RESOLVING BLOCKCHAIN DISPUTES: EMBRACING ARBITRATION IN A BORDERLESS DIGITAL ECONOMY

Abstract

Blockchain technology has transformed digital transactions through decentralization, immutability, and borderless interactions. However, disputes involving cryptocurrency exchanges, tokenized assets, and smart contract failures have become more frequent as their adoption expands. Traditional litigation often struggles to resolve these conflicts due to jurisdictional ambiguity, enforcement challenges, and the parties’ anonymity. In response, arbitration has emerged as the most effective dispute-resolution mechanism, offering efficiency, enforceability under the New York Convention (1958), and a framework that aligns with the decentralized nature of blockchain. This paper examines the legal and procedural challenges of arbitrating blockchain disputes, including jurisdictional uncertainty, enforcement difficulties against pseudonymous parties, and regulatory fragmentation across different jurisdictions. Using the Kleros Model as a case study, it explores how the model resolves blockchain disputes together with the types of disputes it settles. However, challenges such as regulation fragmentation, lack of centralized authority, and jurisdiction uncertainty inhibit the effectiveness of arbitrating blockchain disputes. To remedy these challenges, this paper proposes three key recommendations: encouraging arbitration clauses in blockchain contracts to ensure disputes are preemptively addressed, proposing decentralized oversight mechanisms to improve accountability, ensuring consistency, and upholding procedural fairness in blockchain arbitration. By implementing these reforms, arbitration can offer a reliable and enforceable dispute resolution mechanism tailored to the complexities of blockchain transactions.