Antonio Tejeda Encinas. President Euro-American Committee of Digital Law – CEA Digital Law. CSkip Euro American Digital Law
The technological functionalities of smart contracts have a considerable scope in terms of on-chain automation, enabling process automation and interaction both on-chain and off-chain. This is accomplished by executing commands encoded in the contract.
However, it is important to note that the ability to codify instructions, carry out clearings and settle transactions, payments against payments and deliveries against payments, does not necessarily imply automatic legal effects.
The illustration provided exemplifies this point. The description of the operation exposed there would allow a transaction of a real-world asset (RWA) to be carried out on the chain, facilitating access to the asset (previously deposited) through tokenization and smart contracts (delivery vs. payment). This would occur once the buyer has paid the price set by the seller using tokenized money.
However, it is crucial to understand that, in order to acquire a real-world asset, it is not enough to simply code the transfer of access to the asset. It is necessary to comply with the established legal requirements. This implies the existence of an effective transfer of ownership or rights of use (requiring consent, object and cause). In addition, the appropriate procedures must be followed, either for the acquisition or for the legitimation of the acquirer. It is also essential that the token holder is the rightful holder or has the necessary power over the token. Otherwise, legal recognition of bona fide acquisitions based on appearances, among other aspects, should be considered.
In short, possession of a TOKEN acquired through a smart contract does not automatically guarantee the status of rightful owner or possessor of the security or right hypothetically backed by the TOKEN. The legal effects of smart contracts will be established in accordance with regulations, applicable both between the parties involved and in a broader context.
Image reference: Hashcash Consultants (2023)
