Legal issues of blockchain-based negotiable instruments: bills of lading and investment securities

What is it about?

This paper examines substantive and choice-of-law rules for blockchain-based negotiable instruments – tokens issued on a blockchain meant to function like traditional paper-based negotiable instruments. Similar to paper-based negotiable instruments, blockchain-based negotiable instruments may be traded on a peer-to-peer basis. They facilitate the assignment of the right represented by them without the cumbersome paper handling. Amongst various kinds of negotiable instruments, the main focus of this paper is on bills of lading and investment securities (which, issued on a blockchain, are called crypto-securities, tokenized securities, or securities tokens). Intrinsic tokens (tokens of self-anchored value) such as cryptocurrencies are outside the scope of this paper since they do not represent external rights. To enable a thriving token economy, the paper argues for a robust legal framework and explores appropriate choice-of-law rules.

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Why is it important?

Similar to paper-based negotiable instruments, blockchain-based negotiable instruments may be traded on a peer-to-peer basis. They facilitate the assignment of the right represented by them without the cumbersome paper handling. To enable a thriving token economy, it is essential to have a robust legal framework.