Over the years, the exponential development of the Internet has affected and revolutionized our lives. We have always been able to discern and divide the virtual world from the real world, but as we go on, this distinction fades more and more. On the Internet, we spend a large part of our days. During this activity, however, we leave “traces”. These traces are, quite simply, our data: information of different types and importance that is collected and used by the parties we interface with in the virtual world.
The collection and use for business purposes of our data by third parties has led to ever-increasing importance of data and the resulting sensitivity about it. The totality of this data reveals, on closer inspection, who we really are; our identity. As a result, consumers, governments, and the marketplace are demanding greater control over the data they generate and process. With identity theft occurring every 22 seconds, users today question whether a third-party system should have such extensive control over their personal data, in particular, identity-related data. In this system, possible solutions are offered by the growing use of Blockchain and DLTs.
In the ‘blockchain’ the data, entered through asymmetric cryptography, are allocated in blocks, accompanied by hashes and temporal validation, concatenated between them through the recall of the hash of the previous block in the next one: from this aspect derives the characteristic of unilateral immutability. Since each hash contains the hash of the previous block, an attempt to modify one block of the chain.
With blockchain, using asymmetric encryption would ensure selective data access, respectful of what users have consented to because of the purpose of processing.
It follows that the practical applications of blockchain can potentially be many.
However, such technology brings with it a number of dangers and issues that have yet to be resurrected. These mainly include:
- Identity fraud
- Data breaches
- Lack of reusability of identities
- Right to be forgotten
In particular, precisely the latter issue is closely related to the balance between the use of Blockchain and the processing of data and the guarantee of rights regarding individual identity in light of current regulations (i.e. GDPR, eIDAS).
In this situation, a new technology is gaining ground and deserves to be studied: decentralized identity (DID), also known as “self-sovereign identity” or distributed identity. This aims to help establish unique and secure access connections between parties or systems, without the need for a third-party “connection broker.”
The DID is designed to simulate a kind of digital wallet, in which users store their identity or requests. Individuals are solely responsible for their security and release only the minimum information necessary to establish a secure and reliable connection. There is no password exchange, but biometric authentication such as fingerprint or facial recognition is used. Meanwhile, the underlying decentralized blockchain technology works to ensure that requests are cryptographically authentic and tamper-proof, significantly reducing the risk of fraud.
The decentralized identity space is still in its infancy; however, it is clear that it has the potential to change existing identity management for the better.
D Guerreiro Duarte and others, ’An introduction to blockchain technology from a legal perspective and its tensions with the gdpr’ Cyberlaw by Cijic
D Matsson and others, ’GDPR, Blockchain & Personal data, The rights of the individual v the immutability of Blockchain’ [Juridiska Institutionen Handelshögskolan vid Göteborgs Universitet Examensarbete Juristprogrammet
D Yaga and others, ’Blockchain Technology Overview’  8202(1) National Institute of Standards and Technology Internal Report
F Boucher, ’How blockchain technology could change our lives’  European Parliamentary Research Service 6
F Ghaffari and others, ’Identity and access management using distributed ledger technology’  32(2) Int J Network Mgmt – https://doi.org/10.1002/nem.2180
J Erbguth and others, ’Five Ways to GDPR-Compliant Use of Blockchain’  5 Europe- an Data Protection Law Review 431
M Berberich and others, ’Blockchain Technology and the GDPR – How to Reconcile Privacy and Distributed Ledgers’  2 European Data Protection Law Review 422
M Crosby and others, ’BlockChain Technology: Beyond Bitcoin’ Applied Innovation Review (Berkeley University)
M Finck and others, ’Blockchain and the General Data Protection Regulation: Can distributed ledgers be squared with European Data Protection Law’ 
M Vesali naseh and others, ’Person And Personality In Cyber Space: A Legal Analysis Of Virtual Identity’ Journal of Law and Technology (Masaryk University)
P Dunphy and others, ’A First Look at Identity Management Schemes on the Blockchain’, Innovation Centre, VASCO Data Security Review
Q Stokkink and others, ’Deployment of a Blockchain-Based Self-Sovereign Identity’  IEEE Confs on Internet of Things, Green Computing and Communications, Cyber, Physical and Social Computing, Smart Data, Blockchain, Computer and Information Technology, Congress on Cybermatics
S Kulhari and others, ’Fitting the Blockchain Solution into the GDPR Puzzle, in Building-Blocks of a Data Protection Revolution’ (Nomos 2021)
S Linoy and others, ’Exploring Ethereum’s Blockchain anonymity using smart contract code attribution’  (15TH International Conference on Network and Service Management)
V Ferrari and others, ’Distributed Data Protection and Liability on Blockchains’  InternetScience https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3316954
After the global ﬁnancial crisis of 2008, public conﬁdence in conventional banking systems suffered a severe blow. While the negative effects of the economic crisis were still lingering, Satoshi Nakamoto published Bitcoin’s white paper, explaining that while the current system works well for most transactions, it “still suffers from the inherent weaknesses of the trust-based model”. Nakamoto explained that cryptocurrencies could solve several problems of current ﬁnancial systems through distributed ledger technology (DLT) and cryptography, such as lack of trust, inefﬁcient transactions and instability. DLT was initially conceived with the aim of removing the need to have a central governing authority. Its proponents claim that blockchain technology offers a new model of decentralized trust without intermediaries and in a more democratic way.
DLT is a powerful tool for governance due to its unique characteristics. One of the most significant features is decentralization, where the database is managed by a network of participants rather than a single entity. This can help to reach a more democratic form of governance where power is distributed among the networks. The second important aspect of DLT is transparency. The tamper-proof and transparent nature of DLT can help prevent corruption and ensure accountability in governance processes. This can help rebuild public trust in the system and make it more efficient. DLT also improves accessibility by making information more readily available to all relevant parties. This can lead to a more informed public and greater participation in governance. Additionally, the cost-effectiveness of DLT can lower costs related to governance by eliminating intermediaries and streamlining procedures. Smart contracts, a building block of DLT, allow for automation of governance procedures and eliminate the need for manual intervention. The anonymity provided by DLT enables people to freely express their thoughts without fear of consequences, promoting active participation in government. With these features this technology has the potential to improve inefﬁcient and corrupt public governance mechanisms. Considering the potential beneﬁts, a restrictive approach to blockchain technology could therefore prevent it from developing and realizing its full potential, from which we could beneﬁt signiﬁcantly.
However, this technology is still in its infancy, and the optimal governance structure for it is far from clear. DLT also pose signiﬁcant risks and create legal and regulatory challenges. To efﬁciently unlock the potential of these distributed ledger-based systems, the limitations and risks of this technology should be understood and mitigated. In addition to architectural and governance challenges that blockchain must address for wider adoption, there are also signiﬁcant legal issues that require the right regulatory interventions. While countries around the world are looking for ways to regulate this technology for its possible use in governance, so far three U.S. states – Vermont, Wyoming, and Tennessee – have been the pioneers by recognizing Decentralized Autonomous Organizations, a DLT-based governance tool, as legal entities. As the regulatory landscape is evolving, it’s clear that more regulations from other countries and states are on the way.
Atzori, M. (2017). “Blockchain technology and decentralized governance: Is the state still necessary?” Journal of Governance and Regulation, 6(1), 45-62.
Batubara, F. R., Ubacht, J., & Janssen, M. (2018). “Challenges of blockchain technology adoption for egovernment: a systematic literature review.” The 19th Annual International Conference on Digital Government Research: Governance in the Data Age (pp. 1-9).
Buterin, V. (2014). “A next-generation smart contract and decentralized application platform.” white paper, 3(37).
Cagigas, D., Clifton, J., Diaz-Fuentes, D., & Fernández-Gutiérrez, M. (2021). “Blockchain for public services: A systematic literature review.” IEEE Access, 9, 13904-13921.
Cervone, L., Palmirani, M., & Vitali, F. (2020). “The Intelligible Contract.” Hawaii International Conference on System Sciences.
Consensys. (2021). “Which Governments are Using Blockchain Right Now?” Retrieved June 6, 2022, from https://consensys.net/blog/enterprise-blockchain/which-governments-are-using-blockchain-right-now/.
De Filippi, P. and Wright, A., (2018). “Blockchain and the Law.” In Blockchain and the Law. Harvard University Press.
Dursun, T., & Üstündağ, B.B. (2021). “A Conceptual Solution Proposal for Governance Challenges of DAOs.” In International Conference on Computer Science, Machine Learning and Big Data (pp. 2021).
Faqir-Rhazoui, Y., Arroyo, J., and Hassan, S. (2021). “A comparative analysis of the platforms for decentralized autonomous organizations in the Ethereum blockchain. “Journal of Internet Services and Applications, 12(1), 1-20.
Finck, M. (2018). “Blockchain Regulation and Governance in Europe.” Cambridge University Press.
Goossens, J. (2021). “Blockchain and democracy: Challenges and opportunities of blockchain and smart contracts for democracy in the distributed, algorithmic state”. In Blockchain and Public Law. Edward Elgar Publishing.
Hassan, S., & De Filippi, P. (2021). “Decentralized Autonomous Organization.” Internet Policy Review, 10(2), 1-10.
Hermstrüwer, Y. (2021). “Blockchain and public administration”. In Blockchain and Public Law. Edward Elgar Publishing.
Jensen, J. R., von Wachter, V., & Ross, O. (2021). “How Decentralized is the Governance of Blockchain-based Finance: Empirical Evidence from Four Governance Token Distributions.” arXiv preprint arXiv:2102.10096.
Johnson, D. (2019). “Blockchain-based voting in the US and EU constitutional orders: A digital technology to secure democratic values?” European Journal of Risk Regulation, 10(2), 330-358.
Kassen, M. (2022). “Blockchain and e-government innovation: Automation of public information processes.” Information Systems, 103, 101862.
Kshetri N., and Voas J., (2018). “Blockchain-enabled E-Voting.” IEEE Softw., vol. 35, no. 4, pp. 95–99.
Lykidis, I., Drosatos, G., & Rantos, K. (2021). The use of blockchain technology in e-Government services. Computers, 10, 168.
Magnuson, W. (2020). Blockchain Democracy: Technology, Law and the Rule of the Crowd. Cambridge University Press. ISBN: 9781108687294.
Nakamoto, S. (2008). “Bitcoin: A peer-to-peer electronic cash system”. Decentralized Business Review, 21260.
Reijers, W., Wuisman, I., Mannan, M., De Filippi, P., Wray, C., Rae-Looi, V., & Orgad, L. (2021). “Now the code runs itself: On-chain and off-chain governance of blockchain technologies.” Topoi, 40(4), 821-831.
Samman, G., & Freuden, D. (2020). “DAO: A Decentralized Governance Layer for the Internet of Value.”
Tan, E., Mahula, S., & Crompvoets, J. (2022). “Blockchain governance in the public sector: A conceptual framework for public management.” Government Information Quarterly, 39(1), 101625.
Werbach, K. (2018). “Trust, but verify: Why the blockchain needs the law.” Berkeley Technology Law Journal, 33(2), 487-550.
World Economic Forum. (2022). Decentralized Autonomous Organizations: Beyond the Hype. Available online: https://www.weforum.org/whitepapers/decentralized-autonomousorganizations-beyond-the-hype/.
Wright, A. (2020). “The Rise of Decentralized Autonomous Organizations: Opportunities and Challenges.” Stanford Journal of Blockchain Law & Policy, 4, 1.
Zetzsche, D. A., Buckley, R. P., & Arner, D. W. (2018). “The distributed liability of distributed ledgers: Legal risks of blockchain.” U. Ill. L. Rev., 1361.
Ziolkowski, R., Miscione, G., & Schwabe, G. (2020). “Exploring decentralized autonomous organizations: Towards shared interests and ‘code is constitution’”.
Zwitter, A., & Hazenberg, J. (2020). “Decentralized network governance: Blockchain technology and the future of regulation.” Frontiers in Blockchain, 3, 12.
Financial technology, as well knowns as “FinTech”, is an umbrella term related to a wide range of services for business and private individuals, including banking, financial and insurance services.
Information technologies (IT) on this matter are used for the implementation of monetary transaction and financial risk management. A greater efficiency of market services was mainly due to the global economic and financial crisis in 2009, which prompted the investors to find new forms of financial intermediation.
The creation of an alternative model of finance has permitted not only the introduction of an effective tool to improve investor confidence, but also the implementation of new technologies that can likewise be used in other sectors. A key role in this context was played by start-up companies that provided innovative products and solutions for banks and investors.
In this frame the creation of the Distributed Ledger Techonology (DLT) represented the keystone of the whole economic market (r)evolution.
The creation of Distributed Ledger Technology took place due to the necessity of an alternative financial pattern. In this context Blockchain technology has allowed private individuals, not only professional investors, to approach the world of finance and to generate profit.
Specifically, a distributed ledger is an information database that records transactions and shares information through a set of network nodes which operate with a consensus mechanism. Transactions are carried out without any intermediaries, under conditions of transparency and safely.
Financial instruments traded in these markets are cryptocurrencies: a particular kind of virtual value which cannot be considered as legal tender, but only an instrument for speculative activities. The absence of a stable value has led institutions to mistrust the phenomenon, especially to protect consumers to possible fraud and risky investments.
The latest advances in technology have led to a rapid evolution of FinTech. In particular, the following step in the development of crypto assets may be identified with the inception of Decentralised Finance (DeFi): a new shape of decentralized financial intermediation empowered by smart contracts and based on decentralization. The most remarkable application of DeFi is represented by the Decentralised Autonomous Organizations (DAOs) – financing and value exchange systems in which developers hold a share of tokens to assure you control of the market – and the Stablecoins: currencies that are easily convertible because they are anchored to the values of legal tender currencies.
Regarding the legislative framework, many have been the draft bill about regulations to outline and describe the phenomenon, but also to protect consumers from frauds and to prevent tax evasion.
One of the most considerable initiatives in the EU context is the proposal for the harmonization and regulation of crypto assets (MiCA) which is expected to be approved in the next months by the European Parliament. The main goal of the legislation is to enhance consumers and investors’ protection and promote the innovation of these assets as well as financial stability. Finally, it is worth mentioning a specific regulation on pilot regime for market infrastructures based on distributed ledger technology adopted on 2 June 2022 (Regulation EU 2022/858), which establishes specific rules for trading and transactions in crypto assets.
Avgouleas E. and Marjosola H., Digital Finance in Europe: Law, Regulation, and Governance, 2021, European Company and Financial Law Review.
Berg, Gunhild, Guadamillas, Natarajan and Sarkar, Fintech in Europe and Central Asia: Maximizing Benefits and Managing Risks., World Bank Group, 2020.
Cartea A., Drissi F. and Monga M., Decentralised Finance and Automated Market Making: Execution and Speculation, SSRN Electronic Journal, 2022.
Chen Y., Bellavitis C., Decentralized Finance: Blockchain Technology and the Quest for an Open Financial System, 2019, SSRN Electronic Journal.
Decentralised Finance (DeFi), EU Blockchain Observatory and Forum, 2022.
Didenko A. N., Buckley R. P., The Evolution of Currency: Cash to Cryptos to Sovereign Digital Currencies, 2018, University of New South Wales Faculty of Law Legal Studies Research Paper Series.
Dobrauz-Saldapenna G., Klebeck U., Initial Coin Offering—Legal and Regulatory Challenges of Crossing the Borders, 2019, The Journal of Alternative Investments, 2019, The Journal of Alternative Investments.
European Financial Stability and Integration Review 2022, European Commission, 2022.
Heimbach L. and Wattenhofer R., SoK: Preventing Transaction Reordering Manipulations in Decentralized Finance, 2022, ArXiv.
Klages-Mundt A., Harz D., Gudgeon L., Jun-You L., Stablecoins 2.0: Economic Foundations and Risk-based Models, Minca A., 2020, AFT.
Market in crypto-assets, European Parliamentary Research Service, PE 739.221, November 2022.
Natarajan, Harish, Krause, and Gradstein., Distributed Ledger Technology and Blockchain., World Bank Group, 2017.
Pachaiyappan, Vimalkumar and Ranjita Pai Kasturi, BlockChain Technology (DLT Technique) for KYC in FinTech Domain: A Survey, International Journal of Pure and Applied Mathematics, 2018.
Puschmann T., Fintech, Business & Information Systems Engineering., 59(1):69-76, 2017.
Regulation (EU) 2022/858, European Parliament and Council, 2020.
Schär F., Decentralized Finance: On Blockchain- and Smart Contract-Based Financial Markets, 2020, The Review.
Sun, T., Huang, D., & Yu, J., Market Making Strategy Optimization via Deep Reinforcement Learning, IEEE Access, 10, 9085-9093, 2022..
Torres C. F., Camino R., State R., Frontrunner Jones and the Raiders of the Dark Forest: An Empirical Study of Frontrunning on the Ethereum Blockchain, 2021, USENIX Security Symposium.
Virtual Currency Schemes, European Central Bank, www.ecb.europa.eu, 2015.
Wang, Gui-ping, Simin Zhang, Tao Yu and Yulin Ning, A Systematic Overview of Blockchain Research, Journal of Systems Science and Information 9, 205 – 238, 2021.
Werner S. M., Perez D., Gudgeon L., Klages-Mundt A., Harz D., Knottenbelt W., SoK: Decentralized Finance (DeFi), 2021, ArXiv.
Zetzsche D., Arner D., Ross P. Buckley, Decentralized Finance (DeFi), 2020, SSRN Electronic Journal.
Smart contracts are deterministic computer programs that can automatically execute on the blockchain according to prespecified functions. Smart contracts take advantage of blockchain properties, i.e. immutability and decentralization. Thus, blockchain-based smart contracts are considered an opportunity to automate any kind of process in a safe, transparent, efficient, and traceable way.
Smart contracts, despite the term, are not contracts. Of course, they can get legal relevance and be applied in the contractual domain, to conclude contracts or perform contractual obligations. In principle, however, they are suitable to automate every action or operation and can be applied in innumerable fields. For example, they could facilitate interactions in supply chains, or have the potential to transform the public sector. They are having a significant impact on those fields where huge amounts of data are processed daily between various intermediaries, such as in the finance and the insurance sector. More recently, discussions around smart contracts concern non-fungible tokens (or NFTs), units of data that can be recorded and traded on the blockchain and that are unique. They can be both the digital representation of existing assets or native digital assets that populate the Metaverse. Smart contracts make these tokens ‘programmable’, which means that they allow more complex operations than just exchanging NFTs (e.g., the automatic payment of royalties to the author of a digital work of art represented by an NFT).
Besides contract law, smart contracts can represent or perform other legal acts, which are subject to different legal domains (apart from private law) and can support both private and public activities. For this reason, it is usually distinguished between ‘smart contract code’ and ‘smart legal contracts’, the second indicating the use of smart contracts for legally binding contracts.
Like every new impacting phenomenon, smart legal contracts need a regulatory response to protect consumers and provide legal certainty for businesses. Indeed, while legal scholars affirm that smart legal contracts could foster the development of electronic commerce, on other hand, they have outlined several legal shortcomings and profiles regarding the entire life cycle of contracts, from formation to performance. The Resolution of 3 October 2018 of the European Parliament ‘Distributed ledger technologies and blockchains: building trust with disintermediation’ stresses that the European Commission needs to undertake an in-depth assessment of the legal implications of smart contracts, in particular by use-case monitoring and conducting an in-depth analysis of the existing legal framework in the individual Member States. Following this path, in 2021 the EU Commission released a study on smart contracts and the digital single market through the lens of a ‘law+technology’ approach. Outside the European borders, on 25 November 2021, the UK Law Commission published its advice to Government on smart legal contracts. Also, UNCITRAL and UNIDROIT have organised joint workshops to discuss legal issues arising from the use of DLT and smart contracts. Some countries, including Italy, have even issued dedicated rules.
Allen, J. G., ‘Wrapped and Stacked: ‘Smart Contracts’ and the Interaction of Natural and Formal Language’ (2018) 14(4) European Review of Contract Law 307
Allen, J., Hunn P. (eds), Smart Legal Contracts: Computable Law in Theory and Practice (Oxford University Press 2022)
Arruñada, B., ‘Prospects of Blockchain in Contract and Property’ (2019) 8(3) European Property Law Journal 231
Artzt, M., Richter T. (eds), Handbook of Blockchain Law – A Guide to Understanding and Resolving the Legal Challenges of Blockchain Technology (Wolters Kluwer 2020)
Bacon, J., Michels, J. D., Millard, C., Singh, J., ‘Blockchain Demystified’ (2017) Queen Mary University of London, School of Law, Legal Studies Research Paper No. 268/2017 <https://ssrn.com/abstract=3091218>
Bomprezzi, C., ‘From Trust in the Contracting Party to Trust in the Code in Contract Performance – A Critical Analysis of the Relationship between Blockchain-Based Smart Contracts and Consumer Protection’ (2021) 4 EuCML 148
Bomprezzi, C., Implications of Blockchain-Based Smart Contracts on Contract Law (Nomos 2021)
Borgogno, O., ‘Smart Contracts as the (new) Power of the Powerless? The Stakes for Consumers’ (2018) 26(6) European review of private law 885
Cappiello, B., Carullo, G., Blockchain, Law and Governance (Springer 2021)
Catchlove, P., ‘Smart Contracts: A New Era of Contract Use’ (2017) SSRN Electronic Journal <https://ssrn.com/abstract=3090226>
Cervone, L., Palmirani, M., Vitali, F., ‘The Intelligible Contract’, Proceedings of the 53rd Hawaii International Conference on System Sciences, Maui, Hawaii, USA, 7–10 January, 1780 (2020) <https://hdl.handle.net/10125/63959>
Chamber of Digital Commerce, Smart Contracts Alliance, ‘Smart Contracts: Is the Law Ready?’ (2018) <https://digitalchamber.s3.amazonaws.com/Smart-Contracts-Whitepaper-WEB.pdf>
Corrales, M., Fenwick, M., Haapio, H. (eds), Legal Tech, Smart Contracts and Blockchain (Springer 2019)
Cuccuru, P., ‘Beyond Bitcoin: an early overview on smart contracts’ (2017) 25 International Journal of Law and Information Technology 179
De Caria, R., ‘Blockchain and smart contracts: Legal issues and regulatory responses between public and private economic law’ (2020) 6(1) Italian law journal 363
De Caria, R., ‘The Legal Meaning of Smart Contracts’ (2019) 6 European Review of Private Law 731
De Filippi, P., Wright, A.(eds), Blockchchain and the law – the rule of code (Harvard University Press 2018)
De Franceschi, A., Schulze, R. (eds), Graziadei, M., Pollicino, O., Riente, F., Sica, S., Sirena, P. (co-eds), Digital Revolution – New Challenges for Law. Data Protection, Artificial Intelligence, Smart Products, Blockchain Technology and Virtual Currencies (Beck, Nomos 2019)
De Graaf, T. J., ‘From old to new: from internet to smart contracts and from people to smart contracts’ (2019) 35 (5) Computer Law & Security Review 105322
Di Ciommo, F., ‘Smart contracts and (non)law. The case of financial markets’ (2018) 7(2) Law and Economics Yearly Review 291
Di Matteo, L. A., Cannarsa, M., Poncibò, C. (eds), The Cambridge Handbook of smart contracts, blockchain technology and digital platforms (Cambridge University Press 2020)
Di Stefano, B., Pocher, N., Zichichi, M., ‘MOATcoin: Exploring Challenges and Legal Implications of Smart Contracts Through a Gamelike DApp Experiment’, Proceedings of the 3rd Workshop on Cryptocurrencies and Blockchains for Distributed Systems (CryBlock 2020), New York, USA, 25th September, 53 (2020) <https://doi.org/10.1145/3410699.3413798>
Drummer, D., Neumann, D., ‘Is code law? Current legal and technical adoption issues and remedies for blockchain-enabled smart contracts’ (2020) 35(4) Journal of information technology 337
Durovic, M., Janssen, A., ‘The Formation of Blockchain-based Smart Contracts in the Light of Contract Law’ (2019) 6 European Review of Private Law 753
Durovic, M., Lech, F., ‘The enforceability of smart contracts’ (2019) 5(2) Italian Law Journal 493
Eenma Dimitrieva, H., Schmidt-Kessen, M. J., ‘Creating markets in no-trust environments: The law and economics of smart contracts’ (2019) 35 Computer Law & Security Review 69
Eenmaa-Dimitrieva, H., Schmidt-Kessen, M. J., ‘Regulation through code as a safeguard for implementing smart contracts in no-trust environments’ (2017) EUI 247 Working papers LAW 2017/13 <http://hdl.handle.net/1814/47545>
Ellul, J., Galea, J., Ganado, M., McCarthy, S., Pace, G.J., ‘Regulating Blockchain, DLT and Smart Contracts: a technology regulator’s perspective’ (2020) 21(2) ERA Forum 209
European Commission, ‘Study on Blockchains – Legal, governance and interoperability aspects (SMART 2018/0038), 2020 <https://op.europa.eu/en/publication-detail/-/publication/939fe2cc-5784-11ea-8b81-01aa75ed71a1/language-en>
European Union Blockchain Observatory and Forum, ‘Legal and Regulatory Framework of Blockchains and Smart Contracts’ (2019) <https://www.eublockchainforum.eu/reports>
European Union Blockchain Observatory and Forum, ‘Smart Contracts’ (2022) <https://www.eublockchainforum.eu/reports>
Filatova, N., ‘Smart contracts from the contract law perspective: outlining new regulative strategies’ (2020) 28(3) International Journal of Law and Information Technology 217
Finck, M., ‘Smart contracts as a form of solely automated processing under the GDPR’ (2019) 9(2) International data privacy law 78
Finocchiaro, G., Bomprezzi, C., ‘A legal analysis of the use of blockchain technology for the formation of smart legal contracts’ (2020) 2 MediaLaws 111 https://www.medialaws.eu/rivista/a-legal-analysis-of-the-use-of-blockchain-technology-for-the-formation-of-smart-legal-contracts/
Giancaspro, M., ‘Is a ‘smart contract’ really a smart idea? Insights from a legal perspective’ (2017) 33(6) Computer Law & Security Review 825
Governatori, G., Idelberger, F., Milosevic, Z., Riveret, R., Sartor, G., Xu, X., ‘On legal contracts, imperative and declarative smart contracts, and blockchain systems’ (2018) 26(4) Artificial Intelligence and law 377
Kraus, D., Obrist, T., Hari, O. (eds), Blockchains, Smart Contracts, Decentralised Autonomous Organisations and the Law (Edward Elgar 2019)
Lauslahti, K., Mattila, J., Seppälaä, T., ‘Smart Contracts – How will Blockchain Technology Affect Contractual Practices?’ (2017) ETLA Reports No 68 <https://www.etla.fi/wp-content/uploads/ETLA-Raportit-Reports-68.pdf>
Madir, J., ‘Smart Contracts: (How) Do They Fit Under Existing Legal Frameworks?’ (2018) SSRN Electronic Journal <https://ssrn.com/abstract=3301463>
McKinney, S. A., Landy, R., Wilka, R., ‘Smart contracts, blockchain, and the next frontier of transnational law’ (2018) 13 Washington Journal of Law, Technology & Arts 313
Meyer, O., ‘Stopping the Unstoppable. Termination and Unwinding of Smart Contracts’ (2020) European Consumer and Market Law 17
Mik, E., ‘Smart contracts: terminology, technical limitations and real world complexity’ (2017) 9 Journal of Law, Innovation and Technology 269
Mukherjiee, A., ‘Smart Contracts – Another Feather in UNCITRAL’s Cap’ (2018) Cornell International Law Journal Online <http://cornellilj.org/smart-contracts-another-feather-in-uncitrals-cap/>
O’ Shields, R., ‘Smart Contracts: Legal Agreements for the Blockchain’ (2017) 21 N.C. Banking Inst. 177
Pardolesi, R., Davola, A., ‘What is Wrong in the Debate about Smart Contracts’ (2020) 5 EuCML 2021
Peixoto Barbosa, L., ‘Blockchain Smart Contracts: A Socio-Legal Approach’ (2021) 32(2) European Business Law Review 251
Perugini, M. L., Dal Checco, P., ‘Smart Contracts: A Preliminary Evaluation’ (2015) SSRN Electronic Journal <https://ssrn.com/abstract=2729548>
Raskin, M., ‘The Law and Legality of Smart Contracts’ (2017) 1 Georgetown Law Technology Review 305
Savelyev, A., ‘Contract law 2.0: ‘smart’ contracts as the beginning of the end of classic contract law’ (2016) Higher School of Economics Research Paper no. WP BRP 71/LAW/2016 <https://ssrn.com/abstract=2885241>
Schrepel, T., ‘Smart contracts and the digital single market through the lens of a “law + technology” approach’ (2021), study for the European Commission https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3947174
Sholz, L. H., ‘Algorithmic contracts’ (2017) 20 Standard Technology Law Review 101
Sillaber, C., Waltl, B., ‘Life Cycle of Smart Contracts in Blockchain Ecosystems’ (2017) 8 Datenschutz und Datensicherheit 497
Sklaroff, J. M., ‘Smart contracts and the cost of inflexibility’ (2017) 166 University of Pennsylvania Law Review 263
Stark, J., ‘Making Sense of Blockchain Smart Contracts’ (2016) <https://www.coindesk.com/making-sense-smart-contracts>
Stazi, A., Smart Contracts and Comparative Law – A Western Perspective (Springer 2021)
Szabo, N., ‘Formalizing and Securing Relationships on Public Networks’ (1997) 2(9) First Monday <https://firstmonday.org/ojs/index.php/fm/article/view/548>
Szabo, N., ‘Smart Contracts’ (1994) <http://www.fon.hum.uva.nl/rob/Courses/InformationInSpeech/CDROM/Literature/LOTwinterschool2006/szabo.best.vwh.net/smart.contracts.html>
Szczerbowski, J. J., ‘Place of smart contracts in civil law. A few comments on form and interpretation’, Proceedings of the 12th Annual International Scientific Conference NEW TRENDS 2017, 335 (2017) SSRN Electronic Journal <https://ssrn.com/abstract=3095933>
Tjong Tjin Tai, E., ‘Force Majeure and Excuses in Smart Contracts’ (2018) 26(6) European Review of Private Law 787
UK Law Commission, ‘Smart legal contracts Advice to Government’ (2021) https://www.lawcom.gov.uk/project/smart-contracts/
UNCITRAL/UNIDROIT, ‘Expert group meeting to develop a legal taxonomy of key emerging technologies and their applications’, Vienna, 10 -11 March 2020, <https://unidroit.aedstudio.net/law-technology/>
UNCITRAL/UNIDROIT, ‘Joint workshop on legal issues arising from the use of smart contracts, artificial intelligence (AI) and distributed ledger technology (DLT)’, Rome, 6 – 7 May 2019, <https://unidroit.aedstudio.net/law-technology/>
Veerpalu, A., Jürgen, L., da Cruz Rodrigues e Silva, E., Norta, A., ‘The hybrid smart contract agreement challenge to the European electronic signature regulation’ (2020) 28(1) International Journal of Law and Information Technology 39
Werbach, K., Cornell, N., ‘Contracts Ex Machina’ (2017) 67 Duke Law Journal 313
It is no easy task to define the Metaverse. Etymologically speaking, the term is derived from the combination of the Greek word, “Meta”, which stands for “beyond”, and “verse” which is a contraction of the word “universe”. Practically, the metaverse is best described as an immersive virtual world that exists entirely within a computer-generated space, made accessible by Extended Reality (XR) technology, where its users interact between themselves by using avatars. The virtual world would encompass a combination of social, commercial, and entertainment activities, and while this concept has been around since the end of the last century, a significant change in the scenario was made possible by the development of blockchain.
This is because there is not only one metaverse, but several, and they lack interconnectedness. In this sense, distributed ledger technology provides the perfect structure for interactions between users. And some interactions can have real-life legal interest.
Currently, the main legal consequences of the metaverse are related to property rights including intellectual property disputes, privacy, and harmful behavior. In the field of property law, is indisputable that digital assets have value not only in the metaverse but also in real life. Therefore, disputes over the ownership rights of these assets can arise. In addition, the lack of regulation related to the use of copyrighted material in the metaverse becomes a beacon for copyright infringement discussions. In relation to Data protection, the sole use of XR technology involves the collection of immense amounts of data, including very sensitive personal data, such as biometric, emotional, and physical data, which requires specific protection measures under the General Data Protection Regulation. Finally, there is a considerable range of harmful behavior that can happen within the metaverse environment, same as in social media, including verbal harassment, hate speech, and defamatory content.
The economy of the metaverse relies on blockchain and cryptocurrency technologies. Non-fungible tokens (NFTs), for example, are used to track and validate the sale and ownership of digital assets. In real life, ownership rights of NFTs are in debate, and the lack of clarity and confusion over the existence of ownership of virtual goods can lead to legal disputes.
Intellectual property, therefore, would appear to be a much more reasonable approach. However, it is clear that copyright applies to software, but to what extent it should also be applied to virtual objects and goods in these worlds?
Privacy is another key issue. Besides all the personal sensitive data collected to create one’s avatar, the multitude of entities and data processing by Artificial Intelligence (AIs) will create difficulties in determining the responsibilities and liabilities.
Finally, the use of virtual worlds as a means of social interaction and communication raises the issues of online harassment, bullying, hate speech, and other forms of online misconduct.
In this sense, the rapid growth of the metaverse raises in the same proportion the number of legal challenges society will have to face in order to ensure that the virtual worlds would be safe and secure spaces for users.
Beckett, C. and Dietrich, G. (2023). The Metaverse: a virtual world with real world consequenes. Rutgers Computer & Technology Law Journal, 49(1).
Belk, R., Humayun, M. and Brouard, M. (2022). Money, possessions, and ownership in the Metaverse: NFTs, cryptocurrencies, Web3 and Wild Markets. Journal of Business Research, 153, pp.198–205. doi:10.1016/j.jbusres.2022.08.031.
Cheong, B.C. (2022). Avatars in the metaverse: potential legal issues and remedies. International Cybersecurity Law Review, 3, pp.467–494. doi:10.1365/s43439-022-00056-9.
Crowell, B. (2022). Blockchain-based Metaverse Platforms: Augmented Analytics Tools, Interconnected Decision-Making Processes, and Computer Vision Algorithms. Linguistic and Philosophical Investigations, [online] (21), pp.121–136. Available at: https://www.ceeol.com/search/article-detail?id=1045818 [Accessed 29 Jan. 2023].
Dwivedi, Y.K., Hughes, L., Baabdullah, A.M., Ribeiro-Navarrete, S., Giannakis, M., Al-Debei, M.M., Dennehy, D., Metri, B., Buhalis, D., Cheung, C.M.K., Conboy, K., Doyle, R., Dubey, R., Dutot, V., Felix, R., Goyal, D.P., Gustafsson, A., Hinsch, C., Jebabli, I. and Janssen, M. (2022). Metaverse beyond the hype: Multidisciplinary perspectives on emerging challenges, opportunities, and agenda for research, practice and policy. International Journal of Information Management, 66(66), p.102542. doi:10.1016/j.ijinfomgt.2022.102542.
Fernandez, C. and Hui, P. (2022). Life, the Metaverse and Everything: An Overview of Privacy, Ethics, and Governance in Metaverse. [online] Available at: https://arxiv.org/pdf/2204.01480.pdf.
Filipova, I.A. (2023). Creating the metaverse: consequences for economy, society and law. Journal of Digital Technologies and Law, 1(1).
Gadekallu, T.R., Huynh-The, T., Wang, W., Yenduri, G., Ranaweera, P., Pham, Q.-V., da Costa, D.B. and Liyanage, M. (2022). Blockchain for the Metaverse: A Review. arXiv:2203.09738 [cs]. [online] Available at: https://arxiv.org/abs/2203.09738.
Garon, J. (2022). Legal Implications of a Ubiquitous Metaverse and a Web3 Future. [online] papers.ssrn.com. Available at: https://ssrn.com/abstract=4002551. [Accessed 29 Jan. 2023].
Huynh-The, T., Pham, Q.-V., Pham, X.-Q., Nguyen, T.T., Han, Z. and Kim, D.-S. (2022). Artificial Intelligence for the Metaverse: A Survey. arXiv:2202.10336 [cs]. [online] Available at: https://arxiv.org/abs/2202.10336.
Jeon, H., Youn, H., Ko, S. and Kim, T. (2021). Blockchain and AI Meet in the Metaverse. Blockchain Potential in AI [Working Title]. doi:10.5772/intechopen.99114.
Kasiyanto, S. and Kilinc, M.R. (2022). The Legal Conundrums of the Metaverse. Journal of Central Banking Law and Institutions, [online] 1(2), pp.299–322. doi:10.21098/jcli.v1i2.25.
Kevins, J. (2022). Metaverse as a New Emerging Technology: An Interrogation of Opportunities and Legal Issues: Some Introspection. [online] papers.ssrn.com. Available at: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4050898.
Kostenko O. V. (2022). ELECTRONIC JURISDICTION, METAVERSE, ARTIFICIAL INTELLIGENCE, DIGITAL PERSONALITY, DIGITAL AVATAR, NEURAL NETWORKS: THEORY, PRACTICE, PERSPECTIVE. World Science, 73(1). doi:10.31435/rsglobal_ws/30012022/7751.
Kostenko, O., Furashev, V., Zhuravlov, D. and Dniprov, O. (2022). Genesis of Legal Regulation Web and the Model of the Electronic Jurisdiction of the Metaverse. Bratislava Law Review, 6(2), pp.21–36. doi:10.46282/blr.2022.6.2.316.
L, B.J. and Gabbay (2022). Will NFTs Push Regulators to Regulate the Metaverse? [online] Lexology. Available at: https://www.lexology.com/library/detail.aspx?g=1dce235b-6a5e-4d0c-aab5-9f098e2190b3 [Accessed 29 Jan. 2023].
- Pate, R. (2022). Legal Issues Inside the Unnatural World of Metaverse. Business Law Review, 43(Issue 5), pp.188–193. doi:10.54648/bula2022028.
Leenes, R. (2008). Privacy in the Metaverse. The Future of Identity in the Information Society, pp.95–112. doi:10.1007/978-0-387-79026-8_7.
Liu, C., Xiao, Y., Javangula, V., Hu, Q., Wang, S. and Cheng, X. (2019). NormaChain: A Blockchain-Based Normalized Autonomous Transaction Settlement System for IoT-Based E-Commerce. IEEE Internet of Things Journal, 6(3), pp.4680–4693. doi:10.1109/jiot.2018.2877634.
Mackenzie, S. (2022). Criminology towards the metaverse: Cryptocurrency scams, grey economy and the technosocial. The British Journal of Criminology. doi:10.1093/bjc/azab118.
Madiega, T., Car, P. and Niestadt, M. (2022). Metaverse: opportunities, risks and policy implications. [online] European Parliament: EPRS. Available at: https://www.europarl.europa.eu/thinktank/en/document/EPRS_BRI(2022)733557.
Minucci, G. (2022). Metaverse: the legal challenges for corporate enterprises. [online] Lexology. Available at: https://www.lexology.com/library/detail.aspx?g=ab705ffb-51c7-4ef8-a8df-c5a7e8318138 [Accessed 23 Jan. 2023].
Momtaz, P.P. (2022). Some Very Simple Economics of Web3 and the Metaverse. SSRN Electronic Journal. doi:10.2139/ssrn.4085937.
Murray, M.D. (2022). Trademarks, NFTs, and the Law of the Metaverse. [online] papers.ssrn.com. Available at: https://ssrn.com/abstract=4160233 [Accessed 27 Dec. 2022].
Mystakidis, S. (2022). Metaverse. Encyclopedia, 2(1), pp.486–497. doi:10.3390/encyclopedia2010031.
Ostillo, M.C. (2021). Metaverso e NFT per il branding (seconda puntata) | SDA Bocconi School of Management – Top Business School in Europe. [online] SDAB. Available at: https://www.sdabocconi.it/it/sda-bocconi-insight/branded-world/marketing-e-vendite/metaverso-e-nft-per-il-branding-seconda-puntata [Accessed 23 Jan. 2023].
Park, S.-M. and Kim, Y.-G. (2022). A Metaverse: taxonomy, components, applications, and open challenges. IEEE Access, 10, pp.4209–4251. doi:10.1109/access.2021.3140175.
Qin, H.X., Wang, Y. and Hui, P. (2022). Identity, Crimes, and Law Enforcement in the Metaverse. arXiv:2210.06134 [cs]. [online] doi:https://doi.org/10.48550/arXiv.2210.06134.
Rehman, M.H. ur, Salah, K., Damiani, E. and Svetinovic, D. (2019). Trust in Blockchain Cryptocurrency Ecosystem. IEEE Transactions on Engineering Management, 67(4), pp.1–17. doi:10.1109/tem.2019.2948861.
Sundaram, D., Sadovykh, V., Peko, G. and Craig, K. (2023). Introduction to the Minitrack on The Social and Economic Dynamics of the Metaverse, Smart Contracts, and Non-Fungible Tokens. [online] scholarspace.manoa.hawaii.edu. Available at: https://hdl.handle.net/10125/103183 [Accessed 29 Jan. 2023].
Visconti, R.M. (2022). From physical reality to the Metaverse: a Multilayer Network Valuation. [online] publicatt.unicatt.it. Available at: https://publicatt.unicatt.it/handle/10807/201481 [Accessed 29 Jan. 2023].
Xu, M., Guo, Y., Hu, Q., Xiong, Z., Yu, D. and Cheng, X. (2022). A Trustless Architecture of Blockchain-enabled Metaverse. High-Confidence Computing, p.100088. doi:10.1016/j.hcc.2022.100088.