As has been widely reported, the Government's UK Jurisdiction Taskforce has published its legal statement on cryptoassets and smart contracts, which aims to provide market confidence, legal certainty and predictability by giving guidance on the legal status of these asset classes.
The legal statement is especially relevant as we are seeing an increasing number of instructions concerning cryptocurrency and smart contracts. In particular, we are currently advising on litigation arising out of a crypto fraud involving detailed considerations of the options available to recover crypto asset losses from a variety of parties. We are also acting for several clients seeking regulatory advice in this area, and so the legal statement is a significant development which is highly material for our ongoing work.
Here, we look at the key findings of the report and what they mean for dealings and disputes involving cryptoassets and smart contracts.
Background to the legal statement
The UK Jurisdiction Taskforce (UKJT) is one of six taskforces established by the UK Government-backed LawTech Delivery Panel. The LawTech Delivery Panel aims to promote the use of technology in the UK legal sector, while the UKJT's specific objective is to demonstrate that English law and the legal jurisdiction of England and Wales provide a state of the art foundation for the development and use of distributed ledger technology, smart contracts and associated technologies.
In May 2019, the UKJT issued a consultation paper on the status of cryptoassets, distributed ledger technology and smart contracts in English law. The consultation paper identified that the development of these technologies has far-reaching implications for domestic and international financial markets, but that a lack of certainty around the legal status of these technologies could be hampering development. The consultation sought views of stakeholders on the principal areas of uncertainty, with a view to providing guidance and certainty in this area, and to bolster the use of English law and the jurisdiction of England and Wales in transactions involving these assets and technologies.
Scope and status of the legal statement
The legal statement addresses a number of fundamental principles around the characterisation and treatment of cryptoassets and smart contracts, including whether a cryptoasset is 'property' and/or 'goods'; the ownership and transfer of cryptoassets; whether security may be granted over a...