The Cryptosphere And Arbitration In The British Virgin Islands

• Published date: 28 November 2022
• Subject Matter: Litigation, Mediation & Arbitration, Technology, Arbitration & Dispute Resolution, Fin Tech
• Law Firm: Harneys
• Author: Christopher Pease and Olga Osadchaya

Introduction

The BVI has significantly developed and promoted its role in international arbitration in the last decade. The BVI Arbitration Act (the Act), which is modelled on the UNCITRAL Model Law, came into force in 2014, shortly after the territory joined the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). In 2016 the BVI International Arbitration Centre opened its doors with its rules based on 2010 UNCITRAL Arbitration Rules. It is a modern and familiar framework that links the BVI to the global arbitration community.

This period has also seen a meteoric rise in the global use of digital assets, leading to an increase in disputes with a crypto angle. Many such disputes are cross border and there are potential advantages to dealing with them through arbitration (although the BVI Courts have also shown a progressive stance in this regard).

The BVI has been a popular jurisdiction for those providing services within the cryptosphere, having attracted a number of cryptocurrency exchanges, token issuers, crypto-linked funds, and other providers of defi and blockchain services. This has and will inevitably lead to disputes that involve or relate to BVI companies that operate within the cryptosphere.

Digital asset disputes

Disputes relating to blockchain or crypto can come in many shapes and sizes. Broadly speaking, they can be split into two categories: those scenarios where a claimant seeks to recover digital assets, which tend to involve a blockchain tracing component; and those where there is some other form of dispute, be it contractual or corporate in nature and where the underlying contract or business relates to crypto or blockchain services.

Given the popularity of the BVI for crypto-related business, it is likely that those dealing with digital asset disputes will encounter the jurisdiction.

In these circumstances, consideration should be given as to whether arbitration provides a more effective route to recovery. Many exchanges have arbitration clauses within their terms of service which may force claimants to use this forum to determine certain types of disputes. But even those who have not previously agreed to use arbitration may elect to have disputes determined in this manner on an ad hoc basis.

Advantages of arbitration in digital asset disputes

Some of the advantages of arbitration include: confidentiality; flexibility; expertise of tribunal; bespoke relief; and finality and enforceability...