Bitcoin & Fiduciary Duties

Written by Kemal Tayyareci | June 19, 2023

Intellectual Property

Whether Bitcoin developers owe fiduciary duties to Bitcoin owners remains a hot topic. The recent market turbulence caused by crypto asset holders suffering cyber-attacks continues to result in litigation on untested grounds, with the courts having to fit an ever-evolving technology into the existing legal framework.

Recent Developments

Against this backdrop, a first instance decision in Tulip Trading Ltd v Bitcoin Association for BSV and Others (Tulip) has ruled that bitcoin developers could owe a fiduciary duty to Bitcoin owners.

In considering what this fiduciary duty could encompass, the judge thought that a duty is likely to include a negative duty to not act in their self-interest and in certain circumstances could involve positive duties, such as introducing code to fix software bugs.

It is therefore conceivable that there exists a duty to introduce code to remedy stolen private keys and we eagerly await the full trial decision on this point.

Briffa comment

The case is interesting from a legal perspective because it opens the gateway for a decision which would transform the current common law on fiduciary duties. If the Court of Appeal finds that a fiduciary duty can extend to a floating class of persons, the scope of the duty will have been greatly widened.

Over time, bitcoin owners may be able to recover their crypto assets through software patches, opening the floodgate for claims against developers in crypto asset networks from victims of crypto hacks who will see the network developers as a more realistic course of remedy over the fraudsters themselves.

The litigation landscape for crypto assets is an exciting and rapidly developing area of law, one that Briffa is well placed to assist with having assisted clients in the technology sector and beyond for over 25 years.

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