Blockchain and smart contracts for food traceability

The Law Decree simplifying procedures for businesses and public administration (DL Semplificazioni), as converted by Law no. 12/2019 published in the Official Gazette on 14 February 2019, introduces the normative definition of technology based on distributed registers, better known as Blockchain, into the Italian legal system.

Art. 8-ter of the Conversion Law provides the first definition of blockchains as "technologies based on distributed registers", indicating them as "technologies and computer protocols that use a shared, distributed, replicable, simultaneously accessible, architecturally decentralized register on cryptographic bases, such as to allow the registration, validation, updating and storage of data both in clear and further protected by cryptography verifiable by each participant, not alterable and not modifiable".

A technology initially linked to bitcoin transactions, but of great interest in different application areas where the implementation of a shared register between private individuals - in which each participant in the chain, under their own responsibility, can add information in relation to their area of expertise - can represent an added value, which is then given a regulatory form.

It is precisely the decentralization in the formation of shared registers and the unchangeability of the information entered by the operators that would seem to guarantee the transparency of the information made available to users.

Mass Retail Channel of the food sector has already begun to use blockchain technology, making information available to consumers in order to allow the food chain to be fully transparent and traceable, far beyond what is shown on the label. At the moment, it is an opportunity that regards only specific categories of marketed products, but it allows consumers to be aware of the entire life of the product they are going to purchase.

Having a technological tool defined by the law provides an increase of the level of knowledge and awareness of the purchases, but this is only one possibility for a major change in the information system to consumers and their use for the protection of some products identified by a certain process or from the origin of a food product.

The protection of Made in Italy stands only benefit from the distributed registers: not only the indications on the label, but the entire supply chain will become traceable through a public consultation register that contains all the information entered by the subjects having a relevant relation with the product.

With reference to the identification requirements and for further aspects related to the operations of the distributed registers, the Agency for Digital Italy (AGID) will issue Guidelines within ninety days from the date of entry into force of the law converting the decree. Within the same term AGID will have to identify the technical standards that the technologies based on distributed registers must meet for the purposes of producing the legal effect of electronic time stamps.

It is expected that the necessary rules will be set for the proper management of the distributed registers and, above all, the definition of the rights and liabilities of those who enter information in the register. This is mainly due to the fact that the DL gives to the information included in the distributed registers the legal effect of electronic time stamps as per art. 41 of the Regulation (EU) n. 910/2014, and namely:

• having legal effect and admissibility as evidence in legal proceedings;
• having the presumption of the integrity and the accuracy of the date/time in which they are filed;
• be recognized in all Member States.

The parts of a blockchain must have a contractual regulation for operating within a blockchain. For this purpose, the so-called "smart contract", also regulated and defined by the DL Semplificazioni, may work towards this purpose. Smart contracts are the "computer program operating on technologies based on distributed registers and whose execution automatically binds two or more parts on the basis of predefined effects."

Smart contracts are equivalent to physical contracts and should contain terms and conditions for the operation of a distributed register; as such, it satisfies the requirement of the written form where required by the law. Standardization of provisions applicable to specific sectors or particular cases shall now be investigated, with a decreased risk of discretion on the interpretation and on the effects of the instruments themselves.