The Arab Monetary Fund publishes Guidance Note on “Adopting Smart Contracts and their Legal Enforceability in Arab Countries”

Advantages of adopting smart contracts across different sectors in Arab countries

Assessment of opportunities and risks arising from the implementation of smart contracts for participants and markets

Designing regulatory frameworks to protect data, improve consumer protection, ensure market integrity, and mitigate illicit financial risks

The Arab Monetary Fund (AMF) issued today Monday, December 19th, 2022, a guidance note on “Adopting Smart Contracts and their Legal Enforceability in Arab Countries” prepared by members of the Arab Regional Fintech Working Group (WG), of which the AMF acts as the technical secretariat. This note stems from the AMF's endeavours to promote awareness of the opportunities and risks of adopting smart contracts in various industries in the Arab countries.

The note examines the implementation of existing financial and civil regulations, laws, and norms in the enforcement of smart contract-based services in the financial sector, in addition to the requirements for managing risks that are not covered by current legislation, such as the anonymity of smart contract participants or their pseudonyms. It also addresses aspects of enhancing customer due diligence as well as enabling combating money laundering, terrorist financing and other illicit financial activities that need to be adequately monitored.


In this regard, the guide highlights issues, and requirements for regulating these smart contract-based activities, designing regulatory frameworks to protect data, improve investor protection, ensure market integrity, and reduce illicit financial concerns in a clear and more transparent manner.

The guide also addresses the decentralized and complex nature of smart contract networks and the challenges of identifying the people involved in the structures of those contracts, which makes the conventional oversight structure insufficient. For example, it may be difficult to enforce the current legal restrictions on those contracts due to the lack of an accountable party in some arrangements. Thus, the guide points out the importance for policy makers to set standards on how a decentralized smart contract protocol may qualify as an intermediary and who will legally be accountable for its operations.

The guide also sheds light on interpretation of smart contract by judicial and regulatory authorities, recent developments of the decentralised online dispute resolution, as well as global case studies on smart contract applications by governments and organisations. It also reviews the initiatives of various Arab countries in embracing Blockchain Technology, in addition to related legislation and regulatory frameworks such as data protection and consumer protection. Moreover, the guide refers to case studies in some Arab countries on the legislative and legal frameworks that enable the adoption and execution of smart contracts.

Accordingly, the note draws a set of recommendations for proper adoption of smart contracts, which includes four groups of recommendations as possible remedies to the following: (i) technical challenges, (ii) organizational challenges, (iii) skills development, awareness, and job creation, as well as (iv) managing risks associated with smart contracts. 

In this context, His Excellency Dr. Abdulrahman Al-Hamidy, Director General Chairman of the Board of Arab Monetary Fund, noted with appreciations the initiatives of the Arab Reginal Fintech WG in issuing policy notes, and guidelines providing advice to the relevant authorities in the areas of Fintech, strengthening digital financial services, and supporting innovations and access to formal financial services. H.E referred to the great opportunities resulting by embracing legal enforceability of smart contracts, and expressed his wishes that the report would contribute to raise awareness of deploying such technologies.


You can download the report by clicking on the following link: