ARBITRATING DIGITAL AND VIRTUAL ASSETS DISPUTES IN NIGERIA

INTRODUCTION

Digital assets, cryptocurrencies, non-fungible tokens (NFTs), tokenized real-world assets, decentralized finance (DeFi) protocols, smart contracts, etc. are increasingly central to commerce, investment, ownership and rights allocation in the digital economy. With that rise has come a growing number of disputes: over ownership, fraud, smart contract failures, regulatory compliance, token issuance, and more. Traditional court litigation, though still crucial, poses challenges in this domain. From cross-border complexities and anonymity of parties to rapid technological changes and difficulties in enforcing judgments in a digital/ blockchain context.

Consequently, Arbitration offers an effective mechanism for resolving disputes over digital assets by leveraging specialized rules for technical matters, procedural flexibility, and cross-border enforceability through mechanisms like the New York Convention. While challenges exist in applying existing frameworks to unique issues like the location of digital assets, the process benefits from the appointment of arbitrators with technical expertise in areas like smart contracts and the ability to incorporate blockchain technology for more efficient and automated dispute resolution. This article examines the legal basis, advantages, challenges, and recent developments for arbitration in digital asset disputes, and suggests potential future trajectories.

WHAT ARE “DIGITAL ASSETS” FOR PURPOSES OF DISPUTE RESOLUTION

Digital and Virtual assets are items of value that are created, stored, and exchanged in a digital format. They can be traditional digital content like documents, images, and videos, or they can be cryptocurrencies, NFTs, and tokenized physical assets recorded on decentralized ledgers like blockchain. These assets can hold tangible or intangible value and are essential components of modern digital economies. 

Key legal issues often include whether a given token/asset is “property” under applicable law, the chain of ownership, traceability, enforceability, remedies (injunctions, freezing orders), and how to authenticate/interpret code and blockchain records.

WHY ARBITRATION IS GAINING TRACTION

Arbitration offers several features that make it well-suited to digital asset disputes:

1.    Flexibility and Party Autonomy

One of the greatest strengths of arbitration in the digital-asset space lies in the freedom of the parties to design a dispute resolution process that best suits the peculiarities of the technology involved. Unlike traditional litigation, which is bound by rigid procedural rules and the default jurisdiction of state courts, arbitration allows parties to make critical choices upfront.

They can select the seat of arbitration (lex arbitri) and the courts that have supervisory jurisdiction. For digital-asset disputes, this is especially important because the legal recognition of cryptocurrencies, NFTs, and smart contracts varies significantly across jurisdictions. Choosing a seat in an arbitration-friendly jurisdiction with clear digital-asset regulations can prevent enforcement or public policy complications later.

Parties can also agree on the substantive law governing their dispute, ensuring legal certainty in areas like property rights, contract interpretation, and regulatory compliance, all of which are unsettled in many digital-asset contexts. Furthermore, they may adopt specialized arbitration rules tailored to technology or blockchain disputes, such as the UK Digital Dispute Resolution Rules, JAMS Smart Contracts Rules, or institutional fast-track rules offering modern features like virtual hearings and electronic document handling.

Another major advantage is the ability to appoint arbitrators with technical expertise in areas like blockchain, cryptography, and financial regulation, ensuring informed analysis of complex issues such as smart contract errors or DeFi vulnerabilities. Additionally, arbitration allows parties to tailor procedures, choosing between written or oral hearings, determining evidentiary scope, and opting for virtual or physical proceedings, thereby creating a flexible, efficient, and technology-aligned dispute resolution process well-suited to the decentralized nature of digital assets.

2.    Expedited Process

Given the fast-moving character of digital markets, where token prices fluctuate in real time, assets can become locked or inaccessible due to protocol bugs or custodial issues, smart contracts may self-execute automatically, and protocols undergo frequent upgrades or even forks, the timeliness of dispute resolution becomes critical. Delayed resolution can result in irreversible financial losses or exposure to market volatility.

Arbitration offers the ability to streamline proceedings through procedural flexibility. Parties can adopt fast-track arbitration rules or emergency arbitration procedures that compress timelines for pleadings, hearings, and awards. Emerging digital dispute resolution frameworks such as the UK Digital Dispute Resolution Rules or specialized crypto arbitration protocols, even allow for on-chain dispute resolution mechanisms, virtual hearings, and electronic evidence submissions to expedite the process further.

Additionally, some arbitration institutions now offer expedited processes where cases can be concluded within a few months, or even weeks, with interim measures available to freeze assets or halt transactions pending final determination. This procedural efficiency is particularly attractive in digital asset disputes, where speed is essential to protect asset value and maintain the commercial viability of blockchain-based ventures.

3.    Confidentiality
Confidentiality is one of the most compelling reasons parties in the crypto and broader digital-asset ecosystem turn to arbitration. Participants in digital-asset markets, ranging from cryptocurrency exchanges and token issuers to DeFi protocol developers, custodians, and institutional investors, frequently operate in a highly competitive and heavily scrutinized environment. Disputes may involve proprietary algorithms, smart contract codes, security vulnerabilities, or transaction histories that, if exposed publicly, could compromise trade secrets, weaken competitive advantages, and possibly even invite regulatory investigations. In some cases, public disclosure of disputes could also trigger loss of investor confidence, negative market reactions, or reputational damage that might be difficult to reverse.

Arbitration mitigates these risks because most institutional arbitration rules impose confidentiality obligations on arbitrators, parties, and even witnesses, covering not only hearings and filings but sometimes even the existence of the dispute itself. This level of discretion is especially critical in matters involving allegations of hacking, fraud, mismanagement of digital wallets, or cross-border regulatory violations, where public scrutiny could amplify financial and legal exposure.

Moreover, arbitration allows parties to control the extent of disclosure within proceedings, deciding which technical data, source codes, or blockchain transaction records are revealed, to whom, and under what conditions. For digital-asset businesses that rely on proprietary technology or maintain sensitive commercial arrangements with partners and users, this ability to balance transparency for dispute resolution with privacy from public exposure is a significant advantage over litigation in open courts.

Finally, confidentiality also reduces the risk of regulatory pre-judgment. While regulators have legitimate oversight powers, premature public disclosure of disputes, especially where allegations remain unproven can invite unnecessary regulatory scrutiny or even enforcement actions based on incomplete information. Arbitration provides a controlled environment for parties to resolve disputes first, before considering what, if anything, should be shared publicly.

4.    Enforceability & Cross-Border Nature

Digital-asset transactions, by their very nature, frequently span multiple jurisdictions. A single transaction might involve a token issuer in one country, a crypto exchange incorporated in another, investors from several different continents, and servers or blockchain nodes operating globally. This borderless character of digital assets means that disputes arising from such transactions often require enforcement mechanisms that work across national boundaries.

One of arbitration’s greatest strengths in this context is the global enforceability of arbitral awards under the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, to which over 170 countries are signatories. Under this treaty, a final arbitral award rendered in one member country is generally recognized and enforceable in other member countries, subject to limited exceptions such as public policy or procedural irregularities.

By contrast, foreign court judgments often face far more significant barriers during enforcement. In many jurisdictions, a foreign judgment is only enforceable if there is a reciprocal enforcement treaty or if local laws provide a specific recognition mechanism. Even then, courts might refuse enforcement on broader grounds, such as lack of jurisdiction, differences in legal systems, or perceived unfairness in the foreign proceedings. These hurdles are particularly problematic in the digital-asset space, where assets can be moved across borders instantly and counterparties may lack physical presence in any single jurisdiction.

This advantage is especially critical in digital-asset disputes involving cross-border fraud, misappropriation of tokens, or breach of investment agreements, where the assets or wrongdoers may be located in multiple jurisdictions. An arbitral award recognized under the New York Convention can open the door to asset tracing, freezing orders, or enforcement proceedings in different countries, increasing the likelihood of meaningful recovery for the successful party.

Moreover, many jurisdictions adopting modern arbitration laws, such as the UNCITRAL Model Law on International Commercial Arbitration — also facilitate the enforcement process, providing predictable procedural frameworks for recognizing and executing arbitral awards. For parties transacting in the borderless digital-asset economy, this makes arbitration not only a dispute-resolution mechanism but also a strategic enforcement tool unmatched by conventional litigation.

5.    On-chain Arbitration & Smart Contract-embedded Dispute Resolution

An exciting development in the intersection of blockchain technology and dispute resolution is the emergence of “On-Chain Arbitration” or Decentralized Dispute Resolution (DDR) mechanisms. On-chain arbitration integrates the dispute resolution process directly into smart contracts or blockchain platforms themselves.

In practice, this means that when a dispute arises, for example, over a token sale, NFT transfer, or DeFi transaction, the arbitration process can be triggered automatically via the smart contract governing the transaction. The smart contract may contain a clause specifying that, upon a dispute being referred to an agreed arbitration protocol, the contract’s code will temporarily freeze the disputed assets or halt further transactions until the arbitrator (or panel) renders a decision.

Once the arbitral decision is issued, the smart contract can be programmed to automatically execute the award, for instance, by releasing tokens to the prevailing party, reversing a transaction, or transferring collateral. This removes the need for traditional enforcement mechanisms like court proceedings, which can be frustrating, slow, expensive, and complicated by jurisdictional issues. Some institutional frameworks also contemplate hybrid systems where arbitration awards can be recorded on a distributed ledger, enabling real-time transparency and, in some cases, automatic enforcement.[1]

KEY LEGAL AND PRACTICAL CHALLENGES

While arbitration is promising, several issues arise in practice. Some will be familiar; others are specific to digital assets.

1. Arbitrability/Public Policy Constraints

Some jurisdictions may have laws that limit or prevent arbitration of certain kinds of disputes. Under the Federal Competition and Consumer Protection Act (FCCPA) 2018, the Federal Competition and Consumer Protection Commission (FCCPC) and its Tribunal are vested with exclusive jurisdiction over disputes arising from consumer rights and competition matters[2]. More examples of non-arbitrable matters include criminal offences, matrimonial matters, Election disputes, Tax matters, etc. Even where parties have agreed to resolve their disputes by arbitration, courts may decline to enforce such agreements or resulting awards if they contravene public policy or fall within areas governed by specific statutory frameworks that assign jurisdiction to designated regulatory bodies or tribunals.

2. Determining Applicable Law and Jurisdiction

Digital assets frequently cross borders; involvement may be decentralized thereby complicating the determination of applicable law and jurisdiction. Identifying which law governs issues like ownership, liability, contracts, and regulatory compliance is not always straightforward. Also, choice of seat and applicable law must be sensitive to how local laws treat digital assets. Arbitral awards are generally recognized and enforced more easily across different jurisdictions under the New York Convention, which is vital for resolving disputes involving inherently global digital assets. 

3. Defining Ownership/Title/Proof

Because assets may be minted, transferred, held in wallets, or even lost/private keys lost, tracing ownership, proving title, determining chain of custody or control is technically complex. Evidence may include blockchain metadata, node data, cryptographic signatures etc., and may require expert witnesses. Disputes also arise over interoperability, identity of parties controlling wallets etc.

4. Enforcement of “On-chain” and Off-chain

While some arbitration agreements or frameworks may allow “on-chain” enforcement (automatic transfers, escrow releases, smart contract triggers etc.), many reliefs or awards will still require enforcement through the traditional (off-chain) legal system. This raises issues: courts may not accept “on-chain awards” unless they meet formal requirements; the identity of parties is known; public policy or illegality issues; recognition procedures.

5. Interim or Emergency Measures

Digital asset disputes often require urgent relief: freezing a wallet or token, preventing a smart contract from being altered, stopping a protocol from launching etc. Securing interim measures in arbitration can be more difficult than in courts, especially when parties are anonymous or there is no seat or inadequate institutional support. Some arbitration rules are evolving to offer emergency arbitrator options.

6. Regulatory and Legal Uncertainty

Regulatory regimes for digital assets are still nascent or evolving in many jurisdictions. Laws might change, or there may be inconsistencies in how digital assets are classified (commodity, security, property, intangible, etc.). That uncertainty can influence what types of remedies are available, how digital assets are taxed or regulated, how enforceable rights are, etc.

7. Technical Challenges

Delving into code, verifying smart contract logic, interpreting ambiguous code, assessing vulnerabilities, obtaining and preserving evidence from distributed systems, dealing with forks or chain rollbacks, handling oracles etc.—these are new kinds of evidentiary and procedural issues for arbitrators.

RECENT & EMERGING LEGAL / INSTITUTIONAL DEVELOPMENTS

Here are some of the trends, rules, and cases that show the growing maturity of arbitration for digital asset disputes, particularly in Nigeria:

1. Digital Dispute Resolution Rules (UK Jurisdiction Taskforce / U.K.)

The U.K.’s Digital Dispute Resolution Rules (DDRR), launched in 2021 under the guidance of the U.K. Jurisdiction Taskforce, represent one of the most forward-looking frameworks for resolving disputes arising from digital assets and disruptive technologies. These rules were specifically designed to be embedded directly into contracts involving cryptocurrencies, smart contracts, decentralized ledger technology (DLT), and related innovations. They recognize the unique characteristics of digital transactions such as decentralization, pseudonymity, and automation and therefore introduce procedural innovations that go beyond traditional arbitration rules. Notably, they allow for optional anonymity, which accommodates the pseudonymous nature of blockchain dealings, and they expressly support automatic or “on-chain” dispute resolution, whereby elements of the dispute process or enforcement can be executed directly through code.

By granting tribunals authority to interact directly with such assets, the DDRR brings arbitration closer to the technological fabric of the transactions themselves, thereby enhancing efficiency and reducing reliance on external enforcement mechanisms. Together, these features position the DDRR as a model for how arbitral rules can evolve to address the challenges posed by blockchain-based commerce, offering parties both flexibility and certainty in an otherwise unsettled legal landscape.

2. Securities and Exchange Commission (SEC) 2020 Rules on Issuance, Offering Platforms and Custody of Digital Assets

In 2020, the SEC released guidelines that categorize digital assets as securities in certain cases, thereby bringing them within its regulatory scope. This framework recognizes that tokens and coins may carry investment-like features and therefore should not operate outside the ambit of securities law. Meanwhile, the Central Bank of Nigeria (CBN) has maintained a strong interest in the financial stability implications of crypto trading. After imposing a blanket ban in 2021 that prevented banks from processing cryptocurrency transactions, the CBN softened its stance in December 2023 by partially lifting the ban, allowing regulated dealings. The launch of the eNaira, Nigeria’s Central Bank Digital Currency (CBDC), further signals an openness to blockchain-driven innovation, albeit within a tightly controlled environment. However, with the enactment of the extant Investment and Securities Act of 2025, digital and virtual assets are now legally recognized in Nigerian and SEC is now conferred with regulatory power over virtual and digital assets.[3]

3.    Arbitration and Mediation Act, 2023 (AMA 2023)

At the same time, the Arbitration and Mediation Act, 2023 (AMA 2023) provides a strong foundation for resolving digital-asset disputes. The Act adopts international best practices and supports the recognition of electronic communications[4] and online proceedings (when agreed by parties)[5], which align naturally with the technology-driven nature of blockchain disputes. Furthermore, Nigeria’s status as a party to the New York Convention (1958) means that arbitral awards in digital-asset disputes can, in principle, be recognized and enforced across over 170 jurisdictions, an essential feature given the borderless character of cryptocurrencies. This combination of regulatory oversight, judicial caution, and arbitration-friendly legislation means that while Nigeria offers a viable forum for arbitration of digital-asset disputes, parties must remain sensitive to the intersection between private dispute resolution and public regulatory controls.

4. Judicial Recognition of Digital Assets as Property

Courts in a number of jurisdictions are beginning to provide greater legal certainty around the status of digital assets. Under English law, recent decisions have recognized cryptocurrencies and non-fungible tokens (NFTs) as a form of property, often described as “choses in action.” This classification is significant because it anchors digital assets within established legal categories, allowing them to be subject to remedies traditionally associated with property rights. Courts have granted injunctive relief, freezing orders, and proprietary claims over crypto holdings, thereby protecting parties against dissipation or misuse of digital assets pending the outcome of disputes.

There are instances where courts have refused to enforce arbitral awards in digital asset contexts on grounds such as conflicting with consumer protection statutes or public policy. For example, where the court held that enforcing the award would be contrary to public policy under the Consumer Rights Act, because the arbitrator did not have regard to the relevant law.[6] 

PRACTICAL BEST PRACTICES FOR DRAFTING AND MANAGING ARBITRATION CLAUSES IN DIGITAL AND VIRTUAL ASSETS TRANSACTIONS

1. Define the Digital Asset Precisely

Include clear definitions of what constitutes the tokens / digital assets, rights attached, how transfers are governed, obligations, etc. Consider how future forks, protocol changes, or upgrades are addressed.

2. Choice of Law and Seat

Select a jurisdiction that is arbitration‐friendly and has clarity (or developing clarity) on treatment of digital assets, recognition of property rights, etc. The seat matters because the supervisory court at the seat may have to grant interim relief, annul or set aside awards, etc.

3. Specify Arbitration Institution and Rules

Either adopt rules that are tailored to or at least flexible for digital asset disputes (smart contracts, code, anonymity, etc.). If using standard institutional arbitration, ensure the rules permit the types of remedies/reliefs anticipated, and that the institution is technically capable.

4. Include Emergency / Interim Relief / Preserving Evidence Provisions

Ensure the agreement allows for emergency arbitrators, interim measures, preservation of digital evidence, access to wallet addresses, keys, transaction history, etc.

5. Smart Contract-embedded Dispute Resolution / On-chain Mechanisms

If applicable, embed dispute resolution triggers or mechanisms in smart contracts or within the DLT protocol, potentially enabling automatic enforcement or escrowed assets. But also anticipate whether any off‐chain enforcement will be necessary or possible.

6. Account for Anonymity / Identity Verification

Many digital asset dealings are pseudonymous. Clauses should require identity verification to the extent necessary (while balancing privacy) for enforceability and possible enforcement in courts.

7. Address Regulatory Compliance & Public Policy

Be cognisant of applicable laws on securities, money-laundering, taxation, consumer protection etc. If digital assets might be regulated, ensure compliance, or at least understand risks of non-compliance.

8. Consider Enforceability across Jurisdictions

Even if arbitration proceeds smoothly, enforcement may be challenged in other jurisdictions. Choosing parties, law, seats, arbitration treaties (like New York Convention) that enhance enforceability is key.

CONCLUSION

The rise of digital assets in Nigeria has introduced novel forms of property, obligations, risks, and cross-border transactions. Arbitration offers an appealing mechanism to resolve many of the disputes that arise in this space, thanks to its flexibility, international enforceability, ability to incorporate technical expertise, and capacity for innovations such as smart contract or on-chain dispute resolution.

However, successful use of arbitration in this domain requires careful drafting, awareness of legal uncertainty (especially around ownership, applicable law, arbitrability and enforcement), and consideration of institutional rules suited to the digital context. Particularly, the Nigerian legal landscape is still developing, and issues like enforceability and jurisdiction remain complex for digital assets. 

Regardless, as regulators and courts increasingly respond to the realities of digital assets, arbitration is poised to become a mainstream dispute resolution path in this modern frontier.

Please note that the foregoing does not in any way constitute legal advice. Kindly contact the authors for any legal advice on the subject matter.