Blockchain lawyer reflects on UKJT investigation into cryptocurrencies

The head of blockchain and cryptocurrency law firm Eversheds Sutherland, James Burnie, has responded to the UK Jurisdiction Taskforce’s (UKJT) recent findings regarding the legal nature of cryptocurrencies and smart contracts.

The UKJT published findings from the investigation on Monday, with Burnie stating that the outcomes are “generally as expected”.

In an encouraging step forward for cryptocurrencies as an asset class, the findings agreed that cryptocurrencies will be treated as property, although they cannot be the object of bailment as they cannot be physically possessed.

However, Burnie believes that one pivotal stone was left unturned, as consideration wasn’t given to crypto-assets that are backed by underlying physical assets.

He added: “This is not the full picture for crypto-assets linked to underlying physical assets, as those underlying can be held physically, and it would have been helpful if the report had recognised this.”

On the topic of smart contracts, he said: “The report recognises that a valid contractual relationship can be made through smart contracts, meaning that, as long as the requirements for a contract are in place, these can be evidenced via a smart contract. This follows a similar pragmatic approach taken in other jurisdictions, such as Singapore.”

One of the major talking points from the report is that private keys can be considered a legal signature. This, according to Burnie, could transform the way in which parties evidence an agreement as wet signatures can be fraudulently altered or plagiarised.

He concluded: “Perhaps the most welcome aspect of the report is in regards to the recognition that a private key can be a signature.

“This reflects the reality of modern-day interactions, where it is not practical to, for example, suggest that documents need a wet ink signature to be validly signed.

“Indeed, given the weaknesses of the traditional signature in terms of fraudulent copying, a private key that is only under one individual’s control could be better in terms of providing evidence of an actual agreement.

“The implications of this finding could be broad, as it implies, for example, that an e-mail signature could also in itself be deemed a valid signature.”

For more news, guides, and cryptocurrency analysis, click here.