The UK Law Commission, tasked with overseeing UK law and recommending reform, has stated that England and Wales do not need legislative reform for smart legal contracts in the digital asset space.
In an announcement on Nov. 25, the commission said smart contracts created using distributed ledger technology are allowed within the current England and Wales legal framework. The Legal Commission only recommended “a gradual evolution of common law” as required by existing frameworks, but also encouraged all parties to smart contracts to explain risks related to “the performance of the Code” and any other required terms.
The commission said the conclusions build on the conclusions of the UK Jurisdiction Taskforce, which in 2019 recognized smart contracts as enforceable agreements under local law and marked crypto assets as negotiable property. However, the group added that it aimed to work with the UK government on a project that will examine potential legal conflicts related to new technologies in 2022.
“The legal commission’s analysis shows the flexibility of common law to take account of technological developments, particularly in connection with intelligent legal contracts,” the announcement said. “It confirms that the jurisdiction of England and Wales is an ideal platform for business and innovation.”
“As smart legal contracts become more prevalent, the Commission expects the market to develop well-established practices and model clauses that the parties can use to simplify the process of negotiating and drafting their smart legal contracts.”
Related: Evolve or die: How smart contracts are changing the balance of power in the crypto sector
Determining what regulations and laws apply to emerging markets, including cryptocurrencies and blockchain, has been largely limited to individual governments, although what appears to be a need for a framework for cross-border transactions and other measures affecting more than one country. Some in the public and private sectors have claimed that regulators and raids will ultimately benefit the crypto space, while others claim that regulators should adapt existing frameworks to digital assets, not the other way around.