UK Statement on Legal Status of Cryptoassets and Smart Contracts

November 20

A UK Government-backed, industry-led initiative has published an expert legal statement recognising cryptoassets as property and smart contracts as enforceable agreements under English law. The statement is published by the UK Jurisdiction Taskforce (UKJT), a taskforce of the UK’s Lawtech Delivery Panel.

The report concludes that:

  • Cryptoassets are, in principle, to be treated as property under English law. They are not disqualified from being property by their distinctive features (intangibility, cryptographic authentication, use of a distributed transaction ledger, decentralisation, rule by consensus), nor by the fact that they are “pure information”.
  • A smart contract (characterised by its “automaticity”) is capable of having contractual force, although whether the requirements for an enforceable contract are met in a given case will depend on the parties’ words and conduct.

Uncertainty over the legal status of cryptoassets and smart contracts is often blamed for hindering their adoption. The statement has been developed by leading barristers in consultation with technical, legal, judicial and academic experts, and therefore provides some comfort that cryptoassets and smart contracts have a solid foundation in English law. However, the statement has no binding legal force and so, although it provides the “best possible answer”, is unlikely to be the final word.

The UK is the first jurisdiction to produce an authoritative statement on these issues. At the launch event of the report, the speakers highlighted several next steps for the UK:

  • Regulation of dealing in cryptoassets, and remedies. Now that the legal status of cryptoassets and smart contracts has been confirmed, the stage is set for regulators to consider what specific regulation is necessary, and for the courts to consider what remedies are appropriate in disputes.

Legislative confirmation of legal status. Although the report concludes that the legal status of cryptoassets and smart contracts is clear under English common law, the next step is for the UK Law Commission to consider whether legislation in this area is necessary.

Sue McLean is a partner in the IT/Commercial Practice Group in Baker McKenzie's London office. Sue advises clients on technology, sourcing and digital media business models and deals, as well as the legal issues relating to the implementation of new technologies. Sue advises clients (both customers and suppliers) on a wide range of technology matters including outsourcing, digital transformation, technology procurement, development and licensing, m/e-commerce, cloud computing, AI, FinTech, blockchain/DLT, social media, data privacy and cybersecurity. Sue also advises on commercial agreements and the commercial, technology and intellectual property aspects of M&A transactions and joint ventures. Sue has experience across various business sectors, including the financial services, consumer, TMT, travel and life sciences industries. She regularly speaks and writes about the impact of disruptive technologies and has a regular blog for Computerworld.
Mark Simpson is a partner in the Financial Services & Regulatory Group in the London office where he practices in the areas of financial regulation, financial crime, and regulatory investigations. He is a member of the Firm's EMEA Financial Services & Insurance Steering Committee, as well as its Global Funds and FinTech Groups. He participates actively in industry bodies including the Alternative Investment Managers Association. He has authored a number of articles and other publications, most notably acting as a general editor of and contributor to the International Guide to Money Laundering Law and Practice, and A Practitioner's Guide to the Law and Regulation of Financial Crime.

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