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Smart Contract in Thailand: What Is Its Legal Status?

2025/11/20 02:48:02

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A smart contract on blockchain is a program that runs automatically on a decentralized network, with pre-set conditions specifying what actions to take when certain events occur. For example, if a buyer fails to make payment by the agreed deadline, the system will automatically transfer the deposit held in an escrow account to the seller without requiring approval from either party or any third person. This mechanism enables transactions to occur quickly and reduces human intervention.

Currently, smart contracts are widely used in various digital businesses. For instance, in DeFi, they help match borrowers and lenders, calculate interest, and release collateral automatically upon repayment. Platforms like Aave and Compound use this mechanism. Another example is Supply Chain, where smart contracts track goods and trigger payments when items reach designated checkpoints, ensuring transparency and reducing fraud.

However, a smart contract is not a legal contract by itself—it is simply a program executing pre-defined conditions. Therefore, it is necessary to consider under what circumstances a smart contract can have legal effect. There are three key scenarios:

Scenario 1: Expressing Intent and Forming a Contract

Thai law recognizes electronic contracts under the Electronic Transactions Act B.E. 2544 (2001), which requires systems to maintain message integrity and allow later display. Parties must express intent to be bound electronically and use verifiable electronic signatures. If a smart contract operates on Layer 1, off-chain identity verification may be needed to confirm the parties’ intent.

Scenario 2: Enforcing Contractual Conditions

An example is using smart contracts in loan agreements. The system can verify collateral value, disburse funds once conditions are met, calculate interest in real time, and return collateral upon repayment. If collateral value falls below the threshold, the system will trigger liquidation. In this case, the smart contract is merely a tool for contract management; legal enforceability still depends on compliance with the Electronic Transactions Act.

Scenario 3: Serving as Evidence of Rights

A clear example is creating NFTs. Smart contracts generate unique token codes, link them to digital content, and record ownership transfers. They also enforce royalty conditions on every resale. Here, smart contracts ensure contractual rights are enforceable in the digital world, such as rights over digital assets or royalty payments.

Summary

Smart contracts are not inherently legal contracts but are technologies that make digital transactions efficient and enforceable under pre-set conditions. To achieve legal effect, they must comply with the Electronic Transactions Act and other relevant laws.

 ⚠️ Disclaimer: Cryptocurrency and digital token involve high risks; investors may lose all investment money and should study information carefully and make investments according to their own risk profile.

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