Disputes

We have already seen a wide variety of what might be termed ‘digital asset disputes’, ranging from those involving the insolvency of cryptocurrency exchanges or fraud around NFTs to cases concerning the operation of algorithms or contested intellectual property rights. Some of these disputes fit neatly into established jurisprudential categories. Claims relating to IP, for example, often rely on well-established principles such as copyright or database rights.

Nevertheless, a lot of the jurisprudence around digital assets is new. Many issues are still being considered. Although the body of case law is growing it is still relatively small, and only a small amount of legislation relates specifically to digital assets and their regulation. This situation has pros and cons. As the legal landscape is a work in progress, some parties may welcome the opportunity to influence its development – whether through the conduct of disputes, or through lobbying or responding to the consultations that are frequently issued by bodies such as the Law Commission. 

Even something as simple as record keeping may be a concern. If you are a depositor with a traditional bank that fails, you are likely to have bank statements showing how much money you have in your account, while the bank should have a clear record of your money in its ledger. But if you are an active trader in a crypto exchange that fails, you may not have an up-to-date record of your crypto wallet, and an administrator may find it is far from straightforward to discover who had what assets in their accounts.

In the UK

The frequency with which the courts have had to look – often urgently – at novel issues has probably reinforced the general narrative of legal uncertainty, as well as creating the impression that digital assets are not safe investments and that the law doesn’t know how to treat them. 

But while many uncertainties still exist, both conceptually and in relation to particular circumstances, the courts – in the UK and some other jurisdictions – have in fact largely done a good job of finding a robust and practical approach to cases that centre on digital assets.

As the Law Commission of England and Wales said recently in its report on digital assets, “the common law of England and Wales has already proven itself sufficiently resilient in the face of new technology and flexible enough to answer legal questions concerning digital assets. It is already developing a sophisticated legal regime that recognises and protects the nuanced features of those digital assets, providing the market with a good balance of certainty and flexibility.”

In some ways the most notable thing about the Law Commission’s report is its firm belief that the legal system can resolve the issues that will continue to arise from the growth in digital assets in a pragmatic and reasonable way.

Looking ahead

Although digital assets currently figure in only a relatively small proportion of disputes, some businesses within the digital ecosystem have a considerable caseload. There have been many instances, for example, of crypto exchanges that have found themselves in the firing line – either because of their own alleged actions or because their customers have either become the victims of fraud or theft or are alleged to have perpetrated it. They are increasingly the target of data subject access requests, and the sort of claims that traditional financial institutions are used to seeing from their customers. 

We will certainly see many more disputes like these. But there will also be a growing number of more general disputes with a digital assets element, as mainstream businesses increasingly invest in and utilise these technologies. 

The increasing importance of digital assets will also affect the way disputes are dealt with.