Digital trade is evolving rapidly, and Distributed Ledger Technology (DLT) is increasingly presented as a solution for improving transparency, efficiency, and trust in commercial transactions. From trade documents and supply chains to payments and digital assets, DLT is often promoted as a transformative infrastructure for modern trade systems.
However, technology alone does not create legal certainty, market confidence, or public value. The key challenge for policy makers and public authorities is not whether DLT should be encouraged or restricted, but how it should be understood and governed when it is introduced into real-world trade and regulatory environments.
This article offers a concise, non-technical overview of how to approach DLT from a governance and legal perspective. It distils the core logic that decision-makers should apply when evaluating DLT-based initiatives, without requiring a deep dive into technical or legal detail. The aim is to support informed policy choices, risk-aware regulation, and sustainable digital trade development.
Technology is not the starting point of regulation
A sound approach to DLT is based on technology neutrality. If a digital system performs the same legal and economic functions as traditional or centralized solutions—such as issuing documents, signing contracts, transferring rights, or recording transactions—then the same legal principles should apply, regardless of the underlying technology.
This avoids technology-specific legislation that may quickly become outdated and instead supports legal certainty, market innovation, and cross-border compatibility.
The right questions before adopting DLT
Before using DLT in public services, trade facilitation, or commercial platforms, decision-makers should ask practical questions, such as:
- What type of system is being used, and who actually controls it?
- Is the system open or restricted to identified participants?
- Who is responsible if the system fails or data proves inaccurate?
- How are business continuity, audits, and oversight ensured?
- What dispute resolution mechanisms exist, especially in cross-border contexts?
These questions are essential for informed policy decisions and risk assessment.
Decentralization does not eliminate responsibility
While DLT often relies on decentralization, legal responsibility does not disappear. In fact, unclear governance structures may increase legal and operational risks. This is particularly relevant for decentralized organizational models, where decisions may be taken through algorithms or distributed voting, making accountability difficult to establish.
Clear governance, contractual arrangements, and responsibility allocation remain necessary, even in decentralized environments.
Automation needs legal safeguards
Automation and smart contracts can improve efficiency and reduce costs, but not all contractual terms can or should be automated. Situations involving exceptions, consumer protection, or contract suspension require human judgment and legal flexibility. Legal frameworks must ensure that automation enhances efficiency without undermining legal protection or fairness.
Data and privacy as key risk areas
One defining feature of DLT is the persistence of data, which may conflict with data protection and privacy obligations. Policy makers should therefore consider:
- What data should be recorded in the first place,
- Whether personal data should be stored on or off the ledger,
- Who is legally responsible for data processing,
- How cross-border data flows are handled.
Data governance should be addressed at the design stage, not retrofitted later.
Not all digital assets are the same
A crucial distinction must be made between digital solutions that represent real-world assets or legal rights (such as trade documents) and digital assets that exist independently. This distinction determines which legal framework applies and how risks should be managed. Treating all digital assets alike can lead to regulatory confusion and legal uncertainty.
Key takeaway for policy makers
DLT can support trade and digital transformation, but only if:
- legal implications are assessed early,
- governance and responsibility are clearly defined,
- technology remains subordinate to the rule of law.
For those who wish to explore the topic in greater depth, a dedicated UNCITRAL e-book “Guide on legal issues relating to the use of distributed ledger technology in trade” is available that examines these issues in detail, including practical examples and case analyses.
By DigitralTrade4.EU