Blockchain dispute risks for banks
As applications of distributed ledger technology (DLT) move into the mainstream, financial institutions involved in those applications will find themselves exposed to new types of risks. In this article, we enumerate some of the novel risks created by banks’ involvement in DLT and how they may seek to mitigate those risks. Some of these risks are familiar disputes dressed up in DLT clothing; others are genuinely new aspects of DLT. Robust dispute resolution mechanisms, agreed in advance and optimised to work smoothly with DLT, can provide a necessary escape valve while retaining flexibility.
- Financial institutions involved in distributed ledger technology (DLT) applications are exposed to novel types of disputes as well as traditional disputes complicated by involvement with DLT.
- Recent English cases show courts starting to explore DLT enforcement, including freezing orders over cryptoassets and whether to treat cryptoassets as property.
- Banks must seek to enumerate and then mitigate risks of engaging with DLT, using robust dispute resolution mechanisms and frameworks such as governed blockchains.