Astraea Group's Matthew Allan has a featured interview article in the Autumn "Virtual" edition of City Solicitor magazine, the publication of the City of London Solicitor's Company and the City of London Law Society. In his interview Matthew considers prospective shifts in the regulation of cryptocurrency, the impact of NFTs on the art market and how to enforce your crypto rights.
Below is the text of the article.
Matthew Allan is a litigation lawyer with the Astraea Group who are carving out a niche for themselves in relation to enforcement and asset tracing when it comes to cryptocurrencies. This began as a result of one of the group’s founding partners, James Ramsden QC, being involved in the UK’s first recorded freezing injunction over Bitcoin; Wen v Exmoor Partners (2018).
“Wen v Exmoor Partners served as a launchpad for us to be at the coalface when it comes to the fallout from crypto. The whole decentralised finance (DeFi) paradigm shift away from more conventional finance is certainly at the heart of our work. You are dealing with what are essentially traditional breaches of contract but you have to look at them in a very novel and different way. It’s interesting to see how this is impacting both the regulatory side and the consumer side. Our perspective is that the market is likely to bifurcate in the near future; one fork focussing on consumer protection and one on law enforcement. A lot of consumers will be willing and happy to disclose their identities and there will be those that won’t. This latter category is not just the likes of money launderers or those financing terrorism but also individuals who value their privacy. There is an inherent gambler mentality involved with crypto, so where you are looking to defraud people, you are somewhat cavalier in your approach to the law generally. It is interesting to see how England is finding itself as the central jurisdiction in some of the larger crypto asset cases, One such case is the ongoing litigation in the High Court being brought by the purported creator of Bitcoin, Dr Craig Wright. That’s a case where the value is in excess of £4 billion. But while this speaks volumes as England being the jurisdiction of choice for enforcing these matters, which is good, at the same time you may not be able to do anything practically at the end of a case. For example in the Craig Wright case, so far there has been limited engagement from some of the parties; down to the fact that some won’t even disclose their identities for the service of papers. It’s a tricky situation. You could be spending a huge amount of money to bring the case only to find you could hit immoveable brick walls.
The regulation in the UK is likely to be led by the US. The US is taking very proactive steps at the moment. They’ve got a Bill currently going through the Senate (Eliminate Barriers to Innovation Act) which has bi-partisan support so it will inevitably become law. The follow on from this will be a consultation to discuss how to regulate crypto assets. It’s likely to fall back on the law enforcement side – and that will be picked up in the UK.
With the boom going on in the NFT art market now, we have also had to address this from a contractual and enforcement point of view because people are losing a lot of money while ostensibly buying nothing. It makes for a very interesting discussion with a client when they approach us as the first thing we have to say is that unless you have lost a very substantial amount of money, it’s probably counterproductive to spend any money trying to sue a breach. In one matter, a client lost €300,000 – but even with that amount it may not be cost efficient to pursue. Fortunately, a lot of people investing this sort of money in these sorts of assets do so because they can afford to lose it.
This is where it comes down to that fine balancing act of asking are consumers really demanding more protection or are they just angry they have lost money?
Our advice to clients getting involved in NFTs is to really read all the terms and conditions and be 100% sure of exactly what it is you are buying and where the copyright lies. When you are looking for ownership rights, an NFT is a very different concept from even when you are buying even a share of a piece of traditional art. This is where traditional art fraud would occur; people would sell the same piece of art over and over. While the technology behind NFTs ensures this cannot happen, nonetheless a buyer needs to really understand what it is they are actually buying. Does the artist/gallery/seller still own the copyright? Can he resell the art? Having said all this, the fact that NFTs are unregulated does afford benefits to artists who may otherwise be unable to access a highly restricted market and to monetise their work. NFTs are providing a more egalitarian mindset to the artworld. It’s no longer about contacts, or which college you went to. Anyone can put their art onto one of the digital platforms without having to go through the struggle of getting gallery representation. It is no longer the domain of a gatekeeper to decide what can get sold and purchased and what can’t. It’s a fascinating change in the rules of the game.
The underlying technology, blockchain, can and should be applied to much more than crypto and NFTs as it would see the end of Ponzi schemes and such like and offer real security for purchasers to know that what it is they are buying actually exists and the seller not only has it but has the right to sell it.
It is ironic that it is by treating crypto not as an intangible but as a physical identity, i.e. property, that makes it possible to enforce against, to get freezing orders and to recover assets. Whilst this is not true globally there is definitely a shift towards this approach which is helping make what could otherwise be unenforceable enforceable.”
The information provided in this article is of a general nature and does not constitute, nor should be relied on, as legal or professional advice.