Why Smart Contract Wallets Will Force a Rethink of Agency Law

Traditional law assumes a single, identifiable human actor. SCWs like Safe{Wallet} with multi-sig or ERC-4337 account abstraction enable complex, automated, and multi-party agency.\n- Key Conflict: Who is liable when a "social recovery" guardian acts maliciously?\n- Key Shift: Agency is no longer bilateral but a programmable, multi-layered graph of permissions.

A trustee's duty of care conflicts with a smart contract's deterministic execution. Wallets with transaction bundling (via UniswapX) or intent-based flows (via CowSwap) delegate asset control to opaque solvers.\n- Key Conflict: Can a solver's profit-maximizing MEV extraction breach its implied duty to the user?\n- Key Shift: Fiduciary logic is outsourced to competitive solver markets and keepers, not trusted individuals.

Legal liability often hinges on what a 'reasonable person' would do. A Safe{Wallet} with session keys or a Biconomy gasless relay introduces superhuman, instantaneous actors.\n- Key Conflict: Is a user negligent for approving a session key that gets exploited 30 days later?\n- Key Shift: The benchmark for 'reasonableness' must account for programmable security models and continuous risk audits.

SCWs enable jurisdictional fluidity. A Safe deployed on Gnosis Chain with DAO-based governance can choose its legal domicile, while Argent's guardians can be globally distributed.\n- Key Conflict: Which regulator has authority over a wallet whose logic and signers span 5 countries?\n- Key Shift: Compliance becomes a modular, opt-in layer (e.g., Chainalysis Oracles) rather than a geographic mandate.

With ERC-4337 paymasters and account abstraction, the wallet contract itself becomes the active economic agent, sponsoring gas and batching actions.\n- Key Conflict: If the contract is the agent, who bears tort liability for its actions? The developer? The deployer? The funder?\n- Key Shift: Legal personhood may need to extend to autonomous, code-defined entities with their own capital reserves.

The blockchain provides an immutable ledger, but SCW transactions involve multiple off-chain components (relayers, bundlers, oracles). A Biconomy meta-transaction's validity depends on off-chain services.\n- Key Conflict: Is a fractured, multi-layer log sufficient evidence of consent or authorization in court?\n- Key Shift: The standard of evidence must evolve to accept verifiable, decentralized attestations alongside on-chain finality.

Traditional agency law assumes a human agent who can be negligent, corrupt, or incompetent. In DeFi, this maps to centralized custodians and relayers, creating a single point of failure and legal ambiguity for on-chain actions.

• $40B+ in crypto hacks since 2020, mostly targeting centralized intermediaries.
• Slow dispute resolution: Legal recourse takes months, while exploits are instant.
• Misaligned incentives: Agents (e.g., CEXs) often prioritize their own profit over user intent.

Smart accounts like Safe{Wallet} and Biconomy encode user intent into verifiable, deterministic code. The 'agent' is a non-delegable smart contract, executing pre-authorized logic with cryptographic certainty.

• Removes trust assumption: Execution is permissionless and verifiable by any observer.
• Granular policy enforcement: Social recovery, spending limits, and transaction bundling are baked into the wallet logic.
• Shifts legal focus: From punishing bad actors to auditing immutable code and initialization parameters.

The rise of intent-based systems decouples declaration of a goal from its execution. Users sign a message stating what they want, not how to do it. Solvers (like Across and 1inch) compete to fulfill it, creating a market for agency.

• User as principal: Specifies outcome (e.g., 'best price for 100 ETH').
• Solver as competitive agent: Bids for the right to fulfill, with success guaranteed by cryptographic proofs.
• Legal implication: Breach is now a verifiable protocol failure, not a subjective bad faith act.

A 2-of-3 Safe wallet is a persistent, autonomous agent. The problem: who is liable for its actions? Traditional agency requires a principal with legal capacity. The solution: treat the wallet's rule set as its governing charter, making signers its board of directors.

• Key Benefit: Clear, code-first attribution of authority.
• Key Benefit: Enables DAOs and corporate treasuries to operate at blockchain-native speed.

The problem: granting a dapp full wallet access is a massive security and legal liability. The solution: session keys, as pioneered by Argent and Biconomy, create time- and scope-limited agency.

• Key Benefit: Limits exposure from a single compromised dapp.
• Key Benefit: Creates an audit trail of delegated permissions, simplifying compliance.

The problem: EOAs make users ultimate principals, leading to irreversible loss from a lost key. The solution: ERC-4337 allows wallets to embed social recovery, transaction bundling, and fee sponsorship, decoupling identity from a single private key.

• Key Benefit: Shifts liability from user error to programmable safety nets.
• Key Benefit: Enables new custodial models (e.g., family trust wallets) without centralized intermediaries.

The problem: a wallet configured to auto-compound yield or execute limit orders acts without human intent. Who is responsible for a bug or exploit? The solution isn't technical; it requires new legal frameworks for automated financial agents, similar to debates around autonomous vehicles.

• Key Benefit: Forces clarity in smart contract audit standards and insurance products.
• Key Benefit: Creates a market for on-chain actuarial science and risk modeling.

The problem: managing assets across Ethereum, Arbitrum, and Polygon fragments a user's agency. The solution: smart accounts with native cross-chain capabilities, like those from Safe{Core}, act as a single principal across multiple jurisdictions.

• Key Benefit: Unified legal identity and control surface across fragmented ecosystems.
• Key Benefit: Reduces jurisdictional arbitrage for enforcement and compliance.

The problem: how can a smart wallet act on your behalf if you're offline? Protocols like UniswapX and CowSwap use signed intents. The solution: these signed messages are legally binding commitments, creating a new class of contingent agency that executes only if market conditions are met.

• Key Benefit: Enforces principal's intent without real-time presence.
• Key Benefit: Provides a cryptographic audit trail superior to verbal or email instructions.

Traditional law assumes a single, identifiable human principal. Smart contract wallets like Safe{Wallet} or Argent are multi-signature or programmable agents, creating a legal gray area.

• Who is liable when a 2-of-3 multisig signs a malicious transaction?
• Legal standing of a DAO treasury managed by a smart contract wallet is undefined.
• Courts lack frameworks for attributing intent to code-executed decisions.

Account abstraction (ERC-4337) and wallets like Stackup or Biconomy bake legal logic directly into the wallet's operation, creating auditable, deterministic agency.

• Programmable permissions define authority (e.g., 'spend limit of $1k/day').
• Social recovery via guardians creates a formalized delegation structure.
• On-chain transaction logs become the immutable record of agency, replacing notarized paperwork.

Projects like Safe{Wallet} with its Safe{DAO} are creating de facto legal entities. Their modular security model and governance establish a framework for bounded liability.

• Module boundaries legally compartmentalize risk (e.g., a hacked plugin doesn't compromise core assets).
• Transparent governance provides a chain of custody for major decisions.
• This model forces a rethink of corporate law for on-chain LLCs.

Dispute resolution must move on-chain. Protocols like Kleros and Aragon Court demonstrate how decentralized juries can adjudicate smart wallet actions, creating a parallel legal system.

• Smart contract wallets can designate a fallback arbitrator in their logic.
• Bond-based appeals systems automate enforcement of rulings.
• This reduces reliance on slow, jurisdiction-bound national courts.

Advanced smart wallets using zero-knowledge proofs (e.g., ZK Email for recovery) or intent-based architectures can obfuscate agency, creating regulatory blind spots.

• Privacy-preserving recovery makes identifying the 'principal' impossible.
• Intent solvers (like those in UniswapX or CowSwap) act as opaque intermediaries.
• Regulators may respond with blanket bans on non-custodial tech they cannot audit.

The endpoint is wallets as Delegated Autonomous Organizations (DAOs). A wallet's agency is fully encoded, managed by a mix of human committees and AI agents, demanding a new legal category.

• Continuous, programmed agency replaces discrete power-of-attorney grants.
• Liability pools (akin to insurance) will be mandated for high-value autonomous agents.
• This evolution will force the creation of digital persona law.