As ever, with new advances in commerce and technology, the law is often playing catch-up in order to keep the wheels of justice applying fairly and consistently in matters that go before the UK Courts. The recent explosion in the use of blockchain, and crypto currencies more generally, has long posed problems, when traditional legal frameworks are applied to these types of digital assets.
As reported in this Law Gazette article, Sir Geoffrey Vos (the Master of the Rolls and the second most senior judge in England and Wales) clearly feels that we are entering a 'watershed moment' in the use blockchain and smart contracts. Whilst media interest often focuses on the volatility of the price of certain crypto currencies or their alleged use by organised crime, it is pleasing to see such an authorative voice recognise the benefits that the use of blockchain can bring to commerce - and indeed the clarity to avoid (or 'obliterate'!) future commercial legal disputes.
Sir Geoffrey also recognised that an ever-increasing amount of litigation now involves crypto assets, and that such currencies do not recognise international borders in the same way that moving goods across borders is more apparent. As such, the opportunity for fraud and potential litigation does increase, but yet the current mechanisms by which to trace and recover such assets has always historically diminished as assets leave your jurisdiction. In order to address this, a sub-committee of the UK's Civil Procedure Rules Committee will look at amending or expanding the basis on which UK legal action can be commenced against persons outside of our jurisdiction. In particular, it is intended to be easier for third parties to be required to disclose relevant documentation to UK parties, if it can be shown that fraud occurred (potentially affecting non-UK crypto exchanges holding key information on the passage of the relevant crypto assets).
This development, when combined with HMRC's recent action to seize NFTs (Non-Fungible Tokens) for the first time in a fraud action (read more here), shows that crypto assets are receiving mainstream acceptance, and that those who invest in and own them can be subject to fraud in the same way as any other citizen. Therefore, it can only be a welcome development that the law is now moving to ensure that those harmed in this way have the same legal rights of remedy.
'The blockchain is now at a stage in its development equivalent to where the internet was in or around 1995,' he said. 'The internet was unstoppable in 1995 and blockchain technology is unstoppable now. It will become ubiquitous in all major industrial and financial sectors, simply because it allows for the immutable recording of data, thereby reducing friction in commercial and consumer transactions and obliterating the scope for dispute as to what has occurred.'