Friday 6 November 2015

Legal effect of blockchain-based arrangements

Various proposals have been made to use the blockchain technology for purposes other than to issue and circulate cryptocurrencies. Many of them seem to rest on the assumption that the participants could make effective arrangements themselves. Things will not, however, work according to their plan when disputes arise between them or when third parties get involved unless the applicable law gives effect to their agreements implicit in their arrangements. The law does so only in the sphere of party autonomy. Suppose, for example, that a blockchain-based land registry were created and a plot of land had been registered in the name of one of the participants to the arrangement. That would not be sufficient to confer legal title to the land on the registrant unless the law of the country where that plot of land is situated gives such an effect to such a private arrangement.
Having said that, if there are good reasons why blockchain-based arrangements should be given legal effect, it is the law which should be changed. In some areas, the law might move towards broadening the sphere of party autonomy. It would give rise to a lot of legal debate along the way. In other areas, the law might integrate certain blockchain-based arrangements into the state apparatus. Thus, countries presently having no proper land registry might well adopt a blockchain-based registry as a solution.

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