May 30, 2024
Policy Executive Urges Developers: Make Code Immutable to Avoid Legal Risks
Policy & Regulation

Policy Executive Urges Developers: Make Code Immutable to Avoid Legal Risks

In a panel discussion at the 2024 Bitcoin Policy Summit in Washington, D.C., Coin Center research director Peter Van Valkenburgh emphasized the criticality of ensuring immutability in smart contracts for developers building DApps.

Van Valkenburgh highlighted the regulatory significance of this approach, asserting that it could mitigate potential liabilities for scams occurring on DApp platforms.

Regulatory Imperatives

Van Valkenburgh underscored the regulatory imperative for developers, particularly those exploring DApp development on layer-2 networks of the Bitcoin blockchain.

He emphasized the need to prioritize immutability in smart contracts to avoid legal repercussions, noting that failure to do so could result in severe consequences, including legal liabilities and potential imprisonment.

Source: Yaël Ossowski

Legal Ramifications of Smart Contract Flexibility

Contrasting approaches, Van Valkenburgh cautioned against allowing smart contracts to be manipulated through mechanisms such as multi-signature controls or governance votes.

He warned that developers who adopt such flexible models are at higher risk of being held liable for illicit activities conducted on their platforms.

Van Valkenburgh also discouraged developers from opting not to open-source their smart contracts, citing potential legal uncertainties and increased liabilities associated with closed-source models.

He emphasized the importance of transparency in smart contract deployment to mitigate regulatory risks and ensure accountability among platform participants.

Ethereum as a Regulatory Model

Highlighting the Ethereum ecosystem’s approach, Van Valkenburgh described it as an “interesting model” for evading regulatory bottlenecks by prioritizing decentralization and minimizing human discretion in platform governance.

He cited the recent dismissal of a lawsuit against Uniswap as a testament to the benefits of decentralized governance structures.

Despite the emphasis on immutability, real-world examples like the indictment of Tornado Cash’s founding developers illustrate the complexities and challenges faced by developers in navigating regulatory landscapes.

While immutability-enforced contracts may provide a degree of protection, they do not guarantee immunity from legal scrutiny and prosecution, as evidenced by the legal troubles encountered by Tornado Cash’s developers.

Future Clarity in the U.S.

Van Valkenburgh suggested that further clarity regarding regulatory expectations in the U.S. would likely emerge following the resolution of ongoing legal cases, such as that of Roman Storm, one of the developers associated with Tornado Cash.

Storm’s case is expected to provide insights into how regulatory authorities view developer liabilities in the context of decentralized platforms.

As discussions surrounding regulatory compliance in the crypto space intensify, Van Valkenburgh’s insights underscore the importance of proactive measures to mitigate legal risks and ensure responsible development practices within the burgeoning DApp ecosystem.


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