Conflict of Laws and the Use of Distributed Ledger Technology in Derivatives Markets

Abstract

This chapter considers how DLT could be used in connection with derivatives transactions and the English law and cross-border conflict-of-laws issues that may arise from such use. The chapter addresses more simple use cases for DLT, such as acting as a record keeping function in respect of payments under a transaction or in respect of transfers of collateral, and why conflict-of-laws issues are less likely to arise from such use. The chapter then looks at more complex use cases, in particular the potential use of tokens housed on a DLT system as collateral in respect of derivatives transactions. The chapter considers a number of different types of tokens, from tokens that are backed by a real-world asset to tokens that are native to the DLT system, and addresses the conflicts-of-laws issues that may arise from taking security over such tokens. The chapter also addresses how the law could be developed so as to provide greater legal certainty on these issues.