Immutable Smart Contracts Essential for DApp Developers to Minimize Legal Liability, expert advises
Summary:
Policy expert, Peter Van Valkenburgh, advises Decentralized applications (DApps) developers to enforce unchangeability in smart contracts to reduce potential legal liability for fraudulent activities on their platforms. He also discourages developers from withholding the open-source smart contract code. While the Ethereum platform may provide a way around stringent regulations, the indictment of Tornado Cash's developers illustrates that this approach doesn't necessarily prevent legal repercussions. This comes amid anticipation for more clarity on the issue after the conclusion of Roman Storm's legal case.
Decentralized applications (DApps) developers are being advised to create unchangeable smart contracts to minimize the risk of being held accountable for fraudulent activities on their platforms, according to a policy expert. Coin Center's research director, Peter Van Valkenburgh, emphasized the crucial regulatory significance of this during his talk at the 2024 Bitcoin Policy Summit in Washington, D.C. on April 9. He particularly cautioned Bitcoin developers aiming to establish DApps on layer 2 blockchain networks on the importance of ensuring unchangeability in their smart contracts from inception to avoid legal penalties.
However, developers who permit the alteration of the smart contract by way of a multisignature mechanism or a governance vote are more likely to be held responsible if illegal activities take place on their platform. Also, withholding the open-source code of smart contracts is considered unwise, according to Van Valkenburgh. He elaborated on the difficulty of identifying everyone potentially liable for the activities of the smart contract, noting that this often does not end favorably on the regulatory side.
Van Valkenburgh pointed out that the Ethereum blockchain platform presents an exciting blueprint for circumventing regulatory bottlenecks by constructing something truly beyond human control. He pointed to the recent dismissal of the Uniswap lawsuit as validation of his stance, where the court ruled that the individual who writes computer code can't be held liable for misuse of the platform by a third party.
However, the indictment of founders of Tornado Cash, a crypto mixer, confirms that even unchangeable smart contracts do not necessarily protect developers from legal implications. For example, Alexey Pertsev, one of the developers, served eight months in a Netherlands prison on suspicions of using the protocol for money laundering. Another developer, Roman Storm, pled not guilty to U.S. charges of conspiracy to operate a money transmitter, facilitate money laundering, and evade sanctions. Co-founder Roman Semenov remains at large.
Van Valkenburgh is optimistic clarity might emerge in the U.S. once Storm's case reaches a conclusion.
Published At
4/10/2024 4:16:26 AM
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