SEC on the roll, the US authority has added smart contract developers to the list, a list that will be monitored 24/7 for the days to come. Smart contracts are an excellent idea that holds the crypto-economy environment together. But if, and only if, the code for a contract is bad then the entire process will get sabotaged. In with the right code and used in an intelligent way it becomes a powerful tool like no other. SEC after stepping in against the ICO’s to save investors have turned its attention on smart contractors and its creators.
Nick Szabo, the pioneer of digital contracts, has a different view on what they become. Vitalik Buterin, co-founder of Etherum and Bitcoin magazine now regrets the use of the name, after observing what they have become.
Smart Contracts, Legal Liability and the SEC
Smart contracts, according to SEC, is a mean by which investors and crypto users get to know about their counterparties, prices in the market, and trade a wide variety of digital asset security. A statement issued by the SEC officials referred mentioned Smart Contracts five times and it was particularly towards Etherdelta, whose creator was prosecuted for operating an unregistered securities exchange that ran on smart contracts. After this rule, the path to move forward for developers have become a reluctant process.
There is also a group that advocates that the developers shouldn’t be held liable for how their code is used. In the case of Etherdelta, the prosecution of Zachary Coburn, stated that the smart contracts he developed were solely for the purpose of powering the platform. But in future, SEC may not make an exception for the coders for how the code is used. If the creator of a smart contract used to facilitate decentralized trading can be identified, that individual could conceivably be held liable for securities violations.
This regulation by SEC cannot be viewed on the moral ground, because a code is neither good nor bad. The rules regulating the smart contracts are simply a consequence of the behaviour mandated by its creator. The Cryptocurrency industry’s dependence on smart contracts increases rapidly as the market evolves on a daily basis, the regulators are put in a place where some difficult decisions are to be made. Moreover, SEC’s new division plans on getting deep into the crypto industry. Who can be held responsible for an entity that is used in a different way from its original idea behind the creation?
Nick Szabo, the father of smart contracts, clears that the smart contracts are a digital way of the traditional contracts. The smart contracts mention a deal made between two people, but the deal incentivized by machine-interpreted rules instead of human-interpreted rules. However, in the case of a truly decentralized exchange, there is nobody upon whom the sanctions can be levied.
“A smart property might be created by embedding smart contracts in physical objects.”
On seeing the present stand taken by SEC the US-based developers are given the only option to code using anonymity to keep themselves free from the legal liabilities. This approach is followed by the team behind the upcoming, Grin cryptocurrency that makes use of Mimblewimble privacy tech. An age-old approach followed by the creator of Bitcoin has to be followed now to keep them free.