This document discusses the challenges of litigating disputes related to cryptocurrency and blockchain. There are three main types of crypto disputes: crypto frauds, on-chain disputes involving smart contracts, and off-chain disputes involving agreements. Key challenges include the anonymity of users, lack of a single connecting factor for jurisdiction, and volatility of crypto assets. Current private international law frameworks focus on physical location but this is not relevant for digital transactions. Potential solutions discussed include new rules for online disputes, accepting anonymity with solutions like smart contracts, and increased use of arbitration.

1. Challenges of litigating
crypto / blockchain disputes
Nino Sievi, nino.sievi@lexfutura.ch

2. Definition: Disputes that arise in the crypto / blockchain industry, whether
conducted on or off the blockchain.
Three types of disputes:
• Crypto frauds (e.g. ransomware attack, scam ICOs, theft)
• On-chain disputes (e.g. dispute arising out of malfunction of a smart
contract)
• Off-chain disputes (e.g. SAFT, crypto exchange being sued by a
customer)
What are "crypto disputes"?

3. • Anonymity
• Impossibility to determine location of a blockchain
transaction
• The pseudonymity of users and the decentralised nature of the
ledger can also conceal the situs of transactions. Thus,
traditional connecting factors may not be suitable.
• Decentralization: no single connecting factor
• Unclear legal qualification of certain concepts (e.g.
ownership of crypto as a right in rem or in personam; DAO)
What are the challenges of crypto
disputes?

4. • Need for speed due to volatility of assets
• Assets can be dissipated very easily
• Illegality of crypto transactions in some jurisdiction
• Do certain crypto actors qualify as consumers?
• Calculation of damages
What are the challenges of crypto
disputes?

5. How does the current PIL framework
address these challenges?
• PIL instruments still heavily focus on geographical location of acts,
actors, and objects
• Geographical locations (“situs”) may not be relevant to functioning of transaction
• No multilateral convention addressing issues of PIL for digital activities
• Domestic PIL rules usually have no dedicated provisions on digital activities
• Enforcement mechanisms rely on identification of debtor
• Importance of interim relief (blocking crypto assets, if possible)
• Service of court documents
• Hague Convention 1965 vs. liberal approach of English courts (see
D’Aloia v. Binance Holdings & Others, [2022] EWHC 1723 (Ch))

6. What are potential solutions?
• New PIL rules adapted to online situations with anonymous
participants in a decentralized network
• On a domestic level: broad acceptance of actions against
"person unknown"
• Lex Cryptographia (in combination with decentralized justice
protocols, e.g. Kleros)

7. • More party autonomy for consumers
• Anonymity currently addressed with smart contracts and
escrow solutions
• Accept that there is a new web3-jurisdiction completely
independent of the „real world“?
• JUR-project: „The New Jurisdiction For The Digital Economy”
(https://jur.io/)
What are potential solutions?

8. • HCCH, Developments with respect to PIL Implications of the
Digital Economy (https://assets.hcch.net/docs/b06c28c5-
d183-4d81-a663-f7bdb8f32dac.pdf)
• UK Law Commission, Conflict of laws and emerging technology
(https://www.lawcom.gov.uk/project/conflict-of-laws-and-
emerging-technology/)
• ELI Principles on the Use of Digital Assets as Security
(https://www.europeanlawinstitute.eu/projects-publications/completed-
projects/use-of-digital-assets-as-security/)
Are we working on these solutions?

9. The role of arbitration?
• Off chain disputes
• Crypto Dispute Resolution: An empricial study
(https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3975500)
 Only 35% of Crypto Exchanges provide for arbitration in
their user terms (2021)
• SAFT and contracts between service companies in crypto
industry: mostly arbitration clauses
• Enforcement issues remain (issue of illegaility in some
jurisdictions)
• Arbitrability of consumer disputes?

10. • https://www.unine.ch/files/live/sites/florence.guillaume/files/Publications/Guilla
ume_Blockchain_transactions.pdf
• https://assets.hcch.net/docs/b06c28c5-d183-4d81-a663-f7bdb8f32dac.pdf
• https://conflictoflaws.net/2018/blockchain-networks-and-european-private-
internationale-law/?print=print
• https://www.isda.org/2020/10/21/private-international-law-aspects-of-
derivatives-contracts-involving-dlt/
• https://papers.ssrn.com/sol3/papers.cfm?abstract_id=4042704
• https://www.shs-
conferences.org/articles/shsconf/pdf/2021/20/shsconf_lisid2021_01003.pdf
Happy reading