The tides have turned. There is an emerging trend of global crypto-currency regulation by sovereign States and supranational organisations, such as the European Union. Sovereign States are becoming increasingly concerned with the interplay between an unrestricted crypto-currency market and illegal activities (e.g. cybercrime, tax evasion, money laundering), as well as consumer protection and environmental considerations. For instance:
- In 2024, the Government of Nigeria, one of the world's largest crypto-currency markets, brought a USD 10 billion tax evasion/money-laundering claim against Binance, the world's leading crypto-currency exchange. Nigerian authorities arrested and detained one of Binance's executives on charges of money laundering. Nigeria later dropped the charges due to the executive's health issues.
- In April 2025, the French Government introduced strict regulation of privacy digital assets and crypto-exchanges.
- In April 2025, the Government of Kuwait implemented a total ban of 'crypto-mining' (i.e. the process of creating new crypto-currency, usually in so-called 'mining farms', which are warehouses where super-computers 'mine' crypto-currency) for, among others, environmental reasons.
- In May 2025, the UK Government published draft statutory provisions that, if formally adopted, will introduce restrictions on crypto-asset activities in the retail sector.
There is yet to be a first (public) investment treaty crypto-arbitration, i.e. a dispute between a foreign investor and a sovereign State/State-owned entity under an international investment treaty in relation to measures adopted that are alleged to cause damage to the investor's crypto-currency business. However, as sovereign States are introducing strict regulations on crypto-currency, the odds of such disputes arising have increased significantly.
Types of relevant State measures
Examples of State crypto-currency measures that could amount to a violation of an international investment treaty include:
- The introduction of stricter requirements for the authorisation/licencing necessary for the operation of crypto-currency platforms, which can result in revocation of licences or rejections of applications.
- The introduction of general prohibitions/restrictions of crypto-asset trading in a specific sector (e.g. retail sector)
- The adoption of restrictions with respect to 'crypto-mining', e.g. the prohibition of 'crypto-mining farms', as we have seen in Kuwait.
- The imposition of administrative fines and other penalties on crypto-currency businesses for violations of national laws, e.g. lack of registration/licence to operate in the host State.
This is not an exhaustive list, all would depend on the precise terms of the treaty and the circumstances and impact of the regulation on the foreign investor's investment.
Investment law-related questions
An investment treaty crypto-arbitration would need to overcome the usual significant challenges that arise in investment treaty arbitration.
First, can crypto-assets qualify as protected investments under an international investment treaty? It is conceivable that under an asset-based definition of investments, crypto-assets would qualify as 'any kind of economic asset', 'property rights' or 'any performance under contract having an economic value', by way of example.
Second, is there a territorial link between the crypto-asset as an investment and the host State? Trade of crypto-currency happens via 'blockchain', which is a technology that records all crypto-currency transactions in a decentralised, transparent and cryptographic way. A territorial nexus is not straightforward when all transactions are happening on a server.
Third, what types of investment protection standards could an investment crypto-arbitration trigger? There is a variety of standards under international investment law that could come into play, for instance:
Fair and equitable treatment (FET): This standard relates to the host State's obligation to inter alia observe the investor's legitimate expectations, which form an integral part of FET. Crypto-currency investors will have to establish that the host State made clear representations to foster the investment, i.e. the crypto-asset.
Full protection and security: This standard relates to the host State's obligation to provide the investment with legal protection. This includes the physical integrity of the investment and the investor. For instance, an illegal seizure of a crypto-mining farm or the arrest and detention of the executives of a crypto-currency business (as happened in Nigeria with Binance's executive) could amount to a violation of the standard.
Unreasonable or discriminatory measures: This standard relates to the host State's obligation not to adopt measures that lack foundation, do not serve a legitimate purpose or are prejudicial. Crypto-currency measures, which lack an efficient consultation process with relevant stakeholders, and potentially affected businesses, risk triggering a breach of this standard.
Other traditional investment standards commonly contained in investment treaties, including the prohibition of unlawful expropriation, the most-favoured-nation treatment, or the commitment to observe contractual undertakings (also known as an 'umbrella clause'), might also become relevant in an investment treaty crypto-arbitration.
Conclusion
The global expansion of crypto-currency has led sovereign States to introduce crypto-currency regulations. We anticipate that these regulations will give rise to a wave of investment treaty claims.
If you have any questions or would like to discuss any of these topics and what they mean for you and your business, please contact our International Arbitration experts below.
