Do Developers Of Bitcoin Owe A Duty Of Care To BitCoin Owners

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Do Developers Of Bitcoin Owe A Duty Of Care To BitCoin Owners?

What Is Bitcoin?

Bitcoin is a form of a virtual currency run independently of monitoring by the executive or a bank which is held in what is known as digital wallets. Readers may be familiar with cryptocurrencies and lending carried out peer-to-peer. These are a form of Bitcoin. Usually, Bitcoins are sent electronically between parties by computer device or smartphone.

Blockchain? I Need A Plumber To Sort That, Don’t I?

Many who are unfamiliar with the concept may recoil in fear at the word ‘blockchain’ as it may remind them of an incident involving a broken toilet. However, readers need not be so concerned because it is nothing to worry about. The blockchain is a method for documenting data from each Bitcoin transaction on a ledger that is open to public inspection. A large number of computer servers worldwide are also required to store duplicates of each Bitcoin transaction.

Those Parties Who Developed Bitcoin Owe a Duty Of Care To Those Who Own Such Digital Products, Right?

Whilst the majority of transactions proceed without a hitch and many users comment on how efficient the procedure is, Bitcoin has not been without its controversy. A downside to it is the very real risk that Bitcoins could be stolen from internet sites where Bitcoins are being held. To demonstrate the problem somewhere in the region of $14 billion of Bitcoin and Cryptocurrency was stolen in 2021.

  • The High Court recently heard the case of Tulip Trading Ltd v Bitcoin Association for BSV in which evidence was submitted on behalf of users of Bitcoin. They asserted that they were proprietors of Bitcoin; and
  • claimed that the developer owed fiduciary duties
  • some developers of Bitcoin argued that parties who had developed or controlled the software behind the virtual currencies should help affected users, who had had the misfortune to have their Bitcoins stolen, to recover entry to the website containing the relevant virtual wallets and take charge of the currency again. In the absence of this, the Claimants claimed a remedy of damages and equitable relief.

What Did The Court Say…?

The court rejected the arguments submitted by the Bitcoin users. The reason provided by the court in their judgment was that there was insufficient evidence submitted to suggest that Bitcoin users had assigned the responsibility of their digital assets to the developers of the software. One factor considered by the High Court was the fluid and anonymous identity of the developers involved.

Were Any Further Allegations Made?

The users claimed they were in a fiduciary relationship with the developers based on their absolute allegiance to the digital currency users.

What Did The Court Decide On This Point?

The Court reviewed the evidence presented to it and found that parties who had developed Bitcoin did not subsequently owe a duty of care to subsequent Bitcoin owners. They made clear that developers facing this situation were not obliged to help users recover entry to and control over their Bitcoins. The fact that such developers were often shrouded in anonymity often presented an insurmountable challenge to digital currency users.

What Should Lawyers Be Advising Their Clients?

Lawyers should be advising clients to avoid being caught out by mitigating against the risk of having their digital assets stolen and the need for desperately attempting to sue Bitcoin developers by keeping their private Cryptocurrency keys safe. Thomas Clark of Freshfield Solicitors recently commented that the High Court has left ajar the potential for the imposition of tighter controls on parties developing and controlling Bitcoin.

The Legists Content Team

ASSESSING FIRMS

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THE ARTICLE WAS WRITTEN USING THE FOLLOWING SOURCES

[1] Tulip Trading Ltd v Bitcoin Association for BSV and others [2022] EWHC 667 (Ch) - Tulip Trading Ltd v Bitcoin Association For BSV & Ors [2022] EWHC 667 (Ch) (25 March 2022) (bailii.org)

[2] Clark, Thomas et al. – Tulip Trading: when do blockchain developers owe duties to their users? – Freshfield Bruckhaus Deringer – 6th April 2022 - Tulip Trading: when do blockchain developers owe duties to their users? - Lexology

[3] Jones-Fenleigh, Harriet et al. – High Court rejects claim blockchain developers owe duties to users – Norton Rose Fulbright - 31 March 2022 - High Court rejects claim blockchain developers owe duties to users | Inside Disputes | Global law firm | Norton Rose Fulbright

[4] VTB Capital plc v Nuritek International Corp & Others [2012] EWCA Civ 808

[5] Spiliada Maritime Corporaton v Cansulex Ltd [1987] AC 460

[6] Altimo Holdings Limited and Investment v Kyrgyz Mobil Tel Ltd [2011] UKPC7

[7] Vedanta Resources v Lungowe [2019] UKSC 20

[8] Easyair Ltd v Opal Telecom Ltd [2009] EWCA 339(Ch)

[9] Brownlie v Four Seasons Holdings Inc [2017] UKSC 80

[10] Goldman Sachs International v Novo Bank SA [2018] UKSC 34

[11] Kaefer Aislamiementos v AMS Drilling Mexico [2019] EWCA Civ 10; [2019] 1WLR 3514

[12] Airbus SAS v Generali Italia SpA [2019] EWCA Civ 805; [2019] 2 Lloyd’s Rep 59

[13] – Accepting Online Payments – NI Business Info.co.uk - Advantages and disadvantages of using cryptocurrency | nibusinessinfo.co.uk

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