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The duty of care in cryptocurrency

Author: Syedur Rahman  17 August 2022

A case that went to the UK Court of Appeal is significant because it considers whether cryptocurrency developers owe a duty of care to their end users.

In 2020, Dr Craig Wright, the owner of Seychelles company Tulip Trading, had more than 111,000 Bitcoin stolen from him. He argued that developers owed a duty to those who use and rely on their blockchains.

But in Tulip Trading v Van der Laan and Ors, the High Court denied Dr Wright’s claim against Bitcoin and various other developers on the grounds of jurisdiction. Judge Falk ruled in March that it could not be argued that there is a fiduciary relationship between Bitcoin owners and the cryptocurrency’s developers on the basis that a relationship of this type requires one party to entrust another with its property. In May, Judge Falk declined Tulip permission to appeal her previous ruling, but the company was allowed to go directly to the Court of Appeal with its case.

At the Court of Appeal, Judge Geraldine Andrews said in a brief order granting Tulip permission to appeal that it was “arguable” that High Court Judge Falk “fell into error” when upholding the developers’ arguments.

Judge Andrews added: “The issue as to whether developers owe duties of care and/or fiduciary duties to the owners of digital assets and, if so, what is the nature and scope of those duties, is one of considerable importance.’’

This case has the potential to provide hugely important guidance regarding the duties owed by cryptocurrency developers. It could, however, be overshadowed by ongoing jurisdictional issues.

The permission to appeal that Tulip has obtained will delight those who have fallen foul of cryptocurrency hackers. For them, it may represent a possible new avenue when it comes to seeking to recover assets. This would negate, to a large extent, the dependence on the cryptocurrency providers and avoid the need to obtain third party debt orders from the court.

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Syedur Rahman is known for his in-depth experience of serious fraud, white-collar crime and serious crime cases, as well as his expertise in worldwide asset tracing and recovery, international arbitration, civil recovery, cryptocurrency and high-stakes commercial disputes.

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