Growing demand for expertise in cryptocurrency related arbitration in 2025

Arbitration has become a preferred way for large global cryptocurrency exchanges, such as Ethereum, Bitcoin and Binance, to resolve disputes between the platforms and the users. These companies have specified arbitration institutions to administer arbitration cases on related disputes, instead of ad hoc arbitration. The locations of their chosen arbitration institutions are spread across Hong Kong, the US and Switzerland.

Bitcoin.com, for example, has chosen the Hong Kong International Arbitration Centre (HKIAC) as the venue for disputes between it and non-US parties, and any arbitration cases will be conducted under HKIAC’s Electronic Transaction Arbitration Rules. Disputes involving US residents will be settled through JAMS arbitration in the US, formerly known as Judicial Arbitration and Mediation Services. Meanwhile, Binance has opted for arbitration under International Chamber of Commerce (ICC) arbitration rules.

The types of crypto-related disputes commonly seen in arbitration involve a wide range of matters. They could arise in the sale of cryptocurrency or non-fungible tokens (NFT) and as a result of breaches in the contract with crypto platform or civil fraud. They could also relate to investment disputes; supply of services disputes; sale of goods; fraud and miss-selling; outstanding debts; and intellectual property, or technical issues related to crypto transactions.

Procedural rules

Despite the increasing adaptation of arbitration agreements by cryptocurrency and NFT platforms, major international arbitration institutions are yet to issue specific rules for handling crypto asset-related disputes. In 2021, a new digital dispute resolution procedure, known as the Digital Dispute Resolution rules, was introduced in the UK. In essence, parties can choose to adopt the rules in their agreements concerning digital assets and agree at the outset that disputes arising will be handled under the fast-track process the rules envisage. That entails the parties agreeing to provide the arbitral tribunal with a form of digital access, or power to direct blockchain operators, to operate, modify, sign or cancel any digital asset relevant to the dispute. This enables direct-to-blockchain enforcement of their decision.

However, platforms have been reluctant to adopt the new rules. Instead, parties are likely to rely on the early determination procedures offered by various arbitration institutions to resolve simple crypto asset payment-related disputes.

Take HKIAC as an example. Article 43 of the 2024 HKIAC Administered Arbitration Rules allows a party to apply to the arbitral tribunal for early determination of the law or facts. This can be done on the basis that they are “manifestly without merit” or “manifestly outside the arbitral tribunal’s jurisdiction” or “even if such points of law or fact are submitted by another party and are assumed to be correct, no award could be rendered in favour of that party”.

Under the HKIAC rules, the arbitral tribunal shall make a decision whether to dismiss or allow the request within 30 days from the date of filing the request. Additionally, the arbitral tribunal is required to make an order or award, which may be in the summary form, on the relevant points of law or fact within 60 days from the date of its decision to proceed. Similar provisions apply to arbitrations seated in Singapore administered under the rules of the Singapore International Arbitration Centre (SIAC).

While no immediate changes are expected in crypto asset related arbitration, a trend is developing among large cryptocurrency and NFT platforms in managing class action risks. In a high-profile case, a group of investors initiated a ‘class action’ style HKIAC arbitration against Binance in 2021. The claimants alleged that they suffered $20 million losses due to the platform’s outage during the crypto market meltdown earlier that year.

Several platforms, including Bitcoin, OpenSea and OurSong, have since added “waiver of class actions and class arbitrations” clauses into the terms of service or terms of use as part of their risk mitigation strategy. This will limit the number of class actions against cryptocurrencies and NFTs in the future.

Seat of crypto asset-related arbitration

Among the arbitration seats used by parties to resolve their disputes over digital and crypto assets, Hong Kong is poised to stand out due to several recent developments.

Apart from the high-profile Binance arbitration, which is still ongoing, the HKIAC has handled a flurry of “banking and financial services” cases in the past a few years. There was a particular strong increase in the number of such cases during 2022, when this type of disputes accounted for 36.9% of the HKIAC’s total cases in the same year compared to 16.2% in 2021. Crypto-related disputes are thought to have driven up the sharp increase in the number of banking-related cases from 2021 to 2022.

A landmark court ruling in the Hong Kong Special Administrative Region (SAR) last year has helped reinforce the jurisdiction’s position as the place for parties to seek necessary enforcement actions, such as injunctive reliefs, in relation to crypto assets in Hong Kong. In that case, the court ruled that cryptocurrency is a form of property. Before this decision, courts in Hong Kong had previously granted interlocutory proprietary injunctions over cryptocurrency and no party had ever suggested that cryptocurrencies should not be classed as property. However, the question had not yet been explicitly determined by a court.

Another advantage for parties to resolving disputes involving digital assets and platforms in Hong Kong is that intellectual property disputes are arbitrable under Hong Kong law. For example, parties with issues relating to copyright of crypto assets could commence arbitrations and seek relief in Hong Kong.

Apart from choosing the most suitable seat of arbitration, it is important for crypto asset platform operators to ensure that the arbitration clause in their terms of service is enforceable. In some cases, an arbitration agreement may be unenforceable, for example, if it is seen as not properly incorporated into the terms of service or when it is incompatible with local laws providing for litigation of disputes. These businesses should give priority to engaging legal counsel to review the enforceability of their arbitration clause.

Persisting challenges

Parties involved in crypto asset arbitration can expect to encounter several challenges. This is because where there is a blockchain transaction, new legal issues are likely to be considered and tested. Some of the key issues include what law applies to a blockchain transaction in the absence of a governing law clause, and whether a binding dispute resolution clause can be embedded in a smart contract.

The fact that certain countries have banned crypto assets or heavily regulated their use adds additional complexity for parties seeking to bring a legal action involving crypto assets or enforcing an award relating to crypto which orders the payment of damages in either fiat currency or in cryptocurrency.

On the procedural aspects, it is also more complicated to identify the correct counterparty to the arbitration, secure interim measures over crypto assets, and reach the appropriate valuation of such assets and quantify loss. Identification of the wrongdoer has also proven difficult in some cases.

Due to the expected rise in crypto asset-related arbitration and the challenges it poses, there is a growing need for expertise in this area. Parties will be inclined to choose arbitrators with a background in blockchain or crypto assets on the panel. The demand for experts specialising in blockchain and crypto knowledge to assist arbitration tribunals to understand the facts will also increase as a result.