Adjudicating Cryptocurrencies at the WTO: Potential Threshold, Substantive and Compliance Issues

Abstract

Taking Venezuela’s complaint against the United States at the World Trade Organisation (“WTO”) as the inflection point, this article will explore whether a characterisation of cryptocurrencies as a ‘currency’ (similar to fiat currency) would ensure that cryptocurrencies are not covered by WTO disciplines on goods and services. Despite customary international law principles such as ius cudendae monetae and the persuasive argument that a ‘currency’ is neither a good or service - the article answers this question in the negative. In doing so, the article builds on the author’s blog post which was the first to analyse Venezuela’s complaint. It will divide issues that can arise during such a WTO dispute into three categories: threshold, substantive and compliance issues. Threshold issues would involve interpretative challenges to determine whether the General Agreement on Trade in Services (“GATS”) and General Agreement on Tariffs and Trade (“GATT”) regulate cryptocurrencies. Since the GATS Schedule of Commitments has historically been interpreted in a technologically neutral manner, identifying cryptocurrencies as a ‘service’ may not prove to be insurmountable. However, Howden’s claim that cryptocurrencies are barter goods that will be subject to disciplines of the GATT deserves critical scrutiny – more so because the GATT regulates tangible products and it also contains specific provisions relating to balance-of-payments. The article also undertakes a theoretical analysis of the heterodoxical nature of the cryptocurrency to evaluate whether it can be classified as a ‘security’ within the meaning of the GATS’ Annex on Financial Services. These threshold issues are, however, the tip of the iceberg. Once a WTO Panel commences its analysis, the substantive issues for consideration would involve determining whether a unique product such as cryptocurrencies has a ‘like product’ in the respondent member’s market. Further, the Panel’s analysis would involve a consideration relating to ‘general exceptions’ under Article XIV, GATS or Article XX, GATT which would entail an examination of whether the measure was necessary to achieve, amongst other regulatory objectives, either compliance with domestic regulations or the maintenance of public order. If the measure adversely impacting cryptocurrencies is determined to be WTO-inconsistent, issues of compliance and suspension of concessions are imminent. WTO Panels have historically estimated the quantum of suspensions of concessions by determining the trade volumes affected by the WTO-inconsistent measure and factoring it for a future time period. The decentralised nature of the distributed ledger technology underlying cryptocurrencies complicates any country-specific quantification of the impact on trade volumes of cryptocurrencies affected by the WTO inconsistent measure. Accordingly, determining suspensions of concessions in relation to cryptocurrencies would require significant judicial innovation by the arbitrator. The institutional perils of subjecting cryptocurrencies to WTO's disciplines highlighted in the article necessitate collective action by the WTO members to arrive at a normative framework to regulate cryptocurrencies at the WTO. The article concludes by arguing that the ongoing e-commerce negotiations between 76 member states at the WTO would be the most suitable forum for formulating such global rules. This is a Working Paper prepared for presentation at the conference on International Economic Law in the Era of Distributed Ledger Technology at the University of Turin, Italy on April 9, 2019. The full paper would soon be published in a leading journal.