Legal Formalization of Smart Contracts: Returning the Term <i>Contract</i> within the Legal Framework

Abstract

With the advancement of technological innovations, there emerges the opportunity to manage relationships between parties through the execution of smart contracts, based on blockchain technology, presented as a decentralized system of distributed ledger comprising a network of computers connected to a single server. The primary objective of this research was to identify issues in the legal regulation of smart contracts. The methodological framework of the study includes institutional and comparative legal methods. The study encompasses the theoretical context and the experience of Kazakhstan. Within the scope of the research, an analysis of the current state of legislation regulating the implementation of smart contracts in Kazakhstan and abroad was conducted. Legal mechanisms for regulating legal relationships arising from the conclusion of smart contracts were identified. Challenges related to the legal regulation of smart contracts as a form of civil-law agreement were also examined. It was noted that despite the increasing popularity of smart contracts, their legal regulation is virtually absent both in global practice and in the context of Kazakhstan. The research findings suggest that currently, in most countries, there is no regulatory framework for implementing smart contracts. Despite the advantages of smart contracts, their use also raises legal issues concerning the determination of legal validity and jurisdiction, as well as the need to ensure legal protection for all participants. The study demonstrated the potential of using smart contracts in contractual relationships provided that corresponding legislation is developed. The results of this research can be utilized to improve legal regulation in the fields of contractual activities, banking law, intellectual property, and many related legal areas, as well as for the purposes of the fintech industry.