Plans for new rules to tackle offshore crypto crime

• United Kingdom

• Financial services disputes and investigations
• Financial services

11-03-2022

Background

The Master of the Rolls, Sir Geoffrey Vos, has announced plans to draw up new rules to assist the Courts in tracing crypto assets overseas, as a result of rising levels of litigation involving the offshore transfer of crypto assets. This represents further progress towards enshrining crypto-specific rules and regulations in law and follows recent Government proposals to tighten advertising standards on firms selling crypto-currencies [see our recent article on this topic here].

As the trading and exchanging of crypto assets becomes more commonplace, and disputes involving such assets become equally more frequent, the Courts have found it increasingly difficult to apply historic precedent to these often complex and unique cases, particularly when currencies and assets are transferred abroad – either legitimately or fraudulently. In response, and to provide the Court with a greater set of tools to approach these issues, a sub-committee of the Civil Procedure Rules Committee is amending and expanding the criteria for when extra-jurisdictional proceedings and orders can be served where crypto assets are involved. Specifically, these new rules propose to make it easier for a Court to order a third party to disclose documents relating to accounts belonging to individuals responsible for crypto fraud.

Commentary

The implementation of further rules specifically targeting crypto assets is a step in the right direction and will reassure crypto investors and traders that they have a right of recourse in the event that litigation becomes necessary, even in circumstances where the assets in question are no longer held in the jurisdiction. Crypto fraud is a worldwide problem and the difficulty in tracing crypto assets is an obstacle with which the Court has become all too familiar. Extra-jurisdictional third party disclosure orders are not currently straightforward and simplifying the process should result in fairer and swifter outcomes for those who are the victims of crypto fraud.

Those at the forefront of crypto technology insist that the blockchain is here to stay and has developed beyond the forum of a digital stock market for cryptocurrencies that it was once seen as. Indeed, its ability to immutably record data will lead it to becoming “ubiquitous in all major industrial and financial sectors” according to Sir Geoffrey. Naturally, the increase in usage of any digital product or system allows for more innovative and advanced scams and attacks by those aiming to defraud individuals and companies for their personal gain. It is therefore vital that the law keeps up with these systems as they develop and it is encouraging to see that those with the ability to modernise court rules are embracing the blockchain.