This Article is blog by Ananya Sharma, a Fourth-year law student of Symbiosis Law School

INTRODUCTION-

“Mediation is the conflict’s way of looking at itself.”- Jeff Cohen[1]. This quote reflects upon the introspective nature of mediation. Many conflicts can arise in crypto-currency sector between individuals which can be resolved with the help of a neutral third party, known as a mediator, through a process called mediation.

Due to cryptocurrencies, new types of transactions appeared or with decentralization, global accessibility, anonymity that are more than the bank’s systems. Besides other currency, better-known cryptocurrencies like Ethereum and Bitcoin are being more accepted in the general society; however, they also pose certain difficulties to the field of dispute resolution. Cryptocurrencies operate on peer to peer distributed systems relying on block chain as opposed to systems that involve an authority or regulator. There can appear conflicts which are generally quite hard to settle with the help of legal means as these sorts of procedures were not initially designed to operate within this constantly evolving environment. With economic development, traditional financial operations have modernised as well.[2]

The types of disputes that could be experienced in cryptocurrency business could be as a result of fraud or hackings among other misdeeds. are some of the issues such as loss of private keys, failure of smart contracts, and disagreement between entities in the DAO’s. At times these arguments cut across different regions of the world and different cultural backgrounds. are also commonly open to anonymous or pseudonymous parties, and this factor makes it more complex to solve conflict since the processes of solution contain additional complexities. Under these conditions, it is possible to speak about the need for the search for the solutions that would reflect the specifics of the Cryptocurrency market, with the focus on the elements of the flexibility and adaptability as the major priorities in such strategies. Traditional reporting to the police could take a very long time and at the end turn out to be expensive and not effective.

The use of mediation as an example of one of the ADR mechanisms, can be regarded as a perspective solution of the cryptocurrency disputes. It creates a confidential, cheaper, and non-judicial, non-legal, problem-solving approach to a dispute where all the parties involved would be Voluntary and would be in a position to voluntarily decide what should be done. Due to its focus on consensus, mediation techniques are highly beneficial to apply in the context of digital currencies’ high volatility and constant transactions between the parties with whom the relationship must remain intact. Also, hiring mediators who are acquainted with both cryptocurrency and conflict, the parties can come to reasonable solutions in the best interest of creating effective mechanisms for conflict resolution that will be in harmony with digital decentralized economy.

MEDIATION IN CRYPTO-CURRENCY DISPUTES-

The ever-evolving world of bitcoin and decentralised finance (DeFi) presents different challenges with regard to conflict management and resolution. Since block chain platforms are decentralized, anonymous and international in nature the traditional legal structures often encounter some form of challenge when dealing with cases related to block chain transactions. Currently, problems arising from the cryptocurrency market are being resolved through mediations, which is an acceptable, collaborative and cost-effective method of dealing with disputes.

Nevertheless, one must note that the key function of bitcoin involves the use of the blockchain technology especially smart contracts. These self-executing contracts that facilitate the performance of the conditions the parties have agreed to provide means that the enforcement by third parties will not often be necessitated. Despite that, smart contracts have their disadvantaging even if they are effective.

This is because mediation makes it possible for disagreeing parties to seek solutions where the strictly legal instability of courts or arbitral tribunals may not be desirably uncompromising in such situations, unlike the speed of the process, which remains flexible as is indicated in Anon Trakti 2024[3].

Also, it is almost impossible to sue DAOs that employ blockchain technology since they are frequently unclear as to their legal jurisdiction. In these circumstances mediation is useful because they provide a third-party neutral territory for the disputes to be solved with no need for jurisdictional actions. Due to the fact that parties can hire mediators who, of their own volition, may readily understand cryptocurrencies and blockchain technology, the courts offering unique viewpoints on technology that they themselves might not possess. This may lead to more effective solutions that will encompass the two parties in a dispute as well as ensuring the stability of the blockchain network is maintained (Farallon Law Corporation, 2023)[4].

Besides, one state legal system may not be sufficient to address these disputes because the bitcoin marketplaces are highly globalized and borderless. However, mediation fosters a flexible approach to how conflicts arising from the use of decentralized finance are to be solved as well as arising from the global nature of Bitcoin market. It is important to note that the Application of blockchain governance models require integration of a decentralised market structure where mechanisms such as mediation as a form of dispute solving are incorporated into it to enhance trust for long-term growth as affirmed by the World Economic Forum (2023[5]).

The hope lies in the fact that mediation has the potential of addressing conflicts in a decentralized and cooperative manner and helps sustain business relations and speed up conflict resolution. This is crucial for organizations that deal with cryptocurrencies since, in addition to the likelihood of resolving an issue at some point, confidence is a key factor in market investment and market stability. According to Farallon Law Corporation (2024)[6], mediation offers users a less confrontational and more adaptable method of resolving concerns related to smart contract breaches, asset theft, and regulatory compliance.

CONCLUSION-

Thus, the need for the mediation in the bitcoin conflict increases with the progression of the decentralized financial system. Since mediation is flexible, affordable and not adversarial in its nature it can be used to solve conflicts that occur in an environment that is volatile and characterized by complex technologies. This is different from the normal judicial structures in that mediation offers the power of decision making to the parties while at the same time affording secretive.[7] This is particularly the case in a market that put much premium on the reputation of the business or the providers especially when dealing with health issues.

In addition, new opportunities for increasing efficiency have appeared due to the adoption of new technologies such as blockchain and smart contracts in mediation processes. Cognition of mediated agreements can be automated with the help of smart contracts so that the sides agree to the terms, and the contract will ensure the compliance of the parties without taking a long time to go through the court. While many benefits can be seen in the application of mediation in the bitcoin industry, this is by no means an easy process. Lack of legal tender concerning cryptocurrencies besides the technical know-how required in the use of blockchain-based dispute resolution mechanisms may hinder cryptocurrencies from being embraced fully.

Thus, the mediation appears to be more effective for handling the multifaceted and various forms of the conflict emerged in the decentralized financial markets. It is expected that the use of methods such as mediation will increase as more industries integrate blockchain technology into their operations and create a more versatile and stringent mechanisms for handling of disputes associated with cryptocurrencies.

REFERENCES

[1] Jeff Cohen, Conflict Resolution Today.

[2] Aldhmour F and Sarayrah, ‘A Moderated Mediation Model of Factors Influencing Intention to Adopt Cryptocurrency amog University Students, (2022), https://www.researchgate.net/publication/358526465_A_Moderated_Mediation_Model_of_Factors_Influencing_Intention_to_Adopt_Cryptocurrency_among_University_Students accessed 13 September 2024.

[3] Trakti, 'Blockchain mediation and arbitration with smart contracts' (2024) accessed 13 September 2024.

[4] Nicolas Tang, 'Cryptocurrency & Blockchain Disputes & Litigation' (2023) Farallon Law Corporation accessed 13 September 2024.

[5] 'Dispute resolution is critical for blockchain’s growth' (2023) World Economic Forum accessed 13 September 2024.

[6] Nicolas Tang, 'Cryptocurrency & Blockchain Disputes & Litigation' (2023) Farallon Law Corporation accessed 13 September 2024.

[7] NICArb, ‘Key Issues in International Arbitration of Cryptocurrency Disputes’ (2023) NICArb accessed 13 September 2024.