Legal Aspects of Blockchain; Interview with Inger Bijloo
Inger Bijloo was interviewed about the legal aspects of smart contracts as an application of blockchain technology
Inger Bijloo - 13 november 2017
Legal Deep Dive Interview with Inger Bijloo, Senior legal consultant at Deloitte Legal ¹
Inger, you are a co-author of the report ‘Smart contracts as a specific application of the blockchain technology,’ that will be published in November 2017. Could you tell us something about that report?
Inger: I was part of a working group which was invited by the Dutch Digital Delta to investigate and write a report about the legal questions that raise when it comes to smart contracts. We looked at where existing law and smart contracts intersect, collide and where there are legislative loopholes. Furthermore, we tried to determine what knowledge and education with regard to smart contracts (both technically and legally) is needed and which institution could fulfill this need and develop education in those areas. The report should be seen as a contemporary analysis of smart contracts and law.
We didn’t really look at blockchain as a whole, as the blockchain technology can be used in so many situations. We took smart contracts as a specific application of the blockchain technology, because the terminology smart contract seems to refer to a legally binding contract. However, with regards to blockchain, inclusion of legal aspects is not necessarily the case with a smart contract.
The main question of our investigation and report had to do with what the legal aspects of smart contracts are or could be. We discovered that a smart contract can have a certain legal form and can be legally binding, but that these two elements aren’t necessary apparent.
What do you see as points of improvements between blockchain and the law?
Inger: I don’t think we really thought about points of improvement. We mostly looked at where there is a lack of knowledge and where knowledge can be improved upon.
However, a point of improvement could be the creation of a central platform – maybe even some sort of authority - where knowledge can be created and shared by both industry, government and knowledge institutions. Although this seems to be contrary to the concept of blockchain, having a central authority could also be useful for the development of the blockchain technology. It could improve both the legal and the technological aspects - especially - where those two intersect. This would benefit society as a whole, but also specific groups within societies such as companies and governments, but also individual users.
What do you see as the biggest legal obstacles for smart contracts?
Inger: The biggest obstacle is the terminology. The words smart and contract imply a legally binding contract that thinks for itself. This is not accurate. A smart contract does not necessarily have to be legally binding. Moreover, it does not think for itself, it merely executes automatically. For me, the term smart contract is the biggest obstacle but from a legal perspective there are others. We have described a few of them in the report.
What is the difference between the contract status in a non-smart contract and a smart contract?
Inger: A normal contract and a smart contract are actually different things. A contract – in essence - is an agreement between two or more parties. A smart contract is actually a programmed computer code which could have different (legal) forms, but with one common element: it executes automatically when it receives certain pre-determined input. The smart contract application on the blockchain technology could be seen as the “if this input is received-than that happens”-application. As mentioned before, a smart contract does not necessarily have to be a legally binding contract.
What do you see as the future of smart contracts?
Inger: A smart contract has many forms and therefore there are numerous possibilities. I think that people will even look for more possibilities than are currently apparent.
From the legal side, I think we are just getting started. We took initial steps in which we started to recognize challenges. Those challenges will have to be worked out. You can only see the full extent of a challenge when you are working with a specific form of a smart contract. For example: when a smart contract has been executed but you do not agree with the specific kind of execution, how do you turn it back? You will only know the answer once you try to turn it back. What will happen is still unknown until the time comes when smart contracts are being tested in an actual setting. From that point of view, we still have a long way to go.
How about this interaction between the technology and the law? Technology thrusts itself forward whereas the law has to be reactive. Will this tension become more apparent?
Inger: I think that is just the story of the law and how new laws and regulations are created. Law generally responds to new challenges and new situations. A situation comes forth and the law reacts. Then a new idea of how the law can be applied arises and you try that. Once you think you have figured it out, inevitably unforeseen situations will keep arising. I think, with regards to smart contracts, the technological side of will always precede the legal side.
Do you see your efforts in putting together the report about smart contracts as the law being proactive?
Inger: No, I see it as a necessity for the government and society. If the understanding of people differs, how can people really understand the consequence of using this technology and how can a legislator create new laws or adjust existing laws, and how can a judge rule on a smart contract or other aspects of blockchain?
The contemporary situation is that there are differing opinions on elements of blockchain. For example – and it is a different blockchain-related example - according to the Dutch national court a bitcoin is not considered money, rather it is viewed as a trade good. While in other countries, such as Germany and Australia, bitcoin is considered money. This makes it difficult for people to know what they are dealing with. And because people don’t really understand it, they don’t trust it. I think that our putting together of the report was a necessary new step to create some understanding about blockchain and especially about smart contracts and the legal boundaries.
You went into the role of the government in regulating technology. How do you view the role of the government in regulating technology?
Inger: If you want to be able to do something of meaning, it is important to understand what is happening, where the lack of knowledge is and what role you can fulfill in that respect. There the role of the government comes into play. To create understanding to bring technology further.
In the Netherlands – I think – we are quite advanced with understanding blockchain. To keep going it is important that the government supports growth in blockchain.
In April 2018, the Blockchaingers are organizing the world’s biggest blockchain hackathon. What should a participant in our hackathon know about smart contracts?
Inger: They should know that “contract” in smart contract does not necessarily mean a legally binding contract. They should also know that smart contract is actually about execution of codes.
November 1st, you will be speaking at the Blockchaingers Legal Deep Dive. What do attendees need to know before attending your presentation?
Inger: They have to know that on November 16th there will be presented and published a report about where the legal world and the technological world collide. Therefore, I think the title of the presentation “Implementing legally binding use cases: Legal aspects of smart contracts – when worlds collide” is well chosen.
¹ This interview is published in https://blockchaingers.org/posts/blockchaingers-legal-deep-dive-interview-with-inge
Blockchaingers Legal Deep Dive Interview with Inger Bijloo at AFM
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