Why are smart contracts the smart choice for financial services?
In an age of rapid digitalisation, accelerated by the COVID-19 outbreak in 2020, “smart contracts” are seen by many as a building block in the development of a more efficient and more automated financial services sector. In this series, we will look at the use cases of smart contracts in financial services, and the Law Commission’s report into the enforceability of such contracts. In its broadest sense, a “smart contract” is a piece of computer code that can execute automatically (either in whole or in part). Smart contracts, or smart contract terms, usually follow the logical form, “if x, then y” and may be used for a variety of use cases. For instance, a smart contract can be set up to enable automatic initiation of a payment by one party upon occurrence of a certain event or action made by another party without the need for any human intervention.