Cryptocurrency Investors V States: Is Investment Treaty Arbitration "Ready" For Cryptocurrency Disputes?

• Published date: 21 June 2023
• Subject Matter: Litigation, Mediation & Arbitration, Technology, Arbitration & Dispute Resolution, Fin Tech
• Law Firm: OBLIN Attorneys at Law LLP
• Author: Madina Dumanova and Klaus Oblin

Since their introduction in 2009,¹ cryptocurrencies have gained mainstream interest all over the world. While many states, as well as the international community, have yet to address the legal regulation of these new inventions, there are already disputes emerging within the industry in the commercial context. A stark example is the Binance arbitration which emerged after a shutdown of many parts of the Binance online trading platform on 19 May 2021.²

As the growth of cryptocurrencies is likely to continue globally, we can expect the emergence of investment disputes in the cryptocurrency industry as well. Indeed, many investors are more invested in cryptocurrency than ever before, which makes the field prone to be affected by state measures. However, the question of whether investors using cryptocurrencies to make investments can enjoy protections under applicable investment treaties is still unsettled.

In this article, we will briefly analyze whether cryptocurrency investments may fall under investment law regulations as well as predict the type of disputes that may arise in this context. Furthermore, cryptocurrency investments will be looked at through the lens of the jurisdictional requirements of the International Centre for Settlement of Investment Disputes (ICSID). At the time of writing this article, there is no publicly available arbitral award discussing jurisdiction on cryptocurrency investments.

Establishing jurisdiction for cryptocurrency disputes

To enjoy the whole gamut of protections under international investment law, a cryptocurrency investment must be qualified as an investment under the applicable investment treaty as well as the ICSID Convention, in case the dispute is submitted to an ICSID tribunal. This gives rise to three potential issues in the context of future cryptocurrency disputes:

• The concept of an investment in investment treaties;
• Territoriality requirements in investment treaties;
• The concept of an investment under the ICSID Convention.

The concept of an investment in investment treaties

The definition of an investment varies between investment treaties. Whether cryptocurrencies can enjoy protections under an investment treaty will depend on the exact wording of the treaty.

In light of the evolving nature of investments, many investment treaties provide a broad definition of an investment.³ For example, Article 1 of the Austria-Kazakhstan Bilateral Investment Treaty (BIT) refers to investments as "every kind of assets" with a non-exhaustive list of assets such as traditional property rights, participation in companies, money claims and rights to performance, intellectual property rights, concessions, or similar rights.⁴ Cryptocurrencies are likely covered by the scope of protection of...