When Code Commits A Crime: Legal Challenges Of Criminal Activity Via Smart Contracts
- IJLLR Journal
- Jun 12
- 2 min read
Ayesha Khanum, LL.M., Amity Law School, Amity University, Bengaluru.
Jyotirmoy Banerjee, Assistant Professor, Amity Law School, Amity University, Bengaluru
ABSTRACT
The rise of blockchain technology and the use of smart contracts have revolutionized how transactions and agreements are carried out across various industries.1 These self-executing programs operate autonomously on decentralized networks, offering benefits like transparency, efficiency, and the elimination of intermediaries. Yet, these same features—immutability, decentralization, and autonomy—also make smart contracts susceptible to misuse. Criminals are increasingly leveraging these tools for illicit activities such as ransomware schemes, dark web transactions, financial fraud, and even markets tied to unlawful acts like assassinations. These developments present serious challenges to traditional legal frameworks based on human intent (mens rea) and action (actus reus), as smart contracts often function without further human input and are deployed anonymously. Compounding the problem is the jurisdictional ambiguity associated with decentralized networks. A smart contract can be created in one country, executed globally, and impact users in multiple jurisdictions, undermining the territorial nature of criminal law enforcement. Existing national laws are often outdated and ill-suited to address crimes involving decentralized technologies, creating legal grey areas that bad actors readily exploit. Historical incidents, such as the 2016 DAO hack and the controversial use of platforms like Augur for incentivizing unethical prediction markets, illustrate the murky legal landscape surrounding smart contract-enabled crimes. Globally, legal responses vary. The U.S. relies on traditional cybercrime laws, while the EU has adopted the MiCA framework, which still lacks provisions on criminal liability in autonomous systems. India applies legacy IT laws without specific reference to smart contracts, and China has enforced sweeping bans, though international threats persist. Addressing these challenges requires technical safeguards like contract audits and kill switches, along with adaptive legislation and international collaboration. As code increasingly shapes societal functions, legal systems must redefine responsibility and accountability to safeguard public interest while supporting technological innovation.
Keywords: Smart contracts, Blockchain technology, European Union.
