Trust, liability and identity: Blockchain could reshape AI legal governance

New research argues that blockchain technology could serve as a foundational legal mechanism to restore trust in AI-mediated digital transactions, but only if regulatory frameworks evolve to accommodate decentralized systems.

Published in Frontiers in Blockchain and titled “Blockchain as a model for granting trust in AI-mediated digital transactions,” the study presents a detailed techno-legal analysis of how blockchain’s architecture aligns with existing legal concepts of trust services, evidence, and liability across jurisdictions including the European Union, the United Arab Emirates, Bahrain, Jordan, and Algeria.

Blockchain offers procedural trust but cannot replace legal accountability

Blockchain, through its decentralized ledger, cryptographic validation, and immutable recordkeeping, provides what the authors describe as “trust by design.” It ensures that transactions are recorded accurately, time-stamped, and resistant to tampering, thereby establishing a reliable evidentiary foundation.

This capability becomes particularly important in AI-mediated transactions, where the decision-making process is often opaque. AI systems can generate outcomes without revealing the reasoning behind them, creating what the study describes as a “black box” problem in legal evidence. Blockchain addresses this challenge not by explaining AI decisions, but by documenting the sequence of events with high certainty, including when a transaction occurred, what inputs were used, and which system executed it.

However, the study makes clear that blockchain cannot resolve deeper issues of accountability. While it records what happened, it does not explain why decisions were made or who is ultimately responsible. This limitation is especially significant in legal contexts where intent, negligence, and causation must be established.

The research notes that blockchain should be viewed as an evidentiary infrastructure rather than a substitute for legal judgment. Courts and regulators can rely on blockchain records to reconstruct events, but must still interpret those events within existing legal frameworks. This reinforces the idea that technological solutions alone cannot replace the normative functions of law.

The distinction is further illustrated in AI-driven environments where systems evolve over time. As AI models adapt and change, the same system may behave differently under similar conditions. Blockchain can preserve the outcome of a transaction, but without additional mechanisms to capture the state of the AI model at the time of execution, it cannot ensure full accountability. This introduces a temporal dimension to legal responsibility, requiring courts to assess system behavior at specific points in time.

Legal gaps in identity, certification, and liability limit blockchain adoption

Blockchain faces significant legal barriers that limit its recognition as a formal trust mechanism. The study identifies three major gaps: identity attribution, certification requirements, and liability allocation.

The first challenge lies in identity binding. Blockchain systems rely on cryptographic keys to authenticate transactions, but these keys are not inherently linked to legally recognized individuals or entities. This creates a disconnect between technical verification and legal attribution. While a transaction can be proven to originate from a specific key, it may not be possible to determine the legal person behind that key without additional identity frameworks.

Emerging solutions such as decentralized identifiers and digital identity wallets are beginning to address this issue. These systems allow cryptographic credentials to be linked to legally recognized identities while preserving privacy. The study suggests that integrating such frameworks into trust service laws could enable blockchain-based signatures and seals to meet legal requirements for identity verification.

The second limitation concerns certification. In many jurisdictions, particularly under the European Union’s eIDAS regulation, qualified trust services require centralized certification by accredited providers. Blockchain’s decentralized nature conflicts with this requirement, as it operates without a single authority responsible for validation. As a result, blockchain-based systems cannot currently qualify as formal trust services in many legal frameworks.

However, the study argues that this incompatibility is not inherent to blockchain but rather a result of regulatory design. Jurisdictions that adopt technology-neutral definitions of trust services are better positioned to integrate decentralized systems. In contrast, legal systems that rely heavily on centralized certification structures face greater challenges in adapting to new technologies.

The third and most complex issue is liability. Traditional legal frameworks assign responsibility to identifiable actors such as service providers or intermediaries. In decentralized blockchain networks, no single entity controls the system, creating uncertainty about who should be held accountable in the event of disputes or harm.

To address this, the study proposes a layered liability model. Responsibility is distributed across three levels: infrastructure providers, application developers, and AI system operators. Blockchain network participants, such as validators, are treated as neutral infrastructure actors with limited liability unless misconduct is proven. Developers and deployers of smart contracts bear responsibility for system design and functionality, while AI operators are accountable for the outcomes of automated decision-making processes.

This model aligns legal responsibility with functional control, ensuring that accountability remains tied to identifiable actors even in decentralized environments.

Hybrid governance framework needed to align law, AI, and blockchain

Effective regulation of AI-mediated transactions requires a hybrid governance framework that integrates legal doctrine, technological infrastructure, and international standards. Rather than replacing existing systems, blockchain must be incorporated into a broader regulatory architecture that addresses identity, accountability, and risk management.

This framework operates across multiple layers. At the technical level, blockchain provides secure recordkeeping and transaction validation. At the identity level, emerging digital identity systems enable the attribution of actions to legal entities. At the governance level, standards such as those developed by the National Institute of Standards and Technology and the International Organization for Standardization establish requirements for risk management, security, and AI lifecycle oversight.

Legal frameworks such as eIDAS, GDPR, and emerging AI regulations provide the normative foundation for recognition, liability, and compliance. Together, these layers create a system in which blockchain supports procedural trust, while legal and regulatory mechanisms ensure accountability and enforceability.

The study highlights the importance of technological neutrality in enabling this integration. Jurisdictions that define trust services based on function rather than specific technologies are more adaptable to innovation. The European Union, the United Arab Emirates, and Bahrain are identified as examples of systems that are structurally more capable of incorporating blockchain into their legal frameworks.

On the other hand, countries with rigid, centralized models of trust services face greater challenges. The research points to Jordan and Algeria as examples where existing laws rely heavily on certification authorities and do not accommodate decentralized trust mechanisms. Updating these frameworks to recognize blockchain-based services is identified as a key priority for future legal reform.

The study also emphasizes the role of technical standards in complementing legal frameworks. Standards such as ISO 27001 for information security and ISO 42001 for AI governance provide benchmarks for system integrity, risk management, and compliance. While these standards are not legally binding, they can serve as indicators of due diligence in liability assessments and regulatory oversight.

Toward a new model of digital trust in autonomous systems

Traditional legal systems are built on the assumption that trust is established through identifiable actors, institutional oversight, and enforceable agreements. On the other hand, blockchain introduces a model of trust embedded in technological architecture, while AI introduces autonomous decision-making that challenges existing notions of responsibility.

The convergence of these technologies creates both opportunities and risks. On one hand, blockchain can enhance transparency, security, and efficiency in digital transactions. On the other, the combination of decentralization and automation complicates legal accountability and regulatory enforcement.

The study argues that the future of digital transaction law lies not in choosing between code and law, but in integrating them. Blockchain can provide the factual foundation for trust, while legal systems provide the interpretive framework for responsibility and justice.

A key proposal emerging from the research is the adoption of a rebuttable presumption approach. Under this model, blockchain records would be presumed authentic and reliable unless proven otherwise. This would allow courts to rely on blockchain-based evidence while preserving the ability to challenge it in cases of fraud, malfunction, or external interference.

Such an approach balances innovation with legal safeguards, enabling the use of advanced technologies without undermining fundamental principles of justice. It also reflects a broader shift toward hybrid governance models that combine technological and legal mechanisms to address complex challenges.