UK Jurisdiction Taskforce publishes its third Legal Statement on Digital Assets and English Insolvency Law

Quick read

Following the launch of its public consultation in October 2023, the UK Jurisdiction Taskforce has now published its latest Legal Statement on the treatment of Digital Assets under English insolvency law.

Key conclusions

The UK Jurisdiction Taskforce's (UKJT) key conclusion is that English insolvency law is sufficiently flexible to technological developments around digital assets, and is likely to be applied in a conventional and predicable way.

Importantly, this brings confidence and certainty to those practising (and investing) in this area. The UKJT also concludes, unsurprisingly, that digital assets are capable of amounting to property for the purposes of English insolvency law. From that conclusion, the usual full suite of investigatory and claw-back powers are likely to be available to an insolvency office holder in a digital assets insolvency, although the method of giving some of the powers effect may need some adaptation (to which the English courts should find no difficulty).

However, the UKJT considers that digital assets are not (yet) money or "foreign currency", and therefore not (yet) capable of founding a statutory demand or being subject to conversion as at a particular date.

In terms of determining jurisdiction, the UKJT has drawn upon the well-established COMI test in respect of companies dealing in digital assets (and pointed to the Singaporean case of Zipmex).

There remain, however, many fact-specific scenarios to be answered as this area of law continues to develop. But this new Legal Statement should (like the original) prove to be persuasive in the issues of principle which it addresses.