What about the legalities and dispute resolution?
Since security tokens are classified as investment contracts, they are subject to government regulations. Not every person on the planet always lives by the regulations. On top of that, the world is regularly smitten by cataclysm and revolts. Ensuring the logistics and timely delivery of commodities is not an easy task. However, if you have all your paperwork done properly you can claim damages from the defaulting party via the rigid, yet tested legal system.
What happens if a few tokenised barrels of gasoline fall of a ferry and sink into the sea? How this will affect the token and how to ensure that the value and the tokens are safely connected, and if who should be responsible for any losses? The token buyers need to trust in the token, otherwise, nobody will buy it.
There are only two solutions at present: depending on the legal system or depending on technology. Resolving disputes arising from blockchain transactions may be done with the use of arbitration. Arbitration is an alternative dispute resolution method in which the claim is reviewed by a tribunal, with an enforceable award as a result.
New technologies, such as Big Data and the Internet Of things are changing our world daily. Eventually, the Big Data will trace and structure all the information and the Internet of Things will implement the contract enforcement. The technology is soon approaching the moment when decentralized ledger records will be connected directly to real-world assets, thus achieving automation of ensuring transaction performance and contract enforcement.
For now, until the future comes — we are stuck with the traditional legal system and the conventional ways of dispute resolution. Of course, new laws must be implemented in order to allow the digital transfer of rights. As of now, many jurisdictions around the world are still undecided on the subject, others are moving administrative records and supply chain records to the blockchain.
Digital Commodities Asset Exchange in the Middle East, focusing on tokenised commodities. Licensed and Regulated. Tokenisation advisory.