia as the correct paradigms to be applied to the globalized cryptographic-based context. Finally, this Article emphasizes the need for both public regulation and self-regulation as two complementary sources in commercial law, and the role that new self-regulatory organizations and industry representatives, such as the Chamber of Digital Commerce, should play in the shift towards a new technologic area.
Keywords: Smart Contracts, Blockchain, ICOs, Bitcoin, SEC, CFTC, Federal Regulation, State Regulation, UCC, Self-regulation, Chamber of Digital Commerce, Internet, 'do no harm' Approach
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