A deep analysis on smart contracts its legality and enforcability in india

1. SMART CONTRACTS AND ITS
ENFORCABILITY AND LEGALITY IN INDIA
UNDER GRADUATE PROJECT
ON LAW OF CONTRACTS-I
Submittedby
Name PRANAV VARATHAN
Reg. No: BA0220038
Submitted to
TAMIL NADU NATIONAL LAW UNIVERSITY
(A State University established by Act No. 9 of 2012)
Tiruchirappalli, Tamil Nadu – 620 009
India
MAY 2023

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Mr. JINO M KURIAN
Assistant Professor of LAW
Tamil Nadu National Law University
Tiruchirappalli
Tamil Nadu – 620 027
CERTIFICATE
This is to certify that the project work entitled “SMART CONTRACTS AND ITS
ENFORCABILITY AND LEGALITY IN INDIA” is a bonafide record of the research work
done by PRANAV VARATHAN, under my supervision and guidance. It has not been
submitted by any other University for the award of any degree, diploma, associateship,
fellowship or for any other similar recognition.
Place: Tiruchirappalli
Date: 5.05.2023
Signature of the Guide
PRANAV
VARATHAN
Reg. No. BA0220038
I– B.A., LLB., (Hons.)
Tamil Nadu National Law University
Tiruchirappalli, Tamil Nadu – 620 009

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DECLARATION
I, Pranav Varathan (BA0220038), hereby declare that this research article entitled
“SMART CONTRACTS AND ITS ENFORCABILITY AND LEGALITY IN INDIA.”
has been originally carried out by me under the guidance and supervision of Mr JINO
M KURIAN, Assistant Professor of Law, TNNLU. This work has not been submitted
either in whole or in part of any Degree/ Diploma at any university.
Place: Tiruchirappalli
Date: 05.05.2023
Signature of the Candidate

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CONTENTS
1. CHAPTER I: INTRODUCTION 6
2. CHAPTER II: SMART CONTRACTS AND ITS USES 7
3. CHAPTER III: CURRENT REGULATIONS IN INDIA 12
4. CHAPTER V: STEPS FOR THE ENFORCABILITY OF SMART CONTRACTS
IN INDIA 16
5. CHAPTER VI: METHODS FOR THE ADOPTION OF SMART CONTRACTS 18

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INDEX OF AUTHORITIES:
ACTS
1. Indian Contract Act, 1872
2. Indian Evidence Act, 1872
3. Information Technology Act, 2000
4. Securities Act of 1933 (United States)
5. Securities Exchange Act of 1934 (United States)
6. The Uniform Law Commission's Uniform Electronic Transactions Act (UETA)
7. European Union’s General Data Protection Regulation (GDPR)
CASES
8. Reserve Bank of India v. Internet and Mobile Association of India, (2018) 5 SCC 1
9. IAMAI v. RBI, Writ Petition (Civil) No. 528 of 2018
10. Shreya Singhal v. Union of India, (2015) 5 SCC 1
11. Howey Test
12. SEC v. W.J. Howey Co., 328 U.S. 293 (1946)
BOOKS
13. Mastering Ethereum: Building Smart Contracts and DApps by Andreas M.
Antonopoulos and Gavin Wood
14. Smart Contracts: The Essential Guide to Programming Blockchain Smart Contracts
by S. Pool
15. The Law of Bitcoin by Jerry Brito and Andrea Castillo
Reports:
16. Legal and Regulatory Issues Surrounding Cryptocurrency by Barbara S. Jones, Simon
M. Potter, and Joseph A. Ruta, Jr. (Federal Reserve Bank of New York Staff Reports,
no. 844)
17. Report of the UK Jurisdiction Taskforce on Cryptoassets and Smart Contracts (2019)
JOURNALS
18. Ethereum White Paper by Vitalik Buterin
19. Bitcoin: A Peer-to-Peer Electronic Cash System by Satoshi Nakamoto

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Chapter I. Introduction
The Indian Contract Act 1872 provides the legal framework for contracts in India, and it applies
to all types of contracts, including those that involve cryptocurrencies. However, it is important
to note that the legality of contracts done with cryptocurrency in India is still a matter of debate
and interpretation. Here's a brief background introduction on smart contracts that you can use
for your academic paper on the legality and enforceability of smart contracts in India:
Smart contracts are self-executing contracts that use computer code to automatically enforce
the terms of an agreement between parties. They are typically based on blockchain technology,
which provides a secure and transparent way to store and execute contracts1
. Smart contracts
have been gaining popularity in recent years, as they offer several advantages over traditional
paper contracts. For example, they are more efficient, as they automate the process of contract
execution and reduce the need for intermediaries. They are also more transparent, as all parties
have access to the same contract and can verify its execution on the blockchain.2
However, the legal status of smart contracts is still a matter of debate in many jurisdictions,
including India. While there is no specific legislation governing smart contracts in India, they
are subject to the Indian Contract Act 1872, which provides the legal framework for all
contracts in the country.3
There have been several cases related to smart contracts in India, and
the courts have generally held that smart contracts are legally enforceable if they satisfy the
requirements of contract formation and are not contrary to law, public policy, or morality.
However, the lack of clear regulatory framework for cryptocurrencies, which are often used in
conjunction with smart contracts, has made it difficult to determine the legal status of contracts
done with cryptocurrency under the Indian Contract Act 1872. As the use of smart contracts
continues to grow in India, it is important to consider their legal status and enforceability in
order to promote their adoption and acceptance in the Indian market.4
This paper aims to explore the legal landscape surrounding smart contracts in India,
highlighting their potential benefits and challenges while assessing their legality and
1
Primavera De Filippi & Aaron Wright, Blockchain and the Law: The Rule of Code (2018).
2
Nick Szabo, Smart Contracts: Building Blocks for Digital Markets, in The Idea of Smart Contracts (1996).
3
Niraj Kumar, The Legal Framework of Smart Contracts in India: A Critical Analysis, 10 J. Intell. Prop. Stud. 23,
23-25 (2020).
4
Sandeep Parekh, Smart Contracts and Indian Law, 4 NALSAR Stud. 47, 50-53 (2017).

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enforceability. By delving into this topic, we hope to shed light on the complexities of smart
contracts in India and provide valuable insights for policymakers, legal practitioners, and
businesses interested in this emerging technology.
CHAPTER II: SMART CONTRACTS AND ITS USES.
A man with the pseudonym Satoshi Nakamoto introduced a new concept for peer-to-peer
transactions without any centralized system in 2008. A total of 1639 different currencies have
emerged after the white paper was first introduced for bitcoin. Cryptocurrency has grew rapidly
with bitcoin holding the largest market share with Ethereum being a distant second. The peer
to peer cash transaction system of bitcoin which is blockchain technology, is the backbone of
the cryptocurrency system, is derived from the initial bitcoin transaction system.5
A blockchain is a digital ledger that stores transactions and verifies them through nodes. The
nodes validate the transactions and the cryptographic hash function is used as security. A new
block is created and the transaction is attached and linked to the previous transaction hash value.
When a transaction is added into the blockchain, it can never be modified or altered unless all
the nodes are modified , but it can always be opened and viewed by anyone, this makes the
system very transparent. Some blockchain technologies use proof of work while most
technologies use the proof of stake concept for transaction validation. The proof of work
technology uses hash mining for the validation of transaction by nodes.6
The implications of the blockchain technology is really vast, and it has the potential to even
revolutionize industries across the board. One of the most noticeable areas of innovation in the
industry is the rise and development of smart contracts. Smart contracts are self executing
contracts with the terms and conditions of the agreement written directly into computer code.
They are made on the blockchain technology and are framed to automate the execution and the
enforcement of a contract without any intermediaries.7
The smart contract which consists of
5
Satoshi Nakamoto, Bitcoin: A Peer-to-Peer Electronic Cash System (2008).
6
Narayanan, Arvind et al., Bitcoin and Cryptocurrency Technologies: A Comprehensive Introduction, Princeton
University Press, (2016).
7
Swan, Melanie, Blockchain: Blueprint for a New Economy, O'Reilly Media, (2015).

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the code and the agreement therefore exists on the decentralized network of computers that
together maintain a secure and untampered record of all the transactions on the network.8
These smart contracts can be used in a variety of applications and uses including financial
services, supply chain management, and the internet of things (IOT). In the financial services
industry , it can automate the enforcement, execution and even the settlement of financial
contracts. There are many benefits that are arrived from smart contracts which include
increased efficiency, saving of cost, increase in transparency, and security. We can reduce the
need of intermediaries by automating the execution and enforcement of contracts which can
also reduce the cost and time of the parties. It also reduces the risk of fraud as the system
increases transparency. As smart contracts are designed self-executing, it eliminates the need
for enforcement by third parties. Thus it increases the efficiency and reduces the cost for the
enforcing and the execution of the contracts.9
USES
Several studies have explored the use cases of smart contracts and blockchain-based
applications. These studies discuss the benefits of smart contracts and blockchain based
application in different sectors and highlight the need for further research and development.
Supply chain management
The supply chain management system involves various levels of where each level consists of
many terms and conditions. Various types of systems are used in the supply chain system which
include the food processing syestems, transport system, and the shipment sector. In most of
these cases, a blockchain based digital Hyperledger database makes it more reliable and
transparent without the involvement of third party contractors. Some smart contracts are first
to be made as programs and then to be integrated into the blockchain10
. If the smart contract is
integrated into the system of blockchain the contract becomes reliable, autonomous and even
8
Buterin, Vitalik, A Next-Generation Smart Contract and Decentralized Application Platform, Ethereum White
Paper, (2014).
9
Tapscott, Don, & Tapscott, Alex, Blockchain Revolution: How the Technology Behind Bitcoin Is Changing
Money, Business, and the World, Penguin, (2016).
10
Swan, Melanie, Blockchain: Blueprint for a New Economy, O'Reilly Media, (2015).

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more secure. The blockchain nodes validate and verify the conditions which are then accepted
by the network nodes which triggers the events that are needed to satisfy the smart contract.
Finally the transaction is recorded into the Hyperledger. Making supply chains more efficient
and transparent through smart contracts helps to smoothen out the movement of goods and
services and revives the trust which was lost in trade.
One example of a supply chain management system that uses smart contracts is the IBM Food
Trust network. The network is designed to help participants in the food supply chain track the
origin of their products, detect contamination and other food safety issues, and provide
transparency and accountability to consumers. The network uses blockchain technology to
store data on each transaction, and smart contracts are used to automate processes such as
tracking and verifying the origin of products, managing inventory levels, and triggering alerts
when certain conditions are met.
Healthcare system
With the rapid growth of technology, the standard of living of people is also rapidly growing.
Using the new devices and gadgets developed, people can monitor their vitals at the comfort
of sitting home. The data collected from these devices can be processed locally and get
information quickly. Security of the data is a very essential part of the health care system. The
blockchain provides a smooth and secure system compared to the traditional system where the
data is easily hacked and accessed by foreign parties. There can also be systems created for the
prescription of medication using smart contracts where once the dosage of medication is
received the contract is self executed and it will drastically reduce the illegal purchase of
medication by illegal customers.
In the healthcare industry, smart contracts can be used to automate processes and improve
patient care. For example, the Estonian eHealth system uses blockchain technology and smart
contracts to manage patient health records, prescriptions, and medical history. The system
enables patients to access their medical records and share them with healthcare providers in a
secure and transparent way. Smart contracts are used to automate processes such as prescription
management, appointment scheduling, and payment processing.11
11
Estonian eHealth Foundation, "Blockchain-Based eHealth System" (2018)

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Internet of things
IOT is one of the most rewarding areas of research when it comes to smart contracts. IoT
devices do not have much power and resources as well as very less processing power. The
report by CISCO mentions that the number of IoT devices that are connected to their various
applications has already surpassed the total population on earth.12
There are already major
research being done on blockchain based smart homes, smart cities and even transportation. Iot
is regularly used in devices which monitor the environment. Iot can be almost totally
autonomous with the integration of the blockchain system. One example of this can be the
partnership of bosch and IOTA. Bosch uses IOTA’s Tangle technology to enable secure and
fast data exchange and payments between the IoT devices.
Insurance
Smart contracts in the insurance industry can be used in the automation of claims promising
which will lead to lesser legal problems and improve efficiency. The AXA insurance company
has developed a blockchain based platform that also uses smart contracts to heavily automate
the process of flight delay insurance claims. The platform uses public sources and takes the
data to verify the flight delay information. Smart contracts can drastically improve the time
taken to process a claim which is the burden in the traditional insurance system. Smart contracts
are used to automatically initiate payments to policyholders when the conditions for a claim
are met.
Financial system
The benefits brought by smart contracts to the financial system is already mentioned by many.
The automation of payment processing, securities trading and settlement can be done properly
done by smart contracts. The NASDAQ Linq blockchain program uses smart contracts to
enable private securities transactions between parties. The platform stores and verifies
12
estate Cisco. "The Internet of Things: How the Next Evolution of the Internet Is Changing Everything." 2011

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transactions on the blockchain and smart contracts are used to automate processes such as
transaction, execution, settlement, and reporting.
Real estate
Real estate is a sector which involvels a lot of risks and is time consuming. Traditional real
estate transactions involve multiple stages of legal action and loads of paperwork. Smart
contracts can be used in this industry to automate and secure processes such as property
transactions, title transfers, and lease agreements. This process drastically reduces the
possibility of fraud involved in the industry which is prevalent for a very long time. Propy a
blockchain based platform uses smart contracts to ensure property transactions and transfer in
a safe and secure manner. The blockchain technology similarly stores and verifies the
transaction data like the other apps and automates the process of transfer and payment. All the
documents are then stored in a digital ledger distributed database where the parties and even
the public can see.13
The advantage of the Hyperledger is that is in a sense anonymous where
only the wallet addresses of the parties are disclosed and the names and identity of the parties
cannot be found. This protects the privacy of the parties when the ledger posts their transaction
to the Hyperledger.
Voting system
Traditional system of voting includes many manual processes and verification which can
involve many fraudual activities and human error. Blockchain technology can help create a
secure and transparent digital voting system that is resistant to fraud and manipulation.14
This
would allow voters to cast votes in an anonymous and secure way and the result will be there
available for everyone to see instantaneously. West virginia became the first state in the US to
implement a blockchain based voting system . The system developed by Voatz, allowed
military personnel overseas to cast their votes in the 2018 midterm election when they were
posted on tour without the risk of fraud and manipulation.
13
Crosby, M., Pattanayak, P., Verma, S., & Kalyanaraman, V. (2016). Blockchain technology: Beyond bitcoin.
14
Swan, M. (2015). Blockchain: blueprint for a new economy. O'Reilly Media, Inc.

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CHAPTER III: REGULATIONS ON SMART CONTRACTS
In recent years, smart contracts have gained a significant attention and several jurisdictions
have implemented regulations to ensure their enforceability. In India, smart contracts are
subject to the Indian contract act, 1872 which recognizes contracts formed through electronic
communication if they meet the elements needed to form a valid contract, including elements
like offer and acceptance, lawful consideration, free consent, capacity to contract, and lawful
object. But the act has still not amended to include provisions specific to smart contract. These
provisions which need to be added will be discussed in the final chapter of this paper.
The decision by El Salvador to make bitcoin its legal tender on June 5, 2021, is a significant
development in the world cryptocurrency and blockchain technology. The move has sparked a
thought of potential impact on the global financial system and the future of digital currencies.15
In the case of El Salvador, the government is implementing plans to allow citizens to use bitcoin
through digital wallets for day-to-day taxation. This move towards a cashless society could
further drive the demand for smart contracts and other blockchain-based solutions that’s offer
secure and efficient ways of processing transaction. One of the main implications for these
decisions for the smart contract project is the increased acceptance and adoption of
cryptocurrencies by governments 16
. As many countries start to recognise and embrace
cryptocurrencies as legitimate forms of payments, there will be a demand for blockchain-based
solutions such as smart contracts. It is worth noting that the legal framework and legislation
for smart contracts in El Salvador’s is still in its baby stage, and it remains to be seen how the
government of El Salvador will regulate and enforce these contracts which are integrated on
the blockchain. El Salvador will be treated as a model and will depend on a robust legal
framework that provides clarity and certainty for businesses and individuals alike.
15
Vigna, Paul and Juan Montes "El Salvador Becomes First Country to Adopt Bitcoin as National Currency", The
Wall Street Journal
16
Tapscott, D., & Tapscott, A. (2021). What El Salvador's bitcoin adoption could mean for global economies.
Harvard Business Review.

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In comparison to another jurisdiction, the legal framework of El Salvador is comparatively
untested. Other jurisdictions like the United States, the European Union, and the United
Kingdom have already implemented legal frameworks for smart contracts and have seen
different levels of success in their adoption. In contrast, other jurisdictions have created specific
frameworks for smart contracts. As an example, the Uniform electronic Transaction Act
(UETA) and the electronic signatures in Global and National commerce Act (ESIGN) in the
US has provided a legal framework for electronic signatures and records, The UETA
recognizes electronic signatures and records as legally enforceable and valid. The ESIGN
ensures that electronic records and signatures must be treated as equal as paper-based
documents and signatures. Likely, the EU has implemented the electronic identification,
authentication, and Trust Services (eIDAS) Regulation, which gives a legal framework for
electronic signatures, seals and time stamps, and also recognizes smart contracts legally
binding agreements.17
In the United Kingdom, the law commission 1965 has published a report by proposing
amendments to existing laws to accommodate the usage of smart contracts. The report highly
recommends the amendment of the Electronic Communications Act 2000 and the consumer
Rights Act 2015 to include specific provisions regarding provisions for smart contracts. Adding
to this the European Blockchain Partnership, which also includes the 27 EU member states, has
also proposed a regulatory framework for the blockchain technologies and Smart contracts to
facilitate cross-border transactions. In the European Union, the Rome I Regulation states the
legality of the EU civil and commercial legal contracts which are enforceable. It applies to all
contracts entered after December 17,2009 and defines the law that will apply to the contract,
the validity of the contrast, and the interpretation of the contract.
When we look at Asia, the island nation of Singapore has taken many proactive decisions in
developing a legal framework for smart contracts. The country has implemented the Electronic
Transaction Act, which recognises the validity and enforceability of electronic contracts and
signatures, and transactions (electronic agents) regulations, which also provides for the
17
Electronic Signatures in Global and National Commerce Act (ESIGN), 15 U.S.C. §§ 7001-7031 (2000).

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recognition of contracts by electronic agents18
. The monetary Authority of Singapore has
launched a regulation sandbox for Blockchain and distributed ledger technology or the
Hyperledger, which allows fintech companies to test new and innovative solutions within a
controlled space.
Regulation in India
In India smart contracts are not regulated under any specific legislation. Due to this lack of
clarity in the legal framework surrounding smart contracts their legality may be subject to
interpretation by the courts. The Indian Contract Act of 1872 is the primary legislation that
governs the contracts in India, including electronic and smart contracts. This Act mentions the
requirements for a valid contract, like a communicated acceptance, lawful consideration related
to the matter in hand, and the consent regarding the competent parties. With the introduction
of new technologies like blockchain, smart contracts becoming increasingly popular in various
industries. Under Section 10 of the Indian Contract Act 1872 ‘any agreement can become
enforceable by law as a contract if it consists of an offer, acceptance, and consideration’. So,
we can see that smart contracts can be allowed under the act as it satisfies these requirements.
However, the use of cryptocurrencies as consideration sparks the question of whether it is valid
under the Indian legal system.
Luckily, the sections 5 and 10 of the Indian Information Technology Act of 2000 accepts
contracts that use digital signature to be legitimate, valid, and enforceable by electronic means.
Adding to this, Section 65B of the Indian Evidence Act of 1872 states that ‘contracts digitally
signed shall be admissible in courts. But there is also a case where the courts contradicted this
statue. In the case of Trimex International FZE Ltd v. Vedanta Aluminium Ltd (2010), 19
the
supreme court of India held that “a digital signature on a contract was not sufficient to prove
that the signatory had read and understood the terms of the contract.” The court further
18
Lee, Y. (2020). Smart Contract and Legal Framework: A Comparative Study of Singapore and Korea.
International Journal of Computer Science and Security,
19
(2010) 3 SCC 1.

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observed that a digital signature only confirms the identity of the person or party which has
signed but does not prove that the signator has read and understood the terms of the contract.
This may be a hindrance in the enforceability of the smart contracts as the legal system takes
time to even accept digital signature as sufficient. Likely novel concepts like blockchain and
smart contracts which involve cryptocurrencies which already has a reputation for scandalous
and fraudulent activity as consideration will take much time for the slow grinding gears of the
judicial system to accept them.20
Similarly, when digital signatures provide a safe and encrypted way to sign e-documents and
ensure authenticity, they can also be used by criminals and hackers for fraudulent activities and
other various crimes. In those cases, the validity of digital signatures may be called into
question and can become a serious matter of dispute. Another issue is the lack of clarity by
courts regarding the legal status and validity of digital signature under certain contexts. There
have been cases where digital signatures were rejected by the authorities in various government
departments showing the legal validity as a reason. A case which clearly explains this problem
is the National Insurance Company Limited v. Pranay sethi (2017),21
Here the high court of
Delhi held that a digital signature is not valid for the filing of insurance claims and that the IT
act recognizes only the electronic signatures and that digital signatures where not valid for
filing insurance claims. Therefore, we can say that while the Legal framework in India
recognizes the legal validity of digital signatures, there are many issues and problems
concerning their use in certain contexts like insurance. It is important for Lawmakers and
legislators to address these issues and see that the legal framework is updated, and a
clarification is given to provide better protection and certainty for all the parties that are
involved in a electronic transaction. The Law commission of India has Recognised these issues
and is currently studying the Legal Implications of Blockchain Technology and smart contracts.
The usage of cryptocurrency in smart contracts have raised some legal uncertainties and
negative dogma in India. The Reserve bank of India (RBI), which is the central bank of India
had issued a circular stating the prohibition of banks dealing with cryptocurrency and virtual
21
(2017) 16 SCC 680.

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currency providers and any person or entity dealing with the same in April 2018. The circular
caused a lot of confusion and negative impression on the industry. The circular was challenged
in the supreme court of India, which later ruled that the circular was unconstitutional in March
2020, citing the Article 19 (1) (g) of the Indian Constitution, which guarantees citizens the right
to carry on any profession, trade, or business. The court found that the RBI's circular had a
disproportionately negative impact on the legitimate business activities of cryptocurrency
exchanges and other crypto-related businesses, and that the RBI had not provided sufficient
evidence to justify the ban. The court also noted that there were no laws in India that explicitly
banned the use of cryptocurrencies, and that the government had not taken any concrete steps
to regulate the industry. Since the court's decision, there has been renewed interest in
cryptocurrencies in India, with many entrepreneurs and investors looking to capitalize on the
opportunities presented by the growing market. The government has also indicated that it is
considering new legislation to regulate the industry and provide greater clarity for businesses
and investors.22
22
S. Dhawan, "Cryptocurrency in India: A Comprehensive Overview," 23 National Law School of India Review

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CHAPTER IV: STEPS FOR THE ENFORCABILITY OF SMART
CONTRACTS
STEPS FOR THE ENFORCABILITY
One of the main challenges in the application of The Indian Contract Act to smart contracts is
the problem of offer and acceptance. Since the smart contracts are self-executing, it not always
clears who made the offer and who has accepted it. As only the wallet address is displayed and
not the identity of the person, the integration of the identity of the parties must be added as a
consideration to be enforceable by the legal system of India. In a traditional contract, the offer
is made by one party and the other accepts it, but in smart contracts, the terms are in the form
of computer code and the parties must rely on the code to execute the terms of the contract.
The government must put down specific terms and conditions for the making of smart contracts,
which is related to the essentials needed to form a contract according to the Indian Contract
Act.
Another challenge is the issue of consideration. In a traditional contract, something which has
value like money or services is exchanged between both the parties and forms the consideration.
However, in a smart contract the consideration may be digital assets, such as cryptocurrency,
which are not directly recognized by the Indian contract Act or from time to time even the RBI.
The Indian contract act recognises many types of contracts like telegram, post which were the
modes of communication used in the period when the statue was made. Similarly new modes
like email, telephone, text message, e-commerce websites, online brokerages and newly smart
contracts must be added into the Indian contract Act as it is not up to date.
To make Smart contracts enforceable under the Indian Legal system, legal experts suggest that
the Indian Contract Act should be amended to include some provisions which specifically
address smart contracts. The amendments would need a precarious consideration of the
intricate and unique elements of smart contracts, such as the decentralized blockchain network,
immutability, and self-executing nature. Another possible approach is to adopt a technology-
neutral approach to make smart contracts enforceable in India. This would involve the
application of not only smart contracts but all kinds of contracts, including those using
technology to be amended in the Indian Contract Act. This kind of approach would make sure
that smart contracts are subjected to the same requirements which the traditional contracts use

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and will provide certain clarity for the parties who wish to use smart contracts. There can be
another flexible approach that takes the unique and intricate characteristics of smart contracts.
This approach will involve the specific challenges posed by smart contracts. This would require
a cautious consideration of the risks and benefits of smart contracts and would involve valuable
input from legal and technical experts.
CHAPTER V: METHODS FOR THE ADOPTION OF SMART
CONTRACTS
METHODS FOR ADOPTION IN INDIA
Adoption of the use of smart contracts in many industries has been relatively slow due to many
reasons such as the lack of awareness, technical challenges, and uncertainties in regulation.
Regardless of this there are several methods that can be adopted to overcome those challenges
and increase the use of smart contracts in India.
One method is to increase awareness about smart contracts and education on programming
language relating to blockchain like Selenium and Solana. This awareness must be increased
among business which will get clients and the public which will be the work force to produce
the code. Since India is highly dependent on other countries outsourcing their programming
work to India as the labour is cheap, the current trend shows that blockchain technology will
play a vital role in the IT sector in the future. Many software engineers must be ready before
the boom in the industry and India must be a pioneer in the blockchain workspace. Many
businesses in India are still not aware of the benefits of smart contracts and are still very
sceptical about it. The awareness on the potential applications of smart contracts must be
increased, this may be done through workshops, seminars, and other campaigns that target
businesses and the public. Campaigns can be designed to educate consumers on how smart
contracts can help save time and money while engaging in online transactions like buying
products or services online.
It is important to note that India has India has many Micro small and medium enterprises
(MSMEs). These MSMEs can play a major role in the economy of India. These MSMEs often

19. 19
lack the information on new technologies and innovations which the Large scale industries
enjoy to scale their businesses. Therefore, there is a need to educate SMEs about the potential
benefits of smart contracts and how they can be implemented in their respective businesses.
workshops and seminars which are specifically designed for SMEs organized by government
agencies, industry associations or private companies can provide practical information on how
smart contracts work, how they can be used in different industries and how they are
implemented.
We should also address the technological difficulties associated with smart contracts. The main
challenges when it comes to smart contracts is scalability. Currently most Blockchain platforms
in India have limited capacity to process smart contracts, which can lead to delays and the
increase of transaction cost which is also known as gas fees. Therefore, it is important to
develop scalable blockchain platforms that handle large volumes of smart contracts. Solana is
a Blockchain platform that uses a unique consensus mechanism called proof of history, which
enables the system to process transactions faster and at a much cheaper gas fee. Solana’s
architecture and tokenomics also allows for the easy integration of smart contracts and
interoperability with other platforms. Solana’s focus on scalability and interoperability makes
it a promising solution for various businesses to adopt smart contracts in India. 23
The adoption of smart contracts in India can be further boosted through the creation of new
legal Frameworks specifically for smart contracts. This would Involve drafting new laws and
regulations that accommodate and recognize the unique features of smart contracts. An
example of such a framework we discussed is the Smart Contract Resolution in Arizona, USA,
which recognises smart contracts as enforceable under state laws. Similarly, the European
Union’s Blockchain Observatory forum has proposed a regulation for smart contracts that aim
to provide legal certainty and further reduce the risks which are associated with smart contracts.
Similar frameworks can be brought in India to rapidly Increase the needs of stakeholders
involved.
23
Antonopoulos, A. M. (2014). Mastering Bitcoin: Unlocking Digital Cryptocurrencies. O'Reilly Media, Inc.

20. 20
CONCLUSION
Smart Contracts have the potential to revolutionize transactions and the way they are carried
out in india. Due to the adoption of smart contracts, businesses can Fastrack and streamline
their operations, reduce transaction costs , and increase efficiency. However, there are several
challenges that need to be addressed before smart contracts are adopted in india in a wide scale.
These include legal, technical, scalability and interoperability challenges related to the
blockchain.
Overall, the Government of India has taken a precautious approach for the regulation of
cryptocurrency and smart contracts due to the negative image in the society. While the legal
status of cryptocurrency is under much scrutiny, the government of India has recognized
various benefits of blockchain technology which cryptocurrency is built on and has even
promoted its adoption in various sectors.
There are various methods which can be adopted to promote the usage of smart contracts in
India. These include the development of legal framework, increasing awareness among
businesses and the public, and addressing technical challenges related to the scalability and
interoperability. The government must play a key role in the promotion of adopting smart
contracts by providing incentives, bonuses and support to businesses that adopt the blockchain
technology. We will conclude by mentioning that the adoption of smart contracts has the
potential to transform the economy of India and drive growth in several sectors.

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BIBLIOGRAPHY
ACTS
1. Indian Contract Act, 1872
2. Indian Evidence Act, 1872
3. Information Technology Act, 2000
4. Securities Act of 1933 (United States)
5. Securities Exchange Act of 1934 (United States)
6. The Uniform Law Commission's Uniform Electronic Transactions Act (UETA)
7. European Union’s General Data Protection Regulation (GDPR)
BOOKS:
8. Primavera De Filippi & Aaron Wright, Blockchain and the Law: The Rule of Code
(2018).
9. Nick Szabo, Smart Contracts: Building Blocks for Digital Markets, in The Idea of
Smart Contracts (1996).
10. Swan, Melanie, Blockchain: Blueprint for a New Economy, O'Reilly Media, (2015).
11. Narayanan, Arvind et al., Bitcoin and Cryptocurrency Technologies: A
Comprehensive Introduction, Princeton University Press, (2016).
12. Buterin, Vitalik, A Next-Generation Smart Contract and Decentralized Application
Platform, Ethereum White Paper, (2014).
13. Estonian eHealth Foundation, "Blockchain-Based eHealth System" (2018)
14. Crosby, M., Pattanayak, P., Verma, S., & Kalyanaraman, V. Blockchain technology:
Beyond bitcoin (2016).
15. Antonopoulos, A. M. (2014). Mastering Bitcoin: Unlocking Digital Cryptocurrencies.
O'Reilly Media, Inc.
16. Estate Cisco. "The Internet of Things: How the Next Evolution of the Internet Is
Changing Everything." (2011)
WEB:

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17. Vigna, Paul and Juan Montes "El Salvador Becomes First Country to Adopt Bitcoin
as National Currency", The Wall Street Journal
JOURNALS
18. Sandeep Parekh, Smart Contracts and Indian Law, 4 NALSAR Stud. 47, 50-53
(2017).
19. Niraj Kumar, The Legal Framework of Smart Contracts in India: A Critical Analysis,
10 J. Intell. Prop. Stud. 23, 23-25 (2020).
20. Electronic Signatures in Global and National Commerce Act (ESIGN), 15 U.S.C. §§
7001-7031 (2000).
21. Lee, Y. (2020). Smart Contract and Legal Framework: A Comparative Study of
Singapore and Korea. International Journal of Computer Science and Security
22. Tapscott, Don, & Tapscott, Alex, Blockchain Revolution: How the Technology
Behind Bitcoin Is Changing Money, Business, and the World, Penguin, (2016).
23. S. Dhawan, "Cryptocurrency in India: A Comprehensive Overview," 23 National Law
School of India Review