Legal issues of smart contracts in blockchain technology

Abstract

Technologies are advancing along with the industrial revolution, and the growth of the blockchain technology market has increased globally and received attention and interest from society. The new form of digital currency has now become a pillar in daily life. All online platforms are now executing transactions in smart contract programs. The smart contract is created through blockchain technology to enhance the traditional contract with the characteristic of decentralized, encrypted, transparent, speedy, less cost and user controlled. However, not all applications are free from challenges. Due to smart contract on the network database, security matters are highly needed. Therefore, this study aims to investigate the smart contract issue from the case law and review the court judgment based on relevant legal and regulatory laws applied to the decision. The case law was referred to in Malaysia, Singapore, U.K. and New Zealand. This study adopted a qualitative method in analysing legal practices. The materials for this thesis are gathered from the UTM Database of Lexis Nexis, English Law cases, and relevant regulators and policies.The result found the main issue categorized into three namely technical issues, contractual issues, and legal and regulatory issues. Technical issue is the main contributor to the smart contract such which the oracles of data feeding in the platform is hard to trust and secure in the online platform by the technical glitch in the system due to codes also questioned the enforcement of the legal contract in the contractual issue. Meanwhile, the value of digital assets is volatile and insecure during the exchange between the parties. The vulnerability attached impacted the value of the smart contract and contracting parties faced huge losses of cryptocurrency assets. Hence, contracting parties insist the cryptocurrency be treated as property because the virtual assets can be exchanged for real money and the ownership of the assets. Thus, the legal law and regulations are played important roles to justify the terms in the code of contract and assist the court of law for fair judgment thus remedies are applied to the grief parties. In conclusion, prior to creating the programs and software for the smart contract, all the data must be trustworthy and securely on the online platform. It must precisely and reliable towards the contracting parties which could inherent technical issues and contractual issues. Furthermore, involvement from the government and lawmakers may solidify the regulatory law to enhance the application and benefit of smart contracts in the industry. Later, the operation of the smart contract will be smooth with the enhancement of cyber security in online the platform.