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Wednesday, 14 July 2021 12:16

The Legal Risks of Cryptocurrencies

Cryptocurrencies are digital assets which are used as a medium of exchange. They make use of distributed ledger technology (DLT), such as blockchain, to secure and verify transactions. DLT involves unique identifying information from each transaction being held on a decentralised, anonymous database. This anonymous database can be viewed by everyone but cannot be tampered with, thus providing an accurate record of all transactions which have occurred. The use of DLT allows cryptocurrencies to operate without the backing of a trusted third-party institution, such as a central bank, as with traditional currencies. The most well-known cryptocurrencies are Bitcoin, Ethereum and Litecoin.

Cryptocurrencies have gained considerable public and media prominence in recent years: 78% of UK adults have said that they have heard of cryptocurrencies.[1] This is partly driven by the fact that more and more transactions are occurring online, a trend which has only been accelerated by the coronavirus pandemic. Furthermore, cryptocurrencies such as Bitcoin have registered record increases in value. At the end of 2019, Bitcoin’s price was around $7,000 – this had increased to around $60,000 by March 2021.[2] Cryptocurrencies have also been the focus of government and regulators in recent years. For example, the UK government set up the UK Cryptoassets Taskforce in 2018 which brought together HM Treasury, the Financial Conduct Authority (FCA) and the Bank of England (BoE)

[1] Michael Karim and Gergana Tomova, “Research Note: Cryptoasset consumer research 2021” (Financial Conduct Authority, 17 Jun 2021) < https://www.fca.org.uk/publications/research/research-note-cryptoasset-consumer-research-2021 > accessed 5 Jul 2021

[2] ibid

to consider the impacts of cryptoassets and DLT. The FCA has also conducted numerous qualitative studies into UK consumers’ attitudes towards cryptocurrencies.

FCA research from January 2021 shows that approximately 4.4% of UK adults currently hold cryptocurrency. This has grown from 3.9% in 2020. 82% of all UK adults had heard of Bitcoin, the highest percentage for any cryptocurrency. UK Cryptocurrency users are overwhelmingly male (78%), over 35 (70%) and 47% were within the highest AB social grade. Although 96% of UK adults who were aware of cryptocurrencies were also aware that they would not have financial protection if they did purchase cryptocurrency, there are indications of potential consumer risks. For example, 5% of cryptocurrency users believed they had some protection and borrowed to purchase cryptocurrency. 38% of cryptocurrency users said their main reason for buying cryptocurrency was as a gamble that could make or lose money. Also, sizeable proportions of people hear about cryptocurrencies from social media and online news.[1] This is concerning considering the well-documented issues surrounding accuracy with these sources.

Investing in cryptocurrencies poses a number of legal risks. Cryptocurrencies are increasingly being used to conduct cybercrime, money laundering, tax evasion and terrorist financing.[2] Criminals are attracted by the decentralised, anonymous and efficient nature of payments which enables them to quickly move stolen funds across the globe and into different jurisdictions.[3] In 2017, for example, the UK’s NHS was subject to the WannaCry ransomware cyberattack which demanded payments in Bitcoin.[4] The coronavirus pandemic and associated financial difficulties for many people combined with the huge increase in value of cryptocurrencies has led to criminals increasingly targeting vulnerable consumers using cold calls and ‘get rich quick’ schemes.[5] Cryptocurrency adverts on social media or online may also be misleading, often hiding complex products and charges. Action Fraud reported a 57% rise in cryptocurrency-related scams in the 12 months to December 2020 in the UK.[6]

The use of DLTs and cryptographic platforms also poses risks. Criminals may be able to steal a person’s private cryptographic key used to gain access to assets. Security loopholes within cryptocurrency exchanges and wallets may be exploited by hackers. For example, $460 Million was stolen from Mt Gox, one of the earliest and largest Bitcoin exchanges in the world.[7] Peer-to-peer exchange facilities and the privacy features of some coins also make cryptocurrencies attractive to criminals.[8]

Since cryptocurrencies are not backed by trusted institutions such as banks, they are completely reliant upon how investors and other consumers value them, leading to huge volatility. Still a relatively novel platform of exchange, cryptocurrencies are largely outside the regulatory ambit across the world. Where regulations exist, they evolve separately in different countries; however, cryptocurrencies are very much borderless assets. There being no standard practice means that consumers have much less protection from hacking and cybercrime, and it is therefore very difficult – though not impossible – to recover stolen funds. The onus is very much on individual companies to navigate varying cryptocurrency licensing regimes across jurisdictions.[9]

Businesses are increasingly vulnerable to ‘cryptojacking’ or malicious cryptocurrency mining. This involves an organisation’s computer processing power being used without their permission or knowledge to illegally mine cryptocurrencies. In May 2021 in Sandwell, UK, for example, British police discovered an illegal connection to the electricity supply at an industrial estate. Expecting a cannabis farm, they instead found a network of 100 computers mining Bitcoin, syphoning off huge amounts of electricity.[10]

With regards to regulation, prior to leaving the EU, the UK government implemented the EU’s Fifth Anti-Money Laundering Directive in UK law via the The Money Laundering and Terrorist Financing (Amendment) Regulations 2019 (MLR 2019). MLR 2019 expands the scope of money laundering legislation to now cover cryptoasset exchange providers and custodian wallet providers from 10th January 2020. The Financial Conduct Authority (FCA) will supervise the regulations and must maintain a register of such providers. In October 2020, the FCA further announced that it was banning the sale of crypto-derivatives and exchange traded notes (ETNs) that reference cryptoassets to retail consumers. The FCA believed that these were very risky and volatile investments which were ill-suited for the retail market. Despite these measures, the UK regulatory regime for cryptocurrencies such as Bitcoin remains light-touch with firms only being required to comply with the minimum anti-money laundering regulations. Consumers, for example, are not afforded the protection of the Financial Services Compensation Scheme or the Financial Ombudsman Service as they are for other investments.[11] However, the government is consulting on expanding the financial promotions regime to cover unregulated cryptocurrencies, recognising the role played by advertising in financial decisions.[12]

Stablecoins are a type of cryptocurrency which are pegged to a stable asset such as a fiat currency, for example the US dollar or Pound Sterling. This should make them less volatile, in theory. Diem, formerly known as Libra, is a cryptocurrency backed by Facebook which has announced that it plans to offer cryptocurrencies linked to the pound, dollar and euro and a basket of currencies.[13] The UK government therefore considers stablecoins as harbouring potential for use by retail consumers and investors, unlike traditional unpegged cryptocurrencies such as Bitcoin. A consultation is currently taking place into whether the FCA’s regulatory perimeter should be expanded to cover stablecoins, with the development of an authorisation regime.[14]

Author: Rohit Bansal

If you are seeking advice on any of the issues discussed in this article, please feel free to contact De Jure Chambers on 01223 643580 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it. and we will be happy to help.

Legal Disclaimer:

The Content on Our Site does not constitute advice on which you should rely. It is provided for general information purposes only. Professional or specialist advice should always be sought before taking any action relating to Our Site Content.

We make no representation, warranty, or guarantee that Our Site will meet your requirements, that it will not infringe the rights of third parties, that it will be compatible with all software and hardware, or that it will be secure.

We make reasonable efforts to ensure that the Content on Our Site is complete, accurate, and up-to-date. We do not, however, make any representations, warranties, or guarantees (whether express or implied) that the Content is complete, accurate, or up-to-date.


[1] ibid (all data in paragraph)

[2] HM Treasury, Financial Conduct Authority, Bank of England, ‘Cryptoassets Taskforce: Final Report’ (HM Treasury, Financial Conduct Authority, Bank of England, 2018) < https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/752070/cryptoassets_taskforce_final_report_final_web.pdf > accessed 9 Jul 2021

[3] ibid

[4] BBC News, ‘WannaCry ransomware bitcoins move from online wallets’ (BBC News, 3 Aug 2017) < https://www.bbc.co.uk/news/technology-40811972 > accessed 9 Jul 2021

[5] Jane Croft, ‘UK’s Crown Prosecution Service braces for rise in cryptocurrency scams’ (Financial Times, 4 Apr 2021) < https://www.ft.com/content/ee7f5417-37e9-47bf-9aba-d52c1d8aa785 > accessed 9 Jul 2021

[6] ibid

[7] LOW, Kelvin F. K. and TEO, Ernie. Legal risks of owning cryptocurrencies. (2017). Handbook of Digital

Finance and Financial Inclusion. Vol 1: Cryptocurrency, FinTech, InsurTech, and Regulation, 225-248.

Research Collection School Of Law.

Available at: https://ink.library.smu.edu.sg/sol_research/2485

[8] HM Treasury, Financial Conduct Authority, Bank of England (n 4)

[9] Nathan Reiff, ‘What are the Legal Risks to Cryptocurrency Investors?’ (Investopedia, 25 Jun 19) < https://www.investopedia.com/tech/what-are-legal-risks-cryptocurrency-investors/ > accessed 9 Jul 2021

[10] BBC News, ‘Sandwell Bitcoin mine found stealing electricity’ (BBC News, 28 May 2021) < https://www.bbc.co.uk/news/uk-england-birmingham-57280115 > accessed 9 Jul 2021

[11] HM Treasury, Financial Conduct Authority, Bank of England (n 4)

[12] Jill Lorimer, ‘The new cryptoasset promotions consultation: widening the perimeter of FCA regulation’ (Kingsley Napley, 31 Jul 2020) < https://www.kingsleynapley.co.uk/insights/blogs/crypto-assets-blog/the-new-cryptoasset-promotions-consultation-widening-the-perimeter-of-fca-regulation > accessed 12 Jul 2021

[13] Richard Partington, ‘Digital currencies pose threat to economy, warns Bank of England’ (The Guardian, 7 Jun 21) < https://www.theguardian.com/business/2021/jun/07/digital-currencies-pose-threat-to-economy-warns-bank-of-england > accessed 7 Jul 2021

[14] HM Treasury, ‘UK regulatory approach to cryptoassets and stablecoins: Consultation and call for evidence’ (HM Treasury, Jan 2021) < https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/950206/HM_Treasury_Cryptoasset_and_Stablecoin_consultation.pdf > accessed 9 Jul 2021

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It is irrefutable that the COVID-19 pandemic has fundamentally changed the legal, economic, and social order of the world. While data from the Solicitors Regulation Authority (SRA) does show that the UK legal sector has remained fairly stable, there is more to the story. In today’s rapidly changing world, the legal sector is constantly having to find ways to overcome new challenges. For this reason, it is important to understand how legal services in England and Wales have been affected by the ongoing health crisis. 

 Disruptions to the Profession

 The question of whether COVID-19 has impacted the legal profession has been the topic of much discussion. Recent sources have suggested that the legal sector in the UK has been somewhat stable throughout the global pandemic. While many areas of the law have greatly suffered, there has not actually been a significant amount of change: as noted in an article by Armstrong Watson, the SRA found that ‘the number of regulated firms fell by 1.9% between December 2019 and December 2020.’ 

 Family Law

One area of the law which has been significantly hindered by the outbreak of Covid-19 is Family Law. Slower court responses have escalated tensions within families.  

  1. It has been taking longer to obtain court hearings, and the impact on house prices, pensions, and the stock market has made financial settlement more difficult. This has meant family work is being completed at a much slower rate. Armstrong Watson note that they ‘did not see the usual January bounce in family instructions this year, most probably because the effect of families being together is now much more widespread through the year rather than in holiday pockets,’ but that ‘there is the potential for family work to surge in the future, as the strain of spending weeks together, along with financial pressures, become too much.’   
  2. Rights of Women wrote that some litigants have been struggling to participate in remote hearings in the Family Court during the pandemic, citing the following problems: not having good enough signal or internet access; being at home with children and not having a private space to participate in the hearing; not feeling confident with technology and struggling to switch between the hearing and virtual documents. This suggests that parties have been finding it hard to state their case adequately through a webcam. The outcomes of these hearings have huge implications on the participants’ lives and it is therefore imperative that they are able to express themselves just as well as they could in person. 


Commercial and Corporate

 Commercial and Corporate Law has been the second-worst hit, with many firms reporting a significant drop in obtaining new enquiries on matters. The main issues were that current transactions had not been completed and a lack of new instructions had jeopardised most work, creating a lot of uncertainty; it was not until Summer 2020 that transactional demand was at its peak. However, looking forward, there is still uncertainty due to the global recession and potential tax charges.  




Difficulties in Working from Home (WFH) 

  1. Both employers and employees will face issues with WFH. A notorious issue that will be seen across the board is the challenge of facing technical difficulties. Although this is a rather big issue as an internet connection is not always stable, employers are having success in paying expenses to employees with regards to their broadband. Expenses such as travel are becoming obsolete, and the expense of broadband can be significantly less than what travel costs incur in a month. It also has the benefit of allowing employees to work at their optimum performance, as they are not tired out by their commute.

  2. Coodes Solicitors employment specialist Philip Sayers writes that ‘businesses may not have had the time to carry out security checks and ensure the correct systems are in place to protect sensitive data.’ However, complying with GDPR is a very important check that must be ensured. Furthermore, to avoid a cyber-attack and reduce the risk of a data breach, employers should get advice from experts to ensure their system is secure. 

A Double-Edged Sword: the impact on legal services 

A number of areas in the legal sector, such as employment, housing, and welfare, have also seen a huge rise in cases. As the Government makes immense policy changes at a moment’s notice, it becomes unclear how these policy changes will affect everyday life. 

Employment law

 Employment Law, in particular, has seen a large rise in cases. The word “furlough” will surely ring a bell for many of those told to stay at home to protect the NHS. 

  1. The Coronavirus Job Retention Scheme or CJRS, more commonly known as “furlough”, rolled out in March 2020 as a direct response to the forced closure of businesses throughout the country. As Gov.UK states, it worked by ‘providing grants to employers of up to a maximum 80% of salary to a maximum value of £2,500 per employee (until the end of August).’ Roughly 9.6 million employees were furloughed and almost 8,000 reports of furlough fraud have been reported. 

  2. Since the beginning of the scheme, the rate of pay has changed every couple of months, with employees’ pay being split between the government (who cover the large majority of costs) and the employers. On the 1st of July 2020 we were entered into the “flexible furlough” scheme which differentiates itself from the prior scheme by the fact that furloughed staff are allowed to work part-time, with employers claiming a grant for their non-working hours.

With the end of the CJRS scheme in sight, on the 30th September 2021, we can expect an increase in demand for Employment Law services. 

Property and Conveyancing

 This area of law has reported a large growth in its workload, due to the fact that since the housing market re-opened there has been a temporary change in stamp duty. The reduced rates of stamp duty has meant that there is an increase in properties being bought. The rise in demand has meant that the recruitment market for conveyancers has significantly increased.

Although this is a fantastic opportunity for conveyancers, it does not come without any issues. Conveyancers are facing heavy pressure and according to the law society they are working late into the evening and at weekends to ensure transactions are progressing. A conveyancing update for the Law Society advises that ‘it’s key at this stage to take steps to manage your clients’ expectations in the lead up to 30 June.’ As it is key for client expectations to be managed and conveyancers are aware of this, they must also manage the many factors which could delay a transaction which are outside their control. The conveyancing update goes on to outline these factors, which include clients having issues obtaining mortgages and delays with lenders, therefore risking missing completion before the end of the decreased stamp duty period.

Litigation and Personal Injury

These areas of law have been mostly unaffected by the pandemic, apart from the general slowing-down which we have seen across the board. Litigation matters are taking a much longer response time, but this was due to the closure of courts. Personal Injury matters are also taking longer than usual, but this is mainly due to insurance companies slowing their response time down and adapting to working from home. Despite ongoing matters, there has been a general decrease in claims for injuries, and according to these reports, injuries themselves have decreased significantly. 

  1. Restrictions placed on movement have meant that there are simply fewer people roaming the streets, which equates to fewer incidents. Fewer employees being physically present at workplaces reduces the scope of accidents for which employers are liable.

  2. Likewise, fewer people on the road has meant there have been even fewer RTA claims. According to Armstrong Watson’s article, ‘the Legal Services Board reports that the number of claims made through the Portal have been lower every month compared to the previous year since April 2020.’ 

  3. With the easing of lockdown over the last few weeks came an increase of 35% in motor incidents, as reported recently by Co-Op Insurance. The report states that ‘whilst overall the insurer is seeing less claims than it did compared to before lockdown, perhaps the reason for this sudden increase in motor collisions is the fact that many motorists are out of the habit of driving regularly due to lockdown.’ This is further evidenced by some serious incidents of speeding.

  4. To contrast the above points, a handful of companies have banned the use of remote medical examinations, due to concerns about fraud (this ban has since been lifted). It is very difficult for a medical professional to properly examine an injury over webcam, which in turn makes it difficult for them to give that injury full credibility. With the medical examiner less able to make a fair assessment of the damages incurred, the claimant’s word has to be relied upon. 


Authors: Saif Jabbar, Henna Khatun, Anisa Kebbati

Photos by: Scott Graham @homajob


Linklaters LLP. “The Impact of the Novel Coronavirus Outbreak on Commercial Contracts in 14 Jurisdictions | Publications | Insights | Linklaters.” Linklaters LLP, www.linklaters.com/en/insights/publications/2020/march/novel-coronavirus-commercial-contracts/novel-coronavirus-impact-on-commercial-contracts. Accessed 28 June 2021.

“Covid-19 and Your Business.” The Impact of Covid-19 on the Legal Sector, 2021, ArmstrongWatson, www.armstrongwatson.co.uk/services/covid-19-and-your-business/impact-covid-19-legal-sector.

“Co-Op Media.” Crunch Time for Motorists as Claims Surge by a Third Following Relaxation of Lockdown Rules, 2021, https://www.co-operative.coop/media/news-releases/crunch-time-for-motorists-as-claims-surge-by-a-third-following-relaxation-of

“Coronavirus Job Retention Scheme Statistics.” Overview, 2021, www.gov.uk/government/statistics/coronavirus-job-retention-scheme-statistics-3-june-2021/coronavirus-job-retention-scheme-statistics-3-june-2021.

BBC News. “Coronavirus: Lockdown Drivers Caught Travelling up to 140mph.” BBC News, © 2021 BBC, 20 June 2020, www.bbc.co.uk/news/uk-wales-53055560?intlink_from_url=https://www.bbc.co.uk/news/topics/cx250pek0xxt/road-safety&link_location=live-reporting-story.

“Data from SRA.” SRA Update, 2021, www.sra.org.uk/sra/news/sra-update/sra-update-issue-91-april-2021.

“The Law Society - Property.” Conveyancing Update: SDLT Deadlines, Leasehold Reform and PII, 2021, www.lawsociety.org.uk/topics/property/conveyancing-update-sdlt-deadlines-leasehold-reform-and-pii .

“Law under Lockdown: The Impact of COVID-19 Measures on Access to Justice and Vulnerable People.” The Law Society, www.lawsociety.org.uk/en/topics/research/law-under-lockdown-the-impact-of-covid-19-measures-on-access-to-justice-and-vulnerable-people. Accessed 28 June 2021.

“Stamp Duty Land Tax: Temporary Reduced Rates.” GOV.UK, 8 June 2021, www.gov.uk/guidance/stamp-duty-land-tax-temporary-reduced-rates.

Sayers, Phillip. “Coodes Solicititors Blog.” What Are the Legal Issues around Working from Home?, 2020, https://coodes.co.uk/blog/legal-issues-around-working-from-home/

Au, Emily; Prytherch, Jack; Brown, Andy. “UK: COVID-19: What Should I Do If HMRC Suspect My Business of Furlough Fraud?” Bird & Bird, © 2021 Bird & Bird, 9 Sept. 2020, www.twobirds.com/en/news/articles/2020/uk/covid-19-what-should-i-do-if-hmrc-suspect-my-business-of-furlough-fraud.

Poultney, Joel. “Covid-19 and Legal Practice Areas.” To Be Commercially Aware in 2021, You Have to Know How Coronavirus Has Affected the Work Done by Lawyers, 2021, www.chambersstudent.co.uk/where-to-start/commercial-awareness-info/covid-19-and-legal-practice-areas.

“Remote Hearings.” Coronavirus – Remote Hearings in the Family Court, 2021, https://rightsofwomen.org.uk/get-information/family-law/coronavirus-remote-hearings-in-the-family-court/.

“MedCo Approves Remote Examinations.” Clyde&Co, © Clyde & Co LLP, www.clydeco.com/en/insights/2020/03/medco-approves-remote-examinations-ban-lifted-vide. Accessed 28 June 2021.

If you are seeking advice on any of the issues discussed in this article, please feel free to contact De Jure Chambers on 01223 643580 or by email at This email address is being protected from spambots. You need JavaScript enabled to view it. and we will be happy to help.

Legal Disclaimer:

The Content on Our Site does not constitute advice on which you should rely. It is provided for general information purposes only. Professional or specialist advice should always be sought before taking any action relating to the Our Site Content.

We make no representation, warranty, or guarantee that Our Site will meet your requirements, that it will not infringe the rights of third parties, that it will be compatible with all software and hardware, or that it will be secure.

We make reasonable efforts to ensure that the Content on Our Site is complete, accurate, and up-to-date. We do not, however, make any representations, warranties, or guarantees (whether express or implied) that the Content is complete, accurate, or up-to-date.

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