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Challenges of litigating
crypto / blockchain disputes
Nino Sievi, nino.sievi@lexfutura.ch
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"?
• 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?
• 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?
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))
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)
• 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?
• 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?
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?
• 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

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Challenges of litigating crypto / blockchain disputes

  • 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