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The UKJT launches its legal statement on the status of cryptoassets and smart contracts

Posted on 21 November 2019

In what Sir Geoffrey Vos, Chancellor of the High Court, described as a 'watershed for English law and the UK's jurisdiction', the UK Jurisdiction Taskforce (UKJT) has published its legal statement on the status of cryptoassets and smart contracts under the law of England and Wales.

This statement is a critical step in providing much needed market confidence and a certain degree of legal certainty which is crucial to the successful development of the use of cryptoassets and smart contracts in all sectors (including the financial services sector).

How did the legal statement come about?

In May 2019, the UKJT released its consultation paper, The status of cryptoassets, DLT and smart contracts under English private law. The aim of the consultation process was to address issues of perceived legal uncertainties with respect to these new technologies and to demonstrate that English law and the jurisdiction of England and Wales provides a 'state-of-the-art foundation for the development and use of [Distributed Ledger Technology], smart contracts and associated technologies'.

The consultation intentionally did not cover certain areas of law insofar as they relate to cryptoassets and smart contracts, including their regulatory characterisation and treatment, intellectual property, data protection, consumer law, matters of taxation and anti-money laundering.

Key findings

Cryptoassets

Smart Contracts

The key characteristic of a smart contract, according to the legal statement, is “automaticity”. A smart contract is performed, at least in part, automatically and without the need for, and in some cases without the possibility of, human intervention. Smart contracts are written in code and embedded in a networked system that executes and enforces performance using the same techniques (cryptographic authentication, distributed ledgers, decentralisation and consensus) as cryptoassets.

Next steps

The next step is for the Law Commission to consider whether any legislation might be desirable in this area.

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