Smart contracts are becoming more popular, controlling the distribution of products and services and automating payment via a cryptocurrency e-wallet once the contract has been satisfied.

What are the legal implications of this in your opinion and have you dealt with any smart contracts?

It is currently a question among Luxembourg scholars whether smart contracts are, or are not, true contracts. The majority of authors believe that smart contracts constitute a way to execute contracts, rather than the actual conclusion of an agreement among parties. Smart contracts effectively lack some of the usual and often indispensable features of civil law contracts (formation, amendments, termination, applicable law and competent jurisdictions, misinterpretations, or conflicts with public policy rules).

A smart contract could be considered a useful tool to evidence the existence of a contract or as a means of record of titles over assets. As the underlying agreement will usually be concluded over the internet, the rules applicable to electronically concluded contracts will usually apply.

As mentioned above, in Luxembourg, smart contracts are progressively used as a mean to settle subscriptions to, or transfer of, securities. A key feature is the accurate identification of the counterparty and the efficient undertaking of KYC due diligence.