Senior Associate Guy Robson and Associate Elliott Fellowes discuss cryptoassets and smart contracts following their attendance at the UK Jurisdiction Taskforce public consultation.
On 4 June 2019, representatives of Signature Litigation attended the UK Jurisdiction Taskforce (“UKJT“) public consultation on the status of cryptoassets, distributed ledger technology (“DLT“) and smart contracts under English law. The UKJT was established by the LawTech Delivery Panel with the objective demonstrating that English law and the jurisdiction of England and Wales provide a state-of-the-art foundation for the development of DLT, smart contracts and associated technologies. As the use of fintech becomes ever more common across international and domestic financial markets, it will become increasingly important for parties to have access to appropriate remedies for disputes which arise and Signature is actively monitoring developments in this area.
The UKJT public consultation was called to gather feedback on a series of questions (which can be found here [https://www.lawsociety.org.uk/news/stories/cryptoassets-dlt-and-smart-contracts-ukjt-consultation/]) relating to cryptoassets and smart contracts, and in particular whether the questions being asked by the UKJT in its consultation are the ‘right’ questions, or whether other issues should be considered. The UKJT intends to publish a legal statement by the end of summer 2019 in response to the questions asked in the consultation. There is therefore an opportunity for market participants and their advisers to provide input into the way the UKJT considers these issues and to help inform the conclusions that the UKJT reach.
Sir Geoffrey Vos, Chancellor of the High Court, led the public consultation and stated that it was his hope that the forthcoming legal statement would be accepted by industry and stakeholders as reflecting the current status of English law with respect to cryptoassets and smart contracts, and that in due course it would be affirmed by the English court as such. Sir Vos is on record for calling cyrptoassets one of the most important legal subjects for our generation. If the UKJT concludes that new legislation is needed to address issues, it is intended that any such legislation should be as concise and focussed as possible. It appears that the UKJT has already contacted the government to discuss the possibility of any proposed bill in respect of cryptoassets and smart contracts taking advantage of the process for fast-tracked legislation in order for it to passed by parliament as quickly as possible.
We were interested to hear comments made by Sir Vos about the necessity for market participants to have access to effective dispute resolution methods, even where, for example, smart contracts have been coded to automate the execution of contractual conditions. Recourse to effective remedies where a dispute arises is the other side of the coin when it comes to the UK being perceived as an attractive jurisdiction for market participants to operate and invest in: participants need clarity as to their rights and remedies in the inevitable event that disputes arise. However, what exactly those remedies are will very much depend on whether cryptoassets are accepted by the English court as being property under the current law and understandably this issue of definition is at the heart of many of the questions posed by the UKJT).
In general it seems clear that the UKJT is at pains to reassure fintech industry participants that it is seeking to ensure that English law is not hostile to continuing technological development. The aim is to provide a light-touch, high-level legal basis with the flexibility to accommodate subsequent technological changes and challenges without being overly prescriptive and restrictive to innovation. In doing so the UK may be in a position to establish itself as a leading jurisdiction for cryptoassets and smart contracts, as English common law already may already offer the inherent flexibility needed to allow new developments in fintech to flourish This was contrasted with other international jurisdictions which have decided first to try and regulate the fintech industry without perhaps fully understanding or appreciating the potential of the activities which are proposed to be regulate. It was suggested that this approach risked putting the cart before the horse.
The UKJT is taking feedback on the consultation questions until 21 June 2019. We encourage market participants and advisers to the fintech industry to make their views on the consultation known to the UKJT in order to ensure that the UKJT is able to take these on board.