A Review of Financial Legal Issues and Regulatory Tools for Smart Contract: Focusing on regulatory policies for the decentralized financial industry -

Recent interest rate rises and economic unrest have caused a significant contraction in the decentralized financial industry. The large-scale decline compared to the traditional institutionalized financial industry shows that the right level of financial regulation can help to revitalize the market. As such, the need for regulation in the decentralized financial industry is increasingly recognized, but the discussion is limited to the characteristics of the underlying virtual assets, and there is a lack of discussion on the technologies that form the basis of the decentralized financial industry, such as smart contract. There is much debate about the definition of a smart contract, but basically, a smart contract can be defined as computer code, implemented on blockchain technology, that, upon the occurrence of a specified condition or conditions, is capable of running automatically according to pre-specified functions. The origin of smart contract technology does not necessarily require blockchain technology, but the current usage and practical implementation of the term usually involves blockchain technology. These smart contracts are associated with various legal issues due to the important characteristics of (1) anonymity, (2) inconsistency between intent and code content(Similar to the issue “der Unstimmigkeiten von Willen und Erklärung”), (3) circumvention, and (4) decentralized autonomous organization. The existing regulatory discourse is excellent at achieving its objectives, but it has limitations in terms of (1) specificity and (2) voluntariness. A new regulatory approach needs to consider the specific characteristics of smart contract, the main transaction method of Decentralized finance, while encouraging voluntary responses from individuals. The Smart Contract Self-Review Board, Private Key Custodian Organization, and Entrusted Certification System are solutions based on these requirements, but it is difficult to judge that they completely solve the legal problems of smart contracts, and further discussion is needed on a regulatory method with an incentive structure that can attract voluntarism.