Smart contract: What (is in the) future for consumer protection?

In many areas of e-commerce, especially in the world of decentralized finance, smart contracts are a widespread reality; yet, poorly regulated. This raises substantial legal questions, in particular when it comes to consumer protection. So far, legal scholars, legislative bodies and stakeholders have expressed both high expectations and alarming concerns about the use of smart contracts and the technology underneath in B2C transactions. Self-execution, cryptography and tamper-proof nature of DLTs could foster commercial relations by ensuring the performance of the contract and so lowering transaction costs resulting from lack of trust between parties; for the same reasons, smart contracts have been considered even able to strengthen the level of consumer protection by whether facilitating (if not guaranteeing) the enforcement of certain consumer rights or providing different and more practical remedies toward the satisfaction of contractors’ interests. Nevertheless, the coded terms of a smart contract (at least if not accompanied by natural language explanations) may not result widely comprehensible to the average consumer; accordingly, not ‘transparent’ pursuant to consumer protection regulation. Besides, their self-execution, while reducing the risk of fraud or breach of the contract, also deprives the consumer of the right to suspend the agreement if the terms he agreed are unfair or the contract he has entered to is the result of an unfair practice. As smart contracts perform automatically, in addition, and particularly due to the (allegedly) irrevocable nature of this performance, also the exercise of the right to withdrawal and other consumers’ termination rights or restorative remedies may be made more difficult, unless standards software design incorporating mechanisms to bring the coded contract to an end or reverse its execution are otherwise imposed. In the belief that a greater and sustainable use of smart contracts could revolutionize for the better B2C online contracting, but that for this to happen it is necessary to overcome the still existing uncertainty, this paper - building upon and further developing the extant academic literature on the topic – duly explores B2C smart contract consistency with the consumer protection legislation and analyses the suitability of this regulatory framework to still ensure appropriate protection of the weaker party in the changed, current context of online trading. The article concludes that in some cases it would be appropriate for policy makers to take action to adapt the current rules to the new smart contract’s threats for consumers, also considering the adoption of alternative transparency regimes or standards to be developed that are then endorsed by regulation.