Crypto regulation is maturing - and disputes are following close behind

At London International Disputes Week, discussions on cryptoassets highlighted a market that is no longer defined by novelty, but by regulation, accountability and increasingly familiar legal risk.

The direction of travel is clear: as crypto moves into a fuller regulatory framework, disputes are not disappearing – they are becoming more structured, higher value and more recognisably financial services in nature.

Crypto is moving decisively away from a market driven by collapse, hacks and loosely governed activity.

In the UK in particular, the shift towards a FSMA-style regulatory framework is bringing greater clarity over:

• What activities are regulated

• Who is responsible for what

• The standards firms and individuals are expected to meet

As that framework embeds, disputes are set to evolve accordingly. While fraud, insolvency, and technical failure remain relevant, we will likely see an increase in disputes that mirror traditional financial services, including:

• Mis-selling and financial promotion claims

• Custody and safeguarding failures

• Governance and systems & controls issues

• Disputes between institutional and market participants

Crypto disputes are becoming less exceptional and more recognisably financial, though still shaped by technological and jurisdictional complexity.

Regulation as a catalyst for disputes

Greater regulation is often expected to reduce disputes, but in practice it can increase them - at least in the medium term. New rules create clearer obligations and conduct standards, higher expectations of firms (particularly where retail customers are involved), and more defined grounds for challenge.

Clearer frameworks make breaches easier to identify and raise expectations among investors and regulators. In crypto, we predict this will lead to:

• More regulatory investigations and enforcement

• A rise in follow-on civil claims

• Challenges to historic conduct as standards evolve

As a result, regulation is unlikely to dampen disputes, it will formalise and accelerate them.

A new category: Consumer Duty and “good outcomes” claims

One of the most significant developments is the impact of the FCA’s Consumer Duty.

Disputes are likely to move beyond traditional breach of contract and misrepresentation into broader, more subjective territory, including:

• whether products were distributed to the right target market

• whether firms delivered fair value

• whether risk warnings and consumer understanding were sufficient

This introduces arguments around foreseeable harm and good faith, which go beyond historic legal frameworks and potentially create new avenues for claims.

Divergence, not convergence

Global regulatory convergence remains unlikely. Jurisdictions are competing to attract crypto activity, leading to varied approaches in balancing innovation, protection and market integrity.

This divergence creates:

• Complexity for cross-border operators

• Greater risk of jurisdictional disputes

• Opportunities for regulatory arbitrage

• The dispute environment is therefore becoming both more active and more fragmented

Convergence with traditional finance - with added complexity

As crypto integrates into the financial system, disputes are starting to resemble those in traditional finance. However, they remain distinct, sitting at the intersection of financial regulation, contract law and technology.

These disputes often involve novel legal questions, blockchain-based evidence and cross-border enforcement challenges, requiring specialised expertise.

Preparing for the next phase

With increasing regulation, market maturity and global divergence, both the volume and complexity of disputes will rise.

Businesses should focus on proactive risk management, including:

• Monitoring regulatory exposure across jurisdictions

• Stress testing governance and operational resilience

• Strengthening product design, disclosures and distribution strategies

• Keeping contracts under review as policy and regulation develop

• Anticipating dispute risks across transactions

• Preparing for multi-jurisdictional litigation