Cryptocurrency: How is it treated in the Courts?
18th March, 2022
For many of us the concept of what cryptocurrency is can be a difficult one to grasp. However, its increasing popularity has led to the emergence of a quickly evolving area of law with the courts trying to find a way to deal with the unique problems they raise.
The recent caselaw has highlighted the flexibility of English law in relation to its ability to cope with the rapidly changing technological world.
What is Cryptocurrency?
Cryptocurrency is the name used to describe ‘digital money’. This digital money can be traded between individuals without the need of a third party, such as a bank, using a type of technology called a ‘blockchain’. A blockchain is like a giant spreadsheet which records all of the transactions.
An individual can buy and sell cryptocurrency for ‘standard’ currency such as British pounds or dollars. Once you own cryptocurrency, such as bitcoins, these can be stored in your online ‘wallet’. There are also companies who hold a number of wallets where you can store your cryptocurrency, such as a Bitcoin exchange. You may then use the cryptocurrency in your wallet to buy goods and services or save them as a form of investment.
The legal problems with cryptocurrency and the courts approach
Cryptocurrency is not classed as legal tender in the UK which has caused issues for the court system in terms of best way to deal with them. The court system has now begun to find a way around this problem.
In the recent case of Danisz v Persons Unknown  EWHC 280 (QB) the court upheld the decision of AA v Persons Unknown that cryptocurrency is a form of property under English law. In this case the Claimant alleged that unknown fraudsters had transferred £27,000 worth of Bitcoin from her wallet into a wallet held in the Second Defendant’s Bitcoin exchange.
The court granted the following:
- An interim injunction preventing the unknown fraudsters and the bitcoin exchange from dealing with the Bitcoins in question in any way;
- A Worldwide Freezing Order against the unknown fraudsters; and
- A Bankers Trust Order against the Bitcoin exchange. This is where the Bitcoin exchange will need to pass over the details of the blockchain which should help the Claimant find out where the stolen bitcoins are now if they have been moved from the Second Defendant’s wallet.
The English courts also determined that they had jurisdiction to deal with cryptocurrency where the owner of the cryptocurrency is based in England and Wales. This was further supported by the payment of £27,000 for the Bitcoin being paid from a UK bank account.
It is important to note however that many of the court’s decisions to date in relation to cryptocurrency involve interim remedies and were uncontested.
It will be interesting to see how the fast-paced law surrounding cryptocurrency continues to develop.
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