Case 3. Blockchain and smart contracts: regulatory challenges and regulatory approaches

Abstract

In recent years, the opportunities and challenges brought by distributed ledger technologies (DLTs) have drawn much attention from media, business, and governments. While they represent a relatively recent technology, DLTs could come to considerably redefine socio-economic systems. These disruptive changes raise a number of significant challenges for governments, who strive to find a balance between fostering this innovation while protecting consumers against potential unintended consequences. This case study documents the range of regulatory challenges raised by the development of smart contracts as well as some of the regulatory responses that have been implemented by governments. It highlights, in particular, the need for guidance and appropriate regulatory action to reduce legal uncertainty and limit risks raised by DLT-based smart contracts. It also shows that international co-operation initiatives appears instrumental in addressing territoriality challenges raised by smart contracts.