The Law Applicable to Digital Representations of Off-chain Assets

Abstract

This chapter aims to critically examine the conflict-of-laws implications of asset tokenisation, i.e. the progressive and increasing use of Distributed Ledger Technologies (DLTs) to represent, manage, track and transfer real world assets. While the analysis is grounded on current DLTs applications and the current state of the law, it is also largely prospective. Both intra-systemic and inter-systemic dimensions are considered, as issues of the legal nature of tokens and their localisation are strongly intertwined. Also, the possibility to monetise poorly liquid assets appears to largely account for the keen interest showed by economic actors in the tokenisation of assets. It is argued that legal systems should take due account of this new reality and adapt both substantially and at the conflict-of-laws level to secure rather than hinder transactions. Various proposed solutions and alternatives are scrutinised to conclude that both substantive private law and conflict of laws should focus on where the risks of asset tokenisation concentrate, i.e. the moment of transmutation of the underlying assets into tokens and vice versa. Concrete proposals are made, but political and policy decisions will remain a key necessity.