Legal Challenges for Blockchain-enabled Smart Contracts in Trade Finance

Abstract

Blockchain technology is decentralised environment within trade finance that can record information in a way which makes it difficult to change or manipulate in the system. Blockchain enabled smart contracts has the potential to self-execute computerised contracts terms when it initiated in order to facilitate trade finance in term of effective transparency, auditability, and reduce the human errors often associated with traditional contracts. However, there are certain issues and challenges that blockchain enabled smart contracts technology faced in terms of legal structure. This research main purpose was to identify the key challenges and issues facing by blockchain and smart contracts in trade finance in term of legal modules and standardisations. For this purpose, a desk research method was selected for look into the existing research on the area to provide academic evidence to answer research key questions. There are several benefits that identified from this innovative working paradigm of trade finance which can help trade finance to eliminate the friction that caused by information transmission and achieving sustainable business environment. However, major challenges such as the smart contracts cannot be forced to perform beyond the parameters of their computer codes even by the judicial order. As a self-execution mechanism, there are constitutive issues emerging in the legal field such as causing conflict with existing law and also intrinsically limited on an individual level as well. Therefore, from policy makers, and legislators and law consortium, it is important to develop a common legal framework which applicable components that can be enforceable around the world. Finally, further study is needed in this field to identify both organisational and managerial challenges might impact on the adoption of blockchain enabled smart contract technology