Cryptocurrency – fiduciary duties are not just offline

The recent Court of Appeal decision in Tulip Trading Limited v Wladimir van der Lan and Ors marks an important development in the cryptocurrency space. The High Court had earlier decided that developers of cryptocurrency networks cannot owe fiduciary duties to the owners of cryptocurrency used within that network. The claimant’s subsequent appeal was then allowed. Whilst the question of whether the duty arose on the facts of the present case has not yet been determined, by allowing the case to proceed the English courts demonstrate they continue to be prepared to consider the claimants’ position in this space.  

High Court

Tulip Trading Limited (Tulip), a company registered in the Seychelles, issued proceedings against more than a dozen cryptocurrency developers. Tulip serves as the holding company of Dr Craig Wright, who claims that he created Bitcoin under the pseudonym ‘Satoshi Nakamoto’.

Tulip sought access to a Bitcoin wallet following an alleged hack that resulted in the private key to the wallet being lost, thereby preventing access. Tulip argued that the defendant developers, having undertaken to operate and control the software that ran the cryptocurrency network, could be ordered to reinstate Tulip’s control over the wallet.

Further, Tulip claimed that because the defendant developers operate and control the network, they control how owners of cryptocurrency in the network access their property such that they have control over property held by others. As a result, Tulip claimed that the defendants owe fiduciary duties to the true owners of the property that they control. In these circumstances, Tulip argued that the defendants are obliged to create a software patch to enable Tulip to recover its property.

The defendants were based outside the UK and Tulip obtained an order to serve the proceedings on them outside the jurisdiction. Most of the defendants then applied to the High Court for an order setting aside service. The High Court considered a number of points, including whether the requisite merits test had been met, concluding that Tulip had not established a serious issue to be tried. This was because the High Court took the view that there was no realistic prospect of establishing any breach of fiduciary or tortious duty by the defendants.

The High Court accordingly dismissed the claim, finding that the developers did not owe fiduciary duties to owners of cryptocurrency in the networks that they develop and operate.

Court of Appeal

The Court of Appeal allowed Tulip’s appeal and found that there was “a serious issue to be tried”. The question of whether there is a fiduciary duty in law in the circumstances alleged by Tulip will be decided at trial – once the facts are established.

In arriving at its decision, the Court of Appeal referred to the leading decision in Bristol and West Building Society v Mothew [1998] Ch 1 in which it was held that a fiduciary is someone that undertakes a role acting for or on behalf of another person in a relationship of trust and confidence. In this regard, the Court of Appeal held that:

  • the defendant developers “are people who it is clearly arguable have undertaken a role which at least bears some relationship to the interests of other people, that is to the owners of bitcoins”; and
  • there is a realistic argument that the developers of a given network are a sufficiently well-defined group to be capable of being subject to fiduciary duties. This was considering they had undertaken a role which involves making discretionary decisions and exercising power for and on behalf of other people, in relation to property owned by those people.

In addition, the Court considered whether the fiduciary duties that might be owed by the defendant developers would include both a negative duty not to act in the developers’ own self-interests but also a positive duty to take certain action. The Court noted that the developers had the practical ability to fix “bugs” within the network and exercising that ability would be under their “de facto power”. Whilst recognising that defining the scope of the fiduciary duty to include a positive duty to take certain action would be a significant step, the Court of Appeal remarked that the owners of Bitcoin on the network have placed their property into the care of the developers as an “entrustment” such that it is arguable such a duty exists.


The issue of whether a fiduciary relationship exists between the developers of the Bitcoin network in question and Tulip as the purported owner of Bitcoin used within that network will ultimately be decided at trial – expected to be in early 2024.

Whilst this issue will ultimately turn on the facts of this particular case, the architecture of different cryptocurrency networks is relatively similar. Therefore, a positive finding for Tulip at trial could give rise to authority for the establishment of a general fiduciary duty between cryptocurrency network developers and the owners of cryptocurrency maintained on those networks. If established, this could place a significant burden on developers, following which a reduced number of people and organisations may be prepared to develop and maintain networks, ultimately limiting the development and growth of cryptocurrency and other blockchain networks.

On the other hand, the imposition of a duty on developers could serve as a means of regulating the conduct of developers of cryptocurrency networks, so that they act in the best interests of cryptocurrency owners. This is likely to be well received by the cryptocurrency investor community in circumstances where there have been many instances of network developers acting contrary to the best interests of their users over recent years. A crypto platform was recently found to hold stolen cryptocurrency on a constructive trust for the owner, providing a new tool for victims of crypto fraud and the extension of fiduciary duties in the manner proposed by Tulip would provide further protection for investors. (For more info). The judgment following trial will certainly make interesting reading once it is handed down.  

Full judgement

For more info on Tulip Trading Limited v Wladimir van der Lan and Ors.