The Law Society of England and Wales has responded to the statement on digital assets and English insolvency law published by the UK Jurisdiction Taskforce.
In October 2023, the UK’s Jurisdiction Taskforce (UKJT), which is made up of senior judges, lawyers, a law commissioner, and the Financial Conduct Authority as an observer, issued a consultation on the treatment of digital assets in an English insolvency. This has resulted in the issuance of a Legal Statement on Digital Assets and English Insolvency Law, in which the UKJT has concluded that existing English insolvency law is “entirely capable of convenient and sensible application to disputes concerning digital assets”. Although lacking any binding authority, the Legal Statement provides valuable guidance on the likely approach that the English courts will take to these issues.
The UK Jurisdiction Taskforce (UKJT) is a part of LawtechUK, an industry-led group tasked with supporting the digital transformation of the UK legal services sector and with positioning English Law as a law of choice for new technologies. The remit of the UKJT is to provide legal certainty for new technologies under English law. Digital transformation has become a top priority for many institutions operating in the financial markets. It is widely recognised that blockchain, DLT and associated technologies offer significant potential in this regard.
At the same time, the past 18 months have ‘seen increased turbulence in the digital asset markets’. The UKJT points out that ‘recent high-profile collapses of digital asset exchanges, platforms and funds have highlighted the importance of robust insolvency processes to ensure fair and predictable outcomes in respect of this form of investment’. They also comment that the English courts have ‘nonetheless not yet had occasion to address the application of various important English insolvency law concepts to digital assets’. Having previously published a number of contributions in relation to digital assets, the UKJT says it sees merit in delivering a legal statement on digital assets and English insolvency law, in order to provide clarity to the market as to the application of English insolvency law to digital assets.
The aim of the consultation paper is to ensure that the issues addressed in the proposed legal statement are those about which key stakeholders are most concerned. The consultation will remain open for responses until Monday 4 December. Once this consultation has closed and the results have been considered, it is intended that the Legal Statement on Digital Assets and Insolvency Law will be published in early 2024.
Nick Emmerson, president of the Law Society of England and Wales said:
“We welcome the statement on digital assets and English insolvency law published by the UK Jurisdiction Taskforce. The statement helps maintain our legal system as a preferred choice for international transactions and confirms that English law can effectively resolve legal disputes involving digital assets like crypto-tokens and cryptoassets through using technologies such as electronic signatures, smart contracts and distributed ledgers.
“Additionally, it clarifies that digital assets can be considered property under English insolvency law. It provides guidance on how English courts can determine the “Centre of Main Interests” for a company dealing with digital assets and how claims to digital assets can be handled in legal disputes or insolvency cases.
In this new age of global digital transformation, it is crucial to ensure English law continues to be a vital asset to the UK’s economy by adapting and evolving to preserve its competitive edge and increase the worldwide influence of our legal system.”
