UKJT Legal Statement On Cryptoassets And Smart Contracts Aims To Give Market Confidence That England & Wales Is A Crypto-Friendly Jurisdiction

The UK Jurisdictional Taskforce (UKJT) published a Legal Statement on 18 November 2019 concluding that there is no bar under English law for cryptoassets to have the legal status of property and for smart contracts to be legally binding.

The UKJT is one of 6 taskforces under the Law Tech Delivery Panel (LTDP), a government-backed initiative established to support digital transformation in the legal sector. The Legal Statement, authored by Lawrence Akka QC, David Quest QC, Matthew Lavy and Sam Goodman, follows a consultation process launched in May 2019, with HSF providing input on the draft statement in advance of publication.

Sir Geoffrey Vos, who chairs the UKJT, acknowledged in his introduction to the Legal Statement that the topics covered in the statement will be (and will need to be) the subject of judicial decision in due course. The Legal Statement is not binding on any court in England or Wales but it is intended to give greater market confidence that English courts will take a pragmatic and commercial approach when these issues come before them (at least until legislation addresses these issues expressly).

Cryptoassets as property

Why does it matter whether or not a cryptoasset is characterised as property?

The evaluation of whether a cryptoasset has the requisite characteristics of property is of critical significance for a party's rights and obligations in relation to the asset. The status of cryptoassets as property (or not) impacts upon the legal validity and enforceability (at law) of a transfer, the vesting of a cryptoasset upon a death of its 'owner', in instances of bankruptcy or corporate insolvency, what happens to the asset in the event of fraud, theft or breach of trust, the ability to grant security over a cryptoasset and many other similar questions. This is therefore a crucial question in giving investors legal certainty and the ability to predict how and through what means cryptoassets may represent a sustainable store of value. The legal position of course needs then to be superimposed on the technical characteristics of the cryptoasset in question. For example, even if it is legally possible to grant security over a cryptoasset, is it technically practical to do so?

What does the Legal Statement conclude?

The Legal Statement is premised on the fact that a cryptoasset must be defined by reference to the rules of the system in which it exists. The authors do not seek to identify a 'one-size-fits-all' approach by...

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