Blockchain: legal issues and challenges to practical implementation

Visiting panellists Željka Motika, Attorney at Law with Motika Law Office, Aleksandar Matanović, CEO of ECD, and Aleksandar Arsić, Manager at PricewaterhouseCoopers Consulting, discussed the legal aspects of blockchain technology, its strengths and weaknesses, and the challenges it will bring to the public and private sectors. The panel was moderated byMiloš Stojković, lawyer and head of the Blockchain Unit at the Digital Economy Committee.

Blockchain has been in development since the 1980s but has recently gained in importance. Its continuing evolution and benefits have prompted national authorities to recognise this technology and incorporate it into their agendas. The appearance of bitcoin and its relatively high prices in currency markets have underscored the importance of regulating this area.

Smart contracts are a major aspect of blockchain technology that can drive costs down in employment, taxation, real estate transactions, and the like. Blockchain and smart contracts can help with taxation of labour and simultaneous exchange of information between banks, government bodies, employers, and employees, and their use can make legal transactions much simpler and cheaper. Smart contracts also offer simplified oversight arrangements and complete transparency, access to information, minimal risk of abuse, and a high degree of automation.

The panellists also reflected on the weaknesses of blockchain. The principal disadvantage of smart contracts is that code cannot be altered once it has been stored, meaning that errors can cause irreversible consequences. As such, if an event triggers an automatic action, the trigger must be completely reliable. Lack of capacity was also seen as abottleneck, but this was expected to be addressed gradually.

Serbia’s legal framework must be brought up to date before blockchain technology can be regulated, and the panellists expressed their belief that the country was moving in the right direction with the Digital Assets Bill, currently being considered by Parliament. The participants voiced reservations about some aspects of the Bill, such as fiduciary arrangements, which they felt were at odds with other current rules, and noted that the proposed penalties were excessively restrictive and may disincentivise the use of blockchain for some transactions in Serbia. The legislation was, nevertheless, expected to improve the hitherto almost non-existent relationship between banks and businesses that use blockchain.

Awareness-raising was seen as a key precondition for broadening blockchain take-up. Consistent communication emphasising the advantages of this technology would dispelmany prejudices and assuage much mistrust.