A smart contract, or intelligent contract, is a program that executes automatically on a blockchain when certain conditions are met, for example distributing a coupon or restricting a transfer. It automates execution, but does not replace the legal contract or the obligations that the regulation imposes on the issuer.
A smart contract is a key term for understanding regulated tokenization in Spain. Here it is explained clearly.
What is a smart contract
A smart contract is a program that runs automatically on a blockchain when certain conditions are met, for example distributing a coupon or applying a transfer restriction to verified wallets.
It does not replace the legal contract: the contract is the source of law and the code executes it. It is advisable to define in writing which prevails in the event of a discrepancy between the two. How it fits into an issuance is explained in how to issue a security token.
Frequently asked questions
Does a smart contract replace the legal contract?
No. The legal contract is the source of law; the smart contract executes what it defines. In the event of a discrepancy, it must be clear in writing which one prevails.
Does a smart contract give the token legal validity?
Not by itself. Validity as a transferable security is provided by registration in an ERIR under the LMVSI, not by the code.
More terms in the tokenization glossary.
Notice
Informational content. It does not constitute legal, tax or investment advice. Check the current version of the cited rules on BOE and EUR-Lex.
HokenFi is a software and infrastructure provider; it does not provide regulated services (CASP, ESI, EAF, or ERIR). This article is informative and does not constitute financial or legal advice.
