Smart Contracts – What Does the Law Say?

There is much talk of smart contracts in the National Bank of Denmark paper on payments.

Whether in the context of CBDCs or other payments, they are frequently put forward as an attractive ‘prize’ worth pursuing.

Smart contracts are made possible in a digital payment context because software can automatically make payments when specific conditions are met. The payments are in line with formal agreements. They are already being used in the world of cryptocurrency exchanges, online gambling etc. The advantage of a smart contract is that it is fully automated requiring no paperwork to be processed.

Smart contracts can be written in ‘natural language’, which is then performed by code or entirely in software code. If the latter and something goes wrong, rectification is more problematic than for code written based on natural language.