Last year saw the most significant institutional uptake of cryptocurrencies and blockchain technology to date. BlackRock and Fidelity ramped up their digital asset strategies, reflecting a broader picture of multiple exchange traded funds (ETFs) being approved by regulators, allowing investors to gain indirect exposure to established crypto assets such as bitcoin and ethereum.
The emergence of so-called stablecoins (digital equivalents of traditional currencies, pegged to the value of the relevant currency) will also facilitate and accelerate a move towards funds being converted from cash currency to the stablecoin equivalent, where electronic funds are held on the blockchain rather than in the traditional banking system.
As a result, we will see increasing levels of digital assets held – directly or indirectly through ETFs – on UK business balance sheets, as well as those of pension providers, hedge funds and other investors.
Crypto offers high reward potential but also carries significant risks – it remains notoriously volatile, regulation is in its infancy, and it can be prone to use by bad actors.
The fact that an increasing number of businesses are exploring the opportunities offered by crypto presents interesting legal issues, not least if a company with crypto assets enters financial distress or an insolvency process.
Even basic legal questions are tricky to answer in the context of digital assets: Who owns them? Where are they located? Drilling down further: how can crypto be used as collateral? How can security be enforced against crypto? A new global industry – decentralised finance or DeFi – has developed out of crypto lending and borrowing, where smart contracts govern matters rather than traditional facility agreements.
How the current legal systems grapple with these questions and emerging technologies is an evolving picture. Which court has jurisdiction in the event of dispute? What law applies?
Even where jurisdiction is established, existing law, applicable to corporeal (physical) and incorporeal (non-physical) assets, often does not seamlessly translate. These issues aren’t unique to Scotland or England and Wales; they face all jurisdictions, often with a cross-border dimension.
The law is rushing to catch up. The Property (Digital Assets etc) Act 2025 sees England and Wales become one of the first jurisdictions in the world to confirm in law that digital assets such as cryptocurrency and non-fungible tokens can be recognised as personal property. Meanwhile, in Scotland, the Digital Assets (Scotland) Bill is currently being scrutinised by the Scottish Parliament’s Economy and Fair Work Committee. The bill seeks to clarify the legal basis on which digital assets can be owned and proposes rules governing acquisition and transfer. Burness Paull recently gave oral evidence to the committee alongside experts from the Scottish Centre of Excellence in Digital Trust and DLT. It’s in the interests of all involved that the law governing fast-moving technology is robust and future-proof.
We are seeing the legal and digital worlds collide in real time. Large cryptocurrency exchanges have failed, with FTX being the biggest so far, and Argo Blockchain (a bitcoin mining company) recently had a restructuring plan sanctioned by the High Court. This agreement will see a debt-for-equity swap and the company delisted from the London Stock Exchange, after prolonged industry volatility put the business under mounting financial strain.
Matters are moving quickly, and it is a fascinating area to monitor. There are opportunities for pioneers, legal and otherwise. However, as with any developing area, there will be stumbles along the way. At some point, Scots law will be forced to grapple with these issues in real life.
Fiona Carlin is a director, Burness Paull
