To date, the cases passing through the English courts involving cryptoassets have been dominated by fraud and asset recovery. This body of jurisprudence has helped clarify a number of issues in relation to cryptoassets under English law. However, we have only begun to scratch the surface in terms of resolving novel issues arising out of this still relatively novel technology. Further, wider adoption, particularly at the institutional level, and the introduction of regulation are likely to give rise to a wider variety of disputes.
Introduction
England has firmly established itself as a friendly jurisdiction for victims of crypto fraud. The playbook is, by now, a familiar one: an unsuspecting victim is either hacked or induced into transferring their cryptoassets to fraudsters, whose identities are usually unknown. If a victim is lucky, they are able to intercept the assets while they are passing through the hands of a third-party, usually a crypto-exchange, which is acting as a custodian for the fraudsters or, at least, is being used to exchange those assets for other assets[1]. The English courts have shown great willingness to assist victims by: (i) permitting proceedings to be brought against “persons unknown” (the fraudsters): (ii) recognising long before the introduction of the Property (Digital Assets etc) Bill[2] that cryptoassets were capable of being recognised as a form of personal property under English law[3]; and (iii) granting interim injunctions, such as freezing orders and proprietary injunctions against those third-parties holding the defrauded assets.
Given the decentralised[4] nature of the distributed ledger technology underpinning cryptoassets, the issue of conflict of laws, particularly in the absence of express agreements as to governing law or jurisdiction in cases of fraud, has presented a conceptual challenge[5]. However, to date, the English courts have taken a pragmatic approach of looking to the place of the victim[6] as the situs of the assets in question in order to found jurisdiction in the victim’s favour. A perfect illustration of this is d’Aloia vs Bitkub [2024] EWHC 2342 (Ch), the first, final judgment in the English court on a crypto fraud as described above.
While we expect to see further crypto fraud and asset recovery cases being brought in the English courts, we think that the combination of: (i) incoming regulation; and (ii) wider adoption will lead to a wider variety of disputes. Some will have a familiar form, whilst having to apply well-established principles to cryptoassets (or other forms of digital assets[7]). Other disputes will venture into uncharted legal territory.
Incoming regulation
At the time of writing, cryptoassets and related activities are by and large outside the regulatory permitter in the UK. However, that is about to change. We say “by and large” because:
Furthermore, even if certain cryptoasset themselves do not fall within the list of specified investments[8], businesses offering certain products relating to them may inadvertently be offering such investments. For example, it has been alleged[9] that certain margin trading products offered by a crypto-exchange were either CFDs[10] or instruments creating indebtedness[11]. It might also be argued that certain derivative products constitute futures[12].
The “wait-and-see” approach taken in the UK resulted, in part, from a tension between the FCA on the one hand (who adopted a policy of accompanying all statements about cryptoassets with language to the effect that investors could lose all their money), and the previous government, on the other (Rishi Sunak being an enthusiastic advocate of the sector, at one point wanting the Royal Mint to issue a tradeable non-fungible token[13]). This was in sharp contrast to the approach taken in the EU where MiCA[14] has recently come into force – the first, comprehensive, crypto-specific regulatory regime introduced in the world.
However, on 29 April 2025, HM Treasury and the Chancellor, Rachel Reeves, unveiled the eagerly awaited draft legislation bringing cryptoassets within the regulatory perimeter[15]. The accompanying message was double-edged: “Britain is open for business — but closed to fraud, abuse, and instability“.
And we will watch its development closely. Wherever we end up, once the new regulatory regime is put in place, we would expect to see contentious regulatory disputes and investigations we see today in the traditional financial markets space, as firms and individuals start to bed into a fully regulated regime.
Institutional adoption
In parallel, there is an increasing “institutionalisation” of cryptoassets – that is, something that started off with grassroots, cryptography enthusiasts, then garnered the attention of retail investors and spawned an ecosystem of “crypto-native” businesses, has now caught the eye of some of the world’s largest (traditional) financial institutions. The issuances by them of bitcoin ETFs in the US could prove to have been a real turning point. Then, President Trump campaigned on a platform to make the US the “crypto capital” of the world, and since signed executive orders “to support the responsible growth and use of digital assets, blockchain technology, and related technologies across all sectors of the economy“[16] and establishing a “Strategic Bitcoin Reserve” and a “Digital Asset Stockpile“[17]. Even if banks – given regulatory capital and other constraints – continue to tread with care, on the asset management side, we can expect to see accelerated adoption in the current environment.
In line with the increasing sophistication of the market participants in this space, we would also expect to see increasingly comprehensive and robust legal frameworks to be put in place to support their activities. This is likely to include full suites of M&A and corporate governance documentation, as well as financing related ones, e.g. custody and collateral arrangements, securities lending, derivatives etc. Industry bodies such as ISDA have been doing a huge amount of good work together with market participants to make the contractual arrangements as robust as possible (for example, the development of the Digital Asset Definitions). However, given the unique characteristics of cryptoassets and their implications on fundamental legal issues, such as the nature of property rights under private law, we could see disputes in old guises (e.g. margin-calls, close-out/valuation, title/priority disputes (including in insolvency)) in relation to cryptoassets. By way of one example, there remains an unresolved question as to precisely what kind of personal property a crypto or digital asset is under English law. Many do not fall straightforwardly within the categories of a thing in possession (such as a chattel, since cryptoassets are not physically manifested and therefore cannot be possessed[18]) nor a thing in action (such as a debt), the two previously held to be exhaustive categories of personal property under English law[19]. Far from being an arid, academic debate, categorisation could have significant commercial consequences, given the very different jurisprudence governing the two types of personal property, which depending on the factual pattern, may give rise to difference outcomes and remedies in any dispute[20].
The technology
While cryptoassets are often seen through the lens of financial and investment assets, the wider utility and functionalities of blockchain technology will, in future, be just as, if not more, important as the investment angle. Even in the world of finance, the products and services that may in future be most widely adopted and deliver real-world value may not depend on the value of native cryptoassets. The simplest example is the use of stablecoins to facilitate faster and cheaper (fiat) payments. Smart contract capabilities, combined with tokenisation of real-world assets (whether themselves tangible or intangible) open up a whole new world of possibilities in decentralised finance (“DeFi“). Moving away from finance altogether, the secure, immutable and auditable database, which is what open and permissionless blockchains fundamentally are, can be used for record-keeping (e.g. ownership registries, accounting records, evidence repository), supply-chain management, digital ID and verification, and secure voting, among other things.
These new relationships and interactions might well give rise to very novel legal issues and disputes. For example, the nature and scope, if any, of duties owed by those involved in developing or maintaining DLT protocols or DeFi projects build on top of them have yet to be resolved. While many projects state and aspire to be free from the control of any particular person (whether natural or legal) or a group of them (e.g. Decentralised Autonomous Organisations), the legal relationship between various participants are likely to be determined by the factual position in each case.
At the other end of the spectrum, many market participants have been developing and adapting technologies similar to that underpinning original DLT systems such as bitcoin. Although – as is the case with permissionless, decentralised systems too – the devil is always in the detail, they tend to differ in the degree of (de)centralisation (usually more centralised in terms of control and oversight), participation (usually requiring permissions) and legal framework (usually governed by binding, comprehensive set of contractual rules). The answer to the question of the legal relationships between participants are likely to be very different in this context.
This issue was squarely raised in Tulip Trading Ltd v Bitcoin Association[21], where it was held by the Court of Appeal at a summary judgment stage that there was at least a serious issue to be tried, in the context of bitcoin – which is widely accepted to be the most decentralised of all blockchain protocols – whether the software developers owed tortious and/or fiduciary duties to users, which would turn in large part on the degree of control exerted by them over the network. As the case did not proceed to trial, we await another occasion for clarity or at least guidance on this issue.
Another anticipated area of dispute is in the operation of smart contracts. Very clear terms as to the status of smart contract code – either merely a method of performance, with natural language terms having (legal) superiority, or the code itself constituting the binding legal “terms”, such that whatever it does is what the parties agreed should happen – may reduce the risk of disputes. However, there remains scope for disagreement, particularly if there is a lack of clarity regarding the relationship between code and any accompanying natural language contract, or if there happen to be bugs in the code which lead to outcomes which neither party did or could have contemplated.
Footnotes
[1] See our previous article which examines potential remedies for victims in less fortunate situations.
[2] See our previous article on this draft bill.
[3] For example, in AA v Persons Unknown [2019] EWHC 3556 (Comm), placing reliance on the UK Jurisdictional Task Force’s Legal statement on cryptoassets and smart contracts (November 2019)
[4] Or, at least, stated to be so in almost all cases of permissionless blockchain systems.
[5] For further analysis, see the Financial Markets Law Committee’s paper Digital Assets: Governing Law and Jurisdiction (6 June 2024)
[6] The precise formulation of this concept (e.g. domicile, residence, location of the corporate vs natural persons through whom it acts, the precise time at which the test is applied etc.) has also been subject to debate and remains not fully resolved.
[7] While there are no hard definitions, we use “cryptoassets” here to refer to those instantiated on decentralised, permissionless DLT, whereas we use “digital assets” to mean a broader category of assets that may share similar characteristics to cryptoassets (for example, those using more centralised solutions).
[8] Within the meaning of Financial Services and Markets Act 2000 (Regulated Activities) Order 2001 (SI 2001/544)(“RAO“).
[9] Chechetkin v Payward Ltd (FL-2022-000006)
[10] Article 85, RAO
[11] Article 77, RAO.
[12] Article 84, RAO.
[13] https://www.theguardian.com/technology/2022/apr/04/rishi-sunak-asks-royal-mint-to-create-nft
[14] Regulation (EU) 2023/1114 of the European Parliament and of the Council of 31 May 2023 on markets in crypto-assets.
[15] https://www.gov.uk/government/news/new-cryptoasset-rules-to-drive-growth-and-protect-consumers
[16] https://www.whitehouse.gov/presidential-actions/2025/01/strengthening-american-leadership-in-digital-financial-technology/
[17] https://www.whitehouse.gov/presidential-actions/2025/03/establishment-of-the-strategic-bitcoin-reserve-and-united-states-digital-asset-stockpile/
[18] A physical device on which the private keys to such assets may be recorded is of course a thing in possession, but that is a separate thing to the underlying asset itself.
[19] Colonial Bank v Whinney (1885) 30 Ch D 261 per Lord Fry: “All personal things are either in possession or in action. The law knows no tertium quid [third thing] between the two” (at 285).
[20] See our previous article on this issue: “Victory in Victoria” here.
[21] [2023] EWCA Civ 83
