Cryptoassets (or 'cryptocurrencies') are increasingly being treated by UK authorities as a form of property. This treatment gives rise to certain legal and tax implications. Individuals and businesses will need to give careful consideration to these implications when making investment and estate planning decisions, as well as in the context of disputes involving cryptoassets.
In the recent case of AA v Persons Unknown [2019] EWHC 3556 (Comm), the judge held that Bitcoin is legal property for the purpose of granting an injunction to prevent the distribution of the cryptocurrency which was stored in the defendants' accounts. In making his decision, the judge heavily relied on the opinions made by the UK Jurisdictional Taskforce in their Legal Statement on Cryptoassets and Smart Contracts, which investigated whether to expand the legal concept of property to include cryptoassets.
The decision in AA v Persons Unknown reflects the current judicial trend of treating cryptocurrency as legal property. The judge in the unreported case of Liam David Robertson v Persons Unknown (15 July 2019) recognised Bitcoin as legal property. Similarly, in December 2019, HMRC set out its treatment of cryptoassets, confirming that they can be subject to taxes such as income tax, capital gains tax and inheritance tax, and that National Insurance contributions can apply to those received from mining them, for example.
Parties involved in litigation where the subject-matter is a cryptocurrency will need to reflect on this legal treatment as it will determine what approach they should adopt in court proceedings. The classification will also impact individuals' planning for succession purposes. Businesses will need to consider how to account for cryptoassets; how to secure and protect them; and how to value and deal with cryptoassets in corporate transactions and financing exercises.
Russell-Cooke’s dedicated team of lawyers has significant experience in advising on estate planning and trust matters, buying and selling businesses and companies and dispute resolution.