What’s changing in International Trade because of virtual currencies, Smart contracts, Blockchain and new Technologies?

Smart contracts revolution.
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How are the Brazilian exporters dealing with legal issues on that new digital revolutionizing era?

How to manage crucial legal issues in the latest disruptive ecosystem in the absence of an international regulatory system?


Riccardo de  Caria in “A Digital Revolution in International Trade? The International Legal Framework for Blockchain Technologies, Virtual Currencies, Smart Contracts and Blockchain: Challenges and Opportunities “ (https://iris.unito.it/handle/2318/1632525) pointed out that has been launched a project named “Incochain” which means an Incoterm in the form of smart contract. In other words, Incoterms will be managed on a digital application, by an agreement of code, in which the duties of sellers and buyers will be entirely defined. 


As far as I can see, the idea behind the project is likely to substitute the Incoterms or International Commercial Terms, that are a series of pre-defined commercial terms published by the International Chamber of Commerce, relating to the international commercial law for a Smart contract.


De Caria stated that in the context of use of smart contracts what is missing are recommendations on how to take advantages and what consequences arise from them, in a world where there is an absence of an international legal system regulating this computational agreement.


It is one of many exciting points to be focused on the smart contracts ecosystem. In fact, there is trending to adopt computational contracts on an increasing scale from now on, especially in the international trade field. Digital experts, in an overall idea, have been highlighted that it is a path with no return, mostly because this technology brings low contracting costs, self-enforceability, the certainty of automatic execution with no third party intervention (judges, lawyers, arbitrators) and takes advantage of Bitcoin payment system. Beyond that, it still fascinates because it is a kind of real-time transaction in which there is no risk of contract breach. Ultimately, facilitated by the speed of the cyberspace and massive investments, this type of contract is very likely to be spread quickly, before it is accurately regulated by governments, international entities, and so on.


In that scenario, on the one hand, some Brazilian exporters are considering that there is a paradigm shift taking place in the international trade environment and starts thinking to take advantage of this. On the other hand, the majority of exporters have not acknowledged a smart contract yet as a valuable tool to be adopted even in the future.


Although it not possible to address all concerns and issues surrounding this disruptive and complex technological phenomenon, it seems essential to put a light on some critical points and pitfalls in general associated with this subject.


First of all, for those who are unaware or skeptical about the breakthrough of Blockchain Technology, which involves, for sure, Smart contracts, it is necessary to remind that accordingly World Economic Forum Report by 2027 around 10% of world’s GDP will be concentrated in Blockchain Technologies. The Accenture research predicts that by 2025 Blockchain adoption will be considered mainstream and integral to the capital Market ecosystem. Furthermore, Blockchain will probably address critical issues to global suppliers, providing quicker payments, elimination of fraud, paperless and unbureaucratic trade, and according to Blockchain Council ( www.blockchain-counciLorg) a Blockchain based ledger provides transparency to all users and can be helpful in corruption control, among other upsides. It means that it is crucial to be ready for what is promising to be a common mechanism in the future and take advantage of opportunities when it comes. Thus, it necessary for those to get advising on it and be prepared to new kind of contract.


Second, for those are intending to engage in such kind of contract for international trade, it is crucial to know that even though its virtues that encourage their full adoption, there are some risks that must be considered, such as a) which law will govern the smart contract; b) legal status of the deal in the face of current domestic legislation in which the exporter is; c) which jurisdiction will settle unexpected conflicts arising from the smart contract adoption and if it will be possible; d) risks of bugs on Blockchain platform; e) absence of right to take advantage of the power of an obligation breach of a traditional contract; f) impossibility of solving problems outside the platform, nowadays; g) among others. Even though the risks, it seems necessary to highlight that for some industries and certain types of business the smart contracts appear to be the “Blue Ocean” to be sailed, in which the gains are enormous, overcoming the risks involved in it.


Finally, nowadays, the Brazilian exporters’ best way of dealing with smart contracts is in a base of one-to-one analysis, for each transaction and double-check its pros and cons, because there is no single legal solution for all. It is essential to take in mind that the development of this technological tool still depends on more time and much more work of lawyers, legislators, institutions, developers, policymakers to give more explicit guidance on this subject.

Speak of this topic a little bit further.


#Blockchain #Bitcoin #SmartContracts #Internationaltrade #Internationalcommerciallaw #BrazilianExporter #Incochain #Incoterm


By Antonio Bernardes