International law firm CMS releases today its Crypto Disputes Report 2024 in partnership with litigation data analytics company Solomonic. The research has identified an upward trend in the number of High Court claims in England & Wales related to cryptoassets since 2017, with 118 cases issued in the High Court over that time.
Between 2017 and 2018, there were three crypto-related High Court claims compared with 58 between 2022 and 2023.
The analysis also identifies the following key trends:
Fraud is main cause of crypto asset disputes: Over 50% of cryptoasset claims involve alleged frauds, hacks, or missing assets. Additionally, 18% relate to alleged breaches of contract, and 11% involve alleged breaches of intellectual property, with half brought by Craig Wright.
Novel issues: The courts have determined key principles that cryptoassets are capable of being property and that their location is the place where the person who owns them resides. Beyond that, cryptoasset disputes raise novel questions for the courts, including whether Bitcoin developers owe duties to bitcoin owners, whether copyright attaches to file formats, and issues related to structures like DAOs which may not fall within recognised corporate structures.
Increasing class action risk: With the financial and technology sectors facing significant class actions in the UK, cryptoasset businesses face particular risks, cryptoassets being complex financial products that use novel technologies. This risk is further heightened by the increase in claimant law firms, available litigation funding, and improved coordination technologies.
The rise of arbitration in crypto asset disputes: Arbitration is a favoured method for resolving cryptoasset disputes, especially among cryptoasset companies. Arbitration offers several advantages, including cross-border recognition, quicker resolution, lower costs, and the use of expert arbitrators.
Charles Kerrigan, Head of Crypto and Digital Assets at CMS, comments: "Despite the notable increase in crypto-related claims, volumes remain surprisingly low considering that 10% of adults have held cryptocurrency and there are 44 cryptoasset firms registered with the FCA. However, we anticipate a shift. With the recent rise in cryptocurrency prices, there is a surge in new owners and tokens, as the public continues to respond to new opportunities. Consequently, many new investors are encountering issues for the first time. A further new development in this cycle is the increase in availability of litigation funders in the market, suggesting there are plenty of winnable cases.”
CMS Partner Kushal Gandhi adds: "Our research has identified an upward trend in the number of High Court claims, and we expect this trajectory to continue. Numerous factors, including an increase in the number of claims issued and judgments handed down, combined with the law becoming more certain, makes it more attractive for law firms to litigate the right cases.
"The higher courts of England & Wales have an important role to play in relation to cryptoassets disputes going forward, as they decide on how the law applies and grasp the novel legal issues these complex assets present."
