As part of our series looking at the potential impact of recent cases on the future decisions of the Cayman Islands and the BVI Courts relating to crypto assets, we consider the recent English decision of Tulip Trading Limited v Bitcoin Association for BSV and others [2022] EWHC 141 (Ch), and specifically whether cryptocurrency is likely to be accepted by the Courts as a form of security.
The claimant in Tulip Trading requested that the form of security it be required to provide be cryptocurrency in circumstances where providing cash would be onerous for the claimant. The claimant proposed that it transfer this cryptocurrency to its legal counsel including an additional 10% buffer to account for the potential change in the price of the cryptocurrency between the time it was transferred and when it may be required to settle the defendant’s legal costs. The cryptocurrency offered by the claimant was Bitcoin Satoshi Vision or Bitcoin Core. Notwithstanding the 10% buffer offered by the claimant, the Court did not consider this would constitute a form of security equal to a payment into court in the light of:
In line with the local case law on alternative forms of security for costs (such as guarantees or charges over real estate), we anticipate that the Courts in the Cayman Islands and the BVI will always be concerned to ensure that where the plaintiff requests that something other than a payment of cash into Court is accepted as security, such alternative form of security can properly be regarded as the equivalent of a payment into Court. Therefore, it seems likely that the BVI and Cayman Islands Courts will follow this decision and refuse to order that cryptocurrency be awarded as an alternative form of security for costs, particularly given both the volatility of this asset class when compared to cash and potential issues with enforcement.
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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.
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