AryaTech Editorial Team
12 October 2026
Tokenisation promises faster settlement, greater liquidity and more efficient transfer of financial and real-world assets. As distributed-ledger infrastructure moves from experimental projects toward institutional financial markets, however, a more difficult question is becoming increasingly important:
What happens when the blockchain says that an asset has moved, but the parties disagree about its legal effect?
That question sits at the heart of tokenisation dispute risk.
On 9 October 2026, the European Securities and Markets Authority (ESMA) launched a call for evidence on the potential use of tokenised collateral by central counterparties. ESMA is examining whether tokenised assets can safely perform one of the most legally sensitive functions in financial markets: serving as collateral that must remain accessible, transferable and enforceable, including when a clearing member defaults.
The consultation is significant because it moves the discussion beyond whether financial assets can be tokenised. The more difficult issue is whether the resulting rights will work as expected at the exact moment when legal certainty matters most: default, insolvency and dispute.
A token is not necessarily the legal asset
One of the most common conceptual problems in tokenisation is the assumption that control of a token necessarily equals ownership of the underlying asset.
Sometimes it may. Often, the relationship is more complicated.
A token might itself constitute a legally recognised security. It might instead represent a contractual claim against an issuer or custodian. It might provide evidence of ownership without constituting the underlying right. In another structure, the blockchain token may simply mirror an asset held elsewhere in traditional financial infrastructure.
These differences become critical once a dispute occurs.
If a party transfers a token representing shares, for example, the first question may not be whether the blockchain recorded the transaction correctly. The real question may be whether the transfer legally conveyed the shares themselves.
Similarly, if tokenised collateral is transferred following a default, the dispute may concern whether the recipient obtained an enforceable proprietary interest or merely a contractual entitlement against another participant.
ESMA’s current consultation recognises precisely this problem. It asks how different tokenisation structures—including “digital twins” of conventionally held assets, assets issued directly on DLT, and hybrid arrangements—would operate throughout the collateral lifecycle. It specifically highlights legal enforceability, segregation, access following default and settlement finality.
The legal architecture underneath the token therefore matters as much as the technology operating it.
Smart-contract execution is not the same as legal finality
Tokenisation also creates a temptation to treat automatic execution as final resolution.
A smart contract may transfer a token automatically when predetermined conditions are satisfied. From the blockchain’s perspective, the transaction may be complete.
But legal disputes rarely disappear simply because execution has occurred.
The triggering information may have been incorrect. An oracle may have malfunctioned. A private key may have been compromised. The transfer may have occurred without authority. A party may allege fraud, mistake, breach of contract or violation of a regulatory restriction.
The more relevant question is therefore not simply whether a blockchain transaction can be technically reversed.
It is “What remedies remain available after the blockchain transaction has occurred?”
Recent academic analysis of tokenised securities makes a similar distinction between technical execution and legal finality. Hyoung Goo Kang argues that tokenised settlement can involve several different states—including technical execution, proprietary effect and securities finality and that technological atomicity does not necessarily produce complete legal finality. Even where the settled state cannot simply be reversed, claims based on fraud, error, breach or unauthorised transfer may remain.
This distinction will become increasingly important as financial assets move onto programmable infrastructures.
A court or arbitral tribunal may ultimately conclude that a party is entitled to damages, restitution or corrective transfer even though the original on-chain transaction remains technically immutable.
In other words, immutability can change the available remedy without eliminating the dispute.
Custody is another major source of dispute risk
The popular image of blockchain ownership is direct control through a private key.
Institutional tokenisation often looks very different.
Tokens may be held through custodians, sub-custodians, trading platforms, smart-contract wallets or other intermediaries. The relationship between the investor, intermediary and underlying asset therefore needs careful legal definition.
A dispute following a custodian’s insolvency may ask whether the client actually owns the tokenised assets, whether those assets were properly segregated, whether they form part of the insolvent estate, or whether the client has only an unsecured contractual claim.
These are familiar questions in traditional securities custody, but tokenisation introduces additional layers of technical infrastructure.
Switzerland provides a useful example of attempts to bridge the two systems. Its DLT legislation introduced the concept of “ledger-based securities” under Article 973d of the Code of Obligations and adapted the Federal Intermediated Securities Act so that ledger-based securities can interact with conventional securities custody structures. Swiss law also requires specified characteristics for the securities ledger, including safeguards relating to control, integrity and information available to creditors.
FINMA’s framework likewise permits licensed DLT trading facilities to provide not only multilateral trading but, depending on their authorisation, central custody and clearing or settlement of DLT securities.
These frameworks improve legal certainty, but they do not make careful contractual structuring unnecessary.
The more intermediaries involved, the more important it becomes to determine exactly where legal ownership sits and what happens if one participant fails.
Cross-border tokenisation creates a conflict-of-laws problem
The decentralised nature of distributed ledgers creates another difficulty that becomes particularly visible in disputes: where is the asset legally located?
Traditional private international law often relies on connecting factors linked to a territory, a company’s incorporation, the location of an intermediary, the place of an account, the location of property or the parties’ chosen law.
A distributed ledger may involve nodes across several jurisdictions while the issuer, investor, custodian, platform operator and underlying asset are all located in different countries.
When a dispute arises, several distinct legal questions may therefore point toward different governing laws.
The contract between the parties may contain an express choice of law. But that does not necessarily determine every proprietary question concerning the asset. Insolvency law may impose separate rules. Regulatory law may apply irrespective of the parties’ contractual choice.
For cross-border tokenisation structures, a governing-law clause should therefore not be treated as an afterthought.
The EU’s DLT Pilot Regime expressly requires operators of DLT market infrastructures to document the legal terms governing their systems, including the rights and liabilities of participants, governing law, pre-litigation dispute-settlement mechanisms, insolvency protections and jurisdictions in which proceedings may be brought.
That requirement reflects a broader principle: decentralised technology does not remove the need for a legally identifiable dispute architecture.
Evidence may be on-chain, but interpretation remains off-chain
Blockchain records can provide powerful evidence.
A ledger may demonstrate that a particular wallet initiated a transaction at a particular time or that a token moved between addresses.
But those facts do not necessarily answer the legal questions.
Who controlled the wallet?
Was the person authorised to initiate the transaction?
What agreement governed the transfer?
Did the transfer correspond to an underlying contractual obligation?
Was the private key compromised?
Did an oracle provide erroneous information?
Was a smart contract functioning according to the parties’ actual agreement?
These issues may require technical experts alongside legal analysis.
Parties should therefore consider dispute-resolution provisions capable of dealing with technically complex evidence. In certain cases, expert determination may resolve narrowly technical questions, while arbitration addresses contractual liability and damages.
The distinction between code and contractual intention is particularly important. Pietro Ortolani’s analysis of blockchain and dispute resolution observes that smart contracts do not remove the role of courts and arbitral tribunals. Instead, automated execution can generate new jurisdictional and enforcement questions, especially where decentralised technology encounters traditional territorially based legal systems.
Dispute architecture should be designed before tokenisation occurs
A sophisticated tokenisation project should therefore include a dispute-risk review before launch, rather than waiting for the first contested transaction.
The review should start by identifying precisely what the token represents and what legal rights follow possession or control of it. The relationship between the token, issuer, underlying asset, custodian and platform must be mapped clearly.
It should then examine how transfer occurs legally as well as technically.
If a smart contract performs automatic enforcement, the parties should consider what happens if the automated outcome is disputed. Can execution be suspended? Is there an administrator or multisignature mechanism? Can a tribunal order a corrective transaction? If reversal is impossible, what alternative remedies remain?
Custody and insolvency arrangements require similar analysis. The structure should determine whether assets are segregated, what happens if a custodian or platform fails and which party bears losses caused by private-key compromise or technical malfunction.
The governing law and dispute-resolution mechanism must also be aligned with the structure.
For cross-border tokenised transactions, arbitration can offer important advantages, particularly where the parties, platforms and assets span multiple jurisdictions. Arbitrators with appropriate legal and technical expertise can be selected, proceedings can remain confidential, and awards benefit from the international enforcement framework of the New York Convention.
But simply inserting a generic arbitration clause may not be enough.
A tokenisation agreement may also require provisions addressing emergency relief, preservation of digital evidence, treatment of on-chain records, appointment of technical experts and the ability to order corrective transfers or other remedies relating to digital assets.
Maxime Chevalier’s academic work on blockchain arbitration similarly highlights the tension between decentralised transactions and conventional judicial systems, and the potential role for specialised arbitration mechanisms in resolving blockchain-related disputes.
From tokenisation review to dispute-risk review
The commercial discussion around tokenisation often begins with efficiency.
Can settlement occur faster? Can intermediaries be reduced? Can assets become more liquid? Can transactions be programmed?
Those questions are important. But legal resilience requires another question:
What happens when the system does not operate as the parties expected?
The answer cannot be found exclusively in code.
A robust tokenisation structure should be capable of identifying who owns the relevant rights, who bears the risk of technical failure, which law governs competing claims, what happens in insolvency, which evidence determines authority, and how a tribunal can provide an effective remedy.
Tokenisation does not remove disputes. It changes where disputes arise, what evidence they depend on and which remedies remain possible.
That is why enforceability and dispute architecture should be treated as part of tokenisation design itself, not as legal issues to be examined only after a dispute begins.
How AryaTech can assist
AryaTech’s “Tokenisation Enforceability & Dispute-Risk Review” is designed for token issuers, fintech and Web3 businesses, financial institutions, technology providers and companies developing tokenised asset structures.
The review examines the relationship between the token and the underlying legal right; ownership, custody and segregation; smart-contract execution and available remedies; governing law and cross-border enforceability; insolvency and counterparty risk; technical and digital evidence; and the design of arbitration, mediation or other dispute-resolution mechanisms.
For existing projects, the review can also identify weaknesses in current contractual arrangements before they become live disputes.
The objective is not merely to determine whether a token can be issued. It is to determine whether the legal structure will still work when ownership is contested, a transaction fails, a custodian becomes insolvent or automated execution produces an outcome one party challenges.
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Selected Regulatory and academic References
1. European Securities and Markets Authority (ESMA), “Call for Evidence on CCP Collateral Tokenisation”, 9 October 2026.
(https://www.esma.europa.eu/press-news/consultations/call-evidence-ccp-collateral-tokenisation)
2. European Securities and Markets Authority, “ESMA seeks evidence on the use of tokenised collateral in central clearing”, 9 October 2026.
(https://www.esma.europa.eu/press-news/esma-news/esma-seeks-evidence-use-tokenised-collateral-central-clearing?)
3. Regulation (EU) 2022/858 on a pilot regime for market infrastructures based on distributed ledger technology.
(https://eur-lex.europa.eu/eli/reg/2022/858/oj/enguri=CELEX%3A32022R0858&utm)
4. Swiss Federal Act on the Adaptation of Federal Law to Developments in Distributed Ledger Technology, (https://www.newsd.admin.ch/newsd/message/attachments/60601.pdf)
5. FINMA, Licensing as a DLT Trading Facility.
Official overview of the Swiss regulatory framework for infrastructures providing multilateral trading, custody, clearing and settlement of DLT securities.
(https://www.finma.ch/en/authorisation/fintech/dlt-handelssystem)
6. Pietro Ortolani, “The Impact of Blockchain Technologies and Smart Contracts on Dispute Resolution: Arbitration and Court Litigation at the Crossroads” (2019) 24(2) Uniform Law Review 430–448.
7. Hyoung Goo Kang, “After Finality: Reversal Authority, Remedies, and Institutional Design in Tokenized Securities Settlement” (2026).
*This article is intended for general information and does not constitute legal advice.*