The UK jurisdiction taskforce of the LawTech Delivery Panel has made an unprecedented statement that could have significant implications on dealers of blockchain-based assets in the UK. In a 46-page authoritative statement, it recognized cryptoassets, including cryptocurrencies, as a property with sufficient legal certainty.
The UKJT, which is drawn from industry, government and the judiciary, has also addressed the enforceability of smart contracts, and the extent to which they are legally binding. It concluded that smart contracts are enforceable agreements under English Law. Further, it described the blockchain-based mechanism as capable of satisfying the requirements of contracts in English law, while legal requirements for a signature can be met by techniques such as private key encryption.
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“We conclude that cryptoassets possess all the characteristics of property set out in the authorities. As far as we are aware, the proprietary status of cryptoassets specifically has not yet been the subject of any authoritative decision in any common law jurisdiction,” the statement explains.
The UKJT’s high-powered group of legal experts said they found some support for their conclusion in a recent case in Singapore. Specifically, the judge accepted that bitcoins could be the subject of a trust, and hence were property. The Singaporean judge says the paper observed that “cryptocurrencies have the fundamental characteristic of intangible property as being an identifiable thing of value” and that they met all of the requirements of the National Provincial Bank.
Many uncertainties in terms of tax and data protection
Since cryptoassets are not physical things or rights, so whether or not they are treated as a property holds great importance and also influences the status of crypto-assets under English private law. It also resolves many uncertainties in terms of tax and data protection and helps courts indicate to which extent they can rely upon smart contracts in UK laws, which currently struggle to characterize them.
‘‘In legal terms, cryptoassets and smart contracts undoubtedly represent the future. I hope that the Legal Statement will go a long way towards providing much needed market confidence, legal certainty and predictability in areas that are of great importance to the technological and legal communities and to the global financial services industry,’’ says chancellor to the High Court, the Rt Hon Sir Geoffrey Vos, chair of the UKJT.
The UKJT is one of six taskforces created in the UK in order to promote the use of technology in the country’s legal sector. The purpose was to answer a number of the critical legal questions in this field, so as to provide a legal foundation for the future utilization of cryptoassets and smart contracts. The multiple-front efforts also aimed to clarify areas that are of great importance to both the crypto community and the financial services industry.
While the statement does not provide a final definition of cryptocurrency, it sets a precedent that recognizes the potential use of digital assets in contractual agreements.
Market participants repeatedly confirmed that it is necessary to draft laws and expand regulatory jurisdiction in this dynamically developing field. They were also concerned about the unwarranted interference of law enforcement authorities in business activities involving the use of blockchain technology.