Wednesday 18 September 2019

Choice of law issues in crypto-assets

I presented a paper entitled "Conflict of Laws in Blockchain-Based Crypto-Assets" at the Journal of Private International Law Conference on 12 September 2019 in Munich. As the time was limited, I focused on choice of law issues and discussed four broad categories of issues. They were (1) contractual issues, (2) issues of non-contractual obligations, (3) proprietary issues, and (4) issues pertaining to negotiable instruments.
The powerpoint slides prepared for the presentation are attached here. Some takeaways are set out in the last slide. It was meant to make the following points there.

The crypto-assets are unfit to be deemed to be money for the choice-of-law purposes because, inter alia, none of them is currently used as a medium of exchange and it is not possible to draw a line between the crypto-assets which are deemed to be money and those which are not so deemed.

The crypto-assets are difficult to be localised in a single country because they are contained in distributed ledgers on a borderless blockchain. The localisation may exceptionally be possible where all the nodes validating the blocks are by design located in a single country.

The crypto-assets will pose no particular difficulty in relation to the connecting factors which rely principally on real-life facts and events. Thus, for example, the country with which a contract, tort, or unjust enrichment is most closely connected may be ascertained without particular difficulty stemming from the use of crypto-assets. The ascertainment of the country with which a proprietary issue is most closely connected would be more difficult because the relevant events are mostly on-chain facts.

The crypto-assets will pose no particular difficulty in relation to the principle of party autonomy because the only question for the latter is whether to give effect to the parties' own choice. Given the difficulty of finding an appropriate connecting factor for proprietary issues in crypto-assets, it is arguable that the principle of party autonomy should be extended to proprietary issues where there is a uniform network-wide choice of law clause. How a single choice of law can be secured is, however, another question.

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