With the digital currency bitcoin hitting an all-time high at the end of 2020 and the apparent trend of more institutional investors buying into the cryptocurrency, questions regarding the application and use of cryptocurrencies are arising more often. Given some jurisdictions restrict investments in crypto currency, to what degree are cryptocurrencies recognised under the law of England & Wales?
in Robertson v Persons Unknown (unreported – July 2019)the English Court considered the concept of bitcoin as property in an application for an injunction. In order to grant relief, the Court had to effectively recognise the cryptocurrency as something capable of being owned and it followed the lead of other jurisdictions in recognising that bitcoin could constitute personal property and therefore be subject to the relief sought. One of the main ways fraud victims can seek protection is by obtaining freezing orders and other injunctive relief and so it was important for a cryptocurrency to be recognised in this context. The Court granted an asset preservation order to freeze bitcoin which had been spear phished away by a fraudster and a Bankers Trust order requiring the cryptocurrency exchange, Coinbase, to reveal the identity of the fraudster.
The English Court again held cryptocurrency to be personal property in 2019 in the case of A A v Persons Unknown [2019] EWHC 3556 Comm.
This was a case where the BitPaymer virus held files to ransom and when the ransom was paid by insurers, the insurers attempted to trace and recover the bitcoin ransom. In the application for injunctive relief the court looked again at the concept of property; traditionally recognised as a tangible thing in possession or thing in action which can be enforced e.g. a debt. The Court also looked to the guidance issued by the UK Jurisdictional Task Force and concluded that crypto assets can qualify as property, capable of ownership and definition and therefore granted the injunction.
In Toma V Murray [2020] EWHC 2295 (Ch) the court developed its thinking even further and recognised the unique characteristics of cryptocurrency and their volatility and potential to quickly change in value.
The court decided that an injunction restraining dealing with bitcoin without consent was unworkable as any delay incurred in obtaining consent could result in significant drops in value. The significance of this is that the courts are developing an ever sophisticated practice and knowledge base and recognising the practical considerations of dealing with cryptocurrencies. It should be noted however, especially with fraud cases that jurisdictional issues will need careful handling, including determining where the damage has been suffered.
Alongside this acceptance by the English Court it is also noticeable that the use of cryptocurrencies is becoming more commonplace in the commercial world.
We are assisting clients with requests for more specific advice relating to the use of crypto in employee incentive schemes and for salary payments, just in the last couple of months. In relation to using bitcoin for salary payments, again the fluctuations in value are the most pressing factor. An employee’s basic salary must still meet the national minimum wage legislation (the rate for employees aged 25 and over is currently £8.72) and given the unpredictability in valuing cryptocurrency and the fluctuation issue, care must be taken. For instance, it may be advisable to pay at least part of the base salary normally, with other elements of the remuneration package being paid using cryptocurrency, such as a bonus. This arrangement would need to be clearly set out in the employee’s contract of employment, or in a separate agreement signed by the employee. There are also tax implications which would need to be carefully considered.
If you have any questions regarding the issues raised, or we can assist you in any way, please contact Tammy Evans.
Related links
- Legal support for start-ups >>
- Finance for start-ups >>
- Igniting the Spark with blockchain entrepreneur Fary McKay >>
- Advising tech firms >>
- Contact us >>
