One is that regulators and the courts would simply ignore what you've done there and assert you are still a securities issuer.
Some regulators understand Bitcoin very well and they know that it is not possible to regulate the bitcoin protocol or shut down the system. That does not mean that nothing within the Bitcoin system is subject to regulation. If you are a professional securities issuer you will stay a professional securities issuer when your securities are denominated in BTC.
The question for regulators will always be in what scale you are issuing or buying securities. A p2p loan will be ok in most cases but if you are raising 100.000 BTC for your company publicly the SEC/FSA/BAFIN will knock on your door soon.
(btw, thanks Mike for the great speech on contracts and external state, couldn't be in London but saw it on Youtube)
Problem: we want to make a negotiable instrument ownership of which is identified cryptographically, but it might be legally problematic:
1. we don't know whether court system will recognize cryptographically signed transfers of ownership among anonymous parties
2. it might be illegal to make such instrument because it is seen as security, which is subject to regulations
Arbitration would be the best way:
1. You won't need a national court
2. Arbitration courts can have there own rules adjusted to Bitcoin
3. the "New York Convention" on the Recognition and Enforcement of Foreign Arbitral Awards is in the most cases internationally better recognized than national courts because this UN Convention has been ratified by 145 countries
http://en.wikipedia.org/wiki/Convention_on_the_Recognition_and_Enforcement_of_Foreign_Arbitral_Awards4. Every legal entity can run an arbitration court
It's zero cost and only some paper work to form your own Swiss Verein (used by global law firms, maybe the best legal structure for arbitration)
http://en.wikipedia.org/wiki/Swiss_Verein5. Arbitration will never be subject to financial regulation
We are trying to combine a 2 out of 3 escrow transaction with arbitration. We are using Shamir's Secret Sharing algorithm to encrypt a newly generated private key and only store one of the secret's shares. (when m-of-n escrow transactions are fully implemented we won't need this any more)
It is also a big regulatory advantage, it is more secure and it reduces counterparty risk if you do not involve a "trust" or "escrow company" that holds customers funds but leave an encrypted code at an Arbitration court that does not have control over the funds in the escrow account.
Arbitration courts with a secret share of a private key can enforce there decisions directly by issuing their share to one of the parties.