‘All firms will need to understand blockchain’

If this isn’t a question you have had to respond to yet, you may need to think about it sooner rather than later. While insurers may remain wary of cryptocurrencies use, Filby's own answer to that question was a clear ‘yes’. The UK government trajectory – likely regardless of political persuasion – is to become a world-leader in digital assets (Sir Geoffrey Voss being cited in support of the argument that all firms will need to understand blockchain). This certainly caught the attention of the room.

Amongst the strong arguments in support of his view, Filby posed some highly probable scenarios which would require us as solicitors to be properly informed about digital assets:

• Managing a probate: the estate may well contain crypto assets, and executors will expect the solicitor to be both able to manage and advise on that, including proactively addressing issues of potential volatility of digital assets
• Matrimonial law: clients may require to be advised of the possibility of digital assets forming part of the matrimonial assets
• Corporate & commercial: businesses may be using crypto assets, and may require advice on issues including pricing risk, tax implications, etc.
• Property: in addition to paying with Bit-coin (or other crypto-currency) the emergence of smart contracts using NFTs (non-fungible tokens) will require a working understanding of the technology
• Commercial litigation: English courts are in the vanguard of use of cryptocurrencies within the legal system, and can both award compensation in digital assets, and also accept them as security for costs (though this has not occurred in practice as yet)

Complications to be aware of include the need for appropriate enhanced due diligence, the requirement for clients to transfer digital assets directly – they cannot currently be held in a solicitor’s client account.

Practical actions & risk mitigations

• Review your work-types, taking into consideration the potential use-cases of digital assets. Review your work appetite in light of this.
• Ensure your early-stage fact-find considers digital assets, and that these are included in any client and matter risk assessment at the earliest opportunity.
• Consider whether your Letter of Engagement/Matter Scope precedents need to make reference to digital assets. If you are seeking to exclude advising on any matters concerning digital assets, be alert to the commercial risks (being left behind as digital assets become more common) and the professional risks (of advising on them). Be aware that not advising on them can be a negligence matter also.
• Consider implementing a specialist team to advise on digital asset issues.
• Do not act as a bank – whether for normal assets or digital assets – even inadvertently.

If you have any questions or would like to discuss the use of digital assets further, get in touch.