On 27 April 2023, HM Revenue & Customs (HMRC) released a second consultation regarding the taxation of transactions in the Decentralised Finance (DeFi) market. In short, HMRC proposes to legislate to ensure that the use of cryptoassets in certain DeFi transactions would no longer give rise to a taxable disposal, but instead would trigger taxation only when the assets are economically disposed of in a non-DeFi transaction. This is a significant step for HMRC and the UK…
If 2020 was the year that crypto spurred investment action, then 2022 will be remembered for triggering the “equal but opposite” regulatory reaction. And for good reason. With several high-profile insolvencies and an across-the-board fall in cryptoasset prices, regulators have been reminded of the risks that can accompany financial innovation. The Financial Conduct Authority (FCA), alongside HM Treasury and various other government and enforcement actors, have been monitoring developments in crypto markets and considering the…
In July 2022, the Law Commission published a consultation proposing certain reforms in respect of property rights and digital assets. The consultation’s primary recommendation was to create a new category of property, referred to as data objects, to ensure that cryptocurrency and other forms of digital assets could be legally recognised as property. This approach builds upon previous court rulings which held that cryptoassets could be property and be protected by injunctions, such as freezing…
For the first time in the UK, in D’Aloia v Persons Unknown, Binance Holdings Limited & Others, the High Court of England and Wales granted an order permitting the service of court documents via an NFT on the blockchain. In said order, the High Court also ruled that exchanges holding cryptoassets could be constructive trustees of the cryptoassets deposited within their infrastructure. The Case Mr D’Aloia, the Claimant, applied for an urgent interim proprietary injunction…
In November 2021, Floki Inu, a cryptocurrency, ran an ad across the London Underground. The ad had an image of a cartoon dog wearing a Viking helmet. The text stated “MISSED DOGE. GET FLOKI”. Smaller text at the bottom of the ad said, “Your investment may go down as well as up in value. Crypto currency is not regulated in the UK.” The U.K.’s Advertising Standards Authority (ASA) challenged the ad. Floki Inu explained that…
We have previously posted about how, in January 2020, the UK’s Financial Conduct Authority (FCA) became the anti-money laundering and counter terrorist financing (AML/CTF) supervisor for cryptocurrency businesses in the UK. On December 16, 2020, the FCA announced that cryptocurrency businesses that had filed to register with the FCA could continue operating under a temporary licensing regime for six months as the regulator dealt with a backlog of applications. This was known as the Temporary Registrations…
On 31 March 2021, the UK tax authorities (HMRC) consolidated their existing guidance on crypto-asset taxation for businesses and individuals and published new guidance on the taxation of “staking” activities. This is contained in a new manual (guidance for HMRC officers which is publicly available online but which does not have the force of law). The new guidance on staking activities is almost identical to the existing guidance on mining, but the fact that HMRC…
In Ion Science Ltd. v Persons Unknown and others (unreported), the Commercial Court granted a proprietary injunction and a worldwide freezing order in respect of Bitcoin that had been dissipated by the wrongdoers due to cyber-fraud. The Commercial Court also granted permission to serve disclosure orders against the coin exchanges that processed the transactions in order to help locate the missing assets and wrongdoers. This judgment further solidifies Bitcoin’s status as property, but also shows…
At the start of the pandemic people wondered what the crisis would do to the crypto-asset market. As we left 2020, Bitcoin hit an all-time high and the crypto-asset world was moving into the mainstream and becoming subject to regulation around the world. On 16 December 2020, the FCA announced that cryptocurrency businesses that have filed to register with the FCA may continue operating under a temporary licensing regime for six months as the regulator…
Following the publication of the UKJT’s Legal Statement on cryptoassets and smart contracts in November 2019, the Government asked the Law Commission to undertake a scoping study into the law on smart contracts. Under the terms of reference agreed between the Law Commission and the Government, the scoping study will analyse the current law as it applies to smart contracts, identify areas in which further work or reform may be required, and provide such advice…