Cecilia X. practises in a spectrum of Commercial areas in both dispute resolution and advice. Her practice has a focus on Commercial Law (contract, digital economy, sports and construction), Company Law, Fraud and Economic Crimes, Financial Services and Banking Law, Insurance/Reinsurance, and International Law (international trade, FDI and investment treaty, international sanctions) and ADR (arbitration and mediation). She acts as Counsel in litigation and ADR proceedings. She accepts appointments as Arbitrator or Mediator. She is fluent at native level in oral and written Chinese Mandarin.

You can view the article in Chinese here.

Legislative and Legal Development

The cryptoasset industry in the UK has evolved rapidly over the last several years and experienced ensuing development in the regulatory landscape. Cryptoassets predominantly fall outside the ambit of the Financial Conduct Authorities (FCA)’s current regulations in the UK. Firms dealing with cryptoassets and brokers facilitating cryptoassets trading ought to pay heed to keep up with the development and maintain compliance in their operation, including knowing your clients (KYC). On the other side, consumers in the UK have become more interactive and engaged with cryptoassets, despite that cryptoassets are unlikely subject to the protection by the Financial Services Compensation Scheme (FSCS), that providers are not currently required to have adequate complaint procedures in place and that users cannot escalate the complaint to the Financial Ombudsman Service (FOS).

The UK’s Financial Services and Markets Act 2023 (the “Act”) has received royal assent on 29 June 2023. Many sections of this Act have now come into force. The Act establishes a post-Brexit regulatory framework, succeeding or supplementing many provisions of the Financial Services and Market Act 2000 (“FSMA”). It lays down comprehensive attributes for the UK’s financial services and markets and clarifies uncertainties. It further confers powers to regulators in the UK and provides guidance and protection to consumers. Pursuant to s.69 4 (a) of the Act:

‘“cryptoasset” means any cryptographically secured digital representation of value or contractual rights that— (a) can be transferred, stored or traded electronically, and (b) that uses technology supporting the recording or storage of data (which may include distributed ledger technology).’

As can be seen, all cryptoassets are digital assets. The UK is a leading jurisdiction for digital assets and fintech sectors. The English courts have demonstrated unique creativity and flexibility in dealing with cryptoasset related issues. The UK’s Law Commission has recommended that English common law “should remain at the forefront” of the legal development relating to digital assets and is sufficient to address most digital asset issues in keeping pace with the development.

Regulatory Compliance

FCA is the financial regulatory body and responsible for supervising the conduct of all regulated financial services firms operating in the UK. It classifies cryptoassets based on intrinsic structure and designed use. Whether a firm or platform would require FCA’s authorisation to carry out the regulated cryptoasset-related activities depends on the firm’s or platform’s business structure and designed product use, which in legal terms would be reflected in the detailed terms and policies. Where a cryptoasset falls into the ambit of the regulatory requirements, managing or dealing with such cryptoassets would become a regulated financial service activity and would therefore require authorisation before carrying out any such activities, unless having been authorised or an exemption applies. This is referred to as the “general prohibition” as imposed by s.19 of FSMA. Contravening the general prohibition would constitute a criminal offence punishable by imprisonment and/or a fine (FSMA s.23). Breaching the regulatory requirements may also render an agreement unenforceable against the other party and the other party is entitled to recover any money or property transferred under the agreement and compensation (FSMA s. 26 (1) and (2)). It is therefore critical for firms and platforms to comply with the regulatory requirements and to set up appropriate measures.

Regulatory compliance further concerns combatting criminal activities such as money laundering, terrorist financing, proliferation financing and wildlife trafficking due to the fact that cryptoassets and their exchange and platforms lack scrutiny checks and centralised system so are vulnerable to criminal network. Such concerns expand across jurisdictions where significant variation in respective regulations exists. Despite over 200 jurisdictions around the world have committed to the international standards set by the Financial Action Task Force (FATF), some countries in their national systems remain deficient in preventive measures, transparency and beneficial ownership, competency of relevant authorities, institutional measures, international cooperation and information sharing. The UK is a founding member of FATF since 1990 and has implemented well-developed measures to raise standards and to bring greater transparency to tackle criminal enterprise, protect consumers and support sustained competitiveness of the cryptoassets sector in the UK. From 1 September 2023, cryptoasset businesses are expected to comply with the UK’s requirement for collecting verifying and sharing information about cryptoasset transfers, known as the “Travel Rule”.

Consumer Protection Legislation

Consumer protection is fundamental for development of this industry. Cryoptoassets have high risk, which is vital for consumers to understand when they purchase cryptoassets. Consumers may buy cryptoassets then incur loss; in the current market they may have to face the reality of losing all their money. They are also exposed to scams, fraud and failing providers. FCA’s ScamSmart and InvestSmart campaigns provide warnings to consumers from being misled or mistreated. Consumer protection has become increasingly crucial and has widely impacted on many aspects of the market including dispute resolution (such as international arbitration) and public policy.

“Consumer” is defined by the Consumer Rights Act 2015 (“CRA”) at s.2 (3):

“Consumer” means an individual was not acting for purposes wholly or mainly outside the individual’s trade, business or profession.’

Consumer rights in the UK are further underpinned by the Unfair Terms in Consumer Contracts Regulations 1999 (the “UTCCRs”) which were brought to the UK through the EU Directive 93/13 on unfair terms in consumer contracts (“UTCCD”).

Section 62 of the CRA requires that contract terms and notices must be fair and that the court has a duty to consider fairness of consumer contract terms:

‘62 Requirement for contract terms and notices to be fair

(1) An unfair term of a consumer contract is not binding on the consumer.

(2) An unfair consumer notice is not binding on the consumer.

(3) This does not prevent the consumer from relying on the term or notice if the consumer chooses to do so.

(4) A term is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations under the contract to the detriment of the consumer.

(5) Whether a term is fair is to be determined—

(a) taking into account the nature of the subject matter of the contract, and

(b) by reference to all the circumstances existing when the term was agreed and to all of the other terms of the contract or of any other contract on which it depends.

(6) A notice is unfair if, contrary to the requirement of good faith, it causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer.

(7) Whether a notice is fair is to be determined—

(a) taking into account the nature of the subject matter of the notice, and

(b) by reference to all the circumstances existing when the rights or obligations to which it relates arose and to the terms of any contract on which it depends.

71 Duty of court to consider fairness of term

(1) Subsection (2) applies to proceedings before a court which relate to a term of a consumer contract.

(2) The court must consider whether the term is fair even if none of the parties to the proceedings has raised that issue or indicated that it intends to raise it.

(3) But subsection (2) does not apply unless the court considers that it has before it sufficient legal and factual material to enable it to consider the fairness of the term.

74 Contracts applying law of a country other than the UK

(1) If—

(a) the law of a country or territory other than the United Kingdom or any part of the United Kingdom is chosen by the parties to be applicable to a consumer contract, but

(b) the consumer contract has a close connection with the United Kingdom,

this Part applies despite that choice.’

As can be seen in these provisions, the English courts has a duty to enforce consumer protection legislated by the UK Parliament and to oversee whether a term of a consumer contract is fair in litigation proceedings even if the parties have not raised or indicated such an issue. Further, s.103 (3) of the Arbitration Act 1996 provides that the court may refuse recognition and enforcement of a New York Convention award if such enforcement and recognition would be contrary to public policy.

Case Law

In Payward, Inc. and others v Chechetkin [2023] EWHC 1780 (Comm), the English court readily endorsed the consumer protection. Mr Chechetkin domiciled in the UK and in 2017 he applied to open an online Bitcoin trading account via Kraken website which set up customers’ contract with Payward group entity local to the customer’s domicile country, so his contract was with Payward Ltd in the UK. In his application form, he confirmed that he was not a “corporate client” and would not be a “reseller or reseller of other digitals as a business”. Payward Terms of Service (the “Terms”) were provided in a clickwrap agreement, in which Clause 23 provided:

(a)  for applicable law:

‘the laws of the State of California and applicable United States law, without giving effect to any conflict of laws principles that may provide for the application of the law of another jurisdiction’;


(b)  for dispute resolution:

‘…REQUIRE YOU TO ARBITRATE DISPUTES WITH US … in San Francisco, California … by a single arbitrator in accordance with the rules of JAMS … the state or federal courts in San Francisco, California have exclusive jurisdiction over any appeals of an arbitration award and over any suit between the parties not subject to arbitration. …’.

Mr Chechetkin was required to, and did, check a box to indicate that he read and agreed to the Terms. Subsequently, he traded through his Kraken account online and eventually lost £608,534.

He made a claim in the English High Court and alleged that Payward Ltd carried out regulated activities without authorisation, contravening the s.19 of FSMA. Payward group disputed English jurisdiction and instigated arbitration subject to Californian law and under JAMS procedure in California. In arbitration, Mr Chechetkin challenged arbitrability and jurisdiction. The arbitrator affirmed arbitrability and jurisdiction, rejected FSMA and English law which were raised on behalf of Mr Chechetkin, and determined in her Final Award that (among other items):

–       the arbitration agreement was valid and enforceable;

–       JAMS Consumer Minimum Standards applied to the arbitration [NB. which indicates that the arbitrator regarded Mr Chechetkin a consumer];

–       Mr Chechetkin assumed the risk of trading;

–       Mr Chechetkin breached the Terms;

–       Paryward’s request for attorney’s fees and costs for both the arbitration and the claim in the UK were denied due to the prohibition by Consumer Minimum Standards No. 6.

Pursuant to s.101 of the Arbitration Act 1996 (the “AA”), the Payward parties issued a claim in the English High Court to enforce the Final Award against Mr Chechetkin. He contended that recognition and enforcement should be refused if it would contravene public policy (s.103 (3) of the AA) and may also be refused if the award deals with a matter beyond the scope of the submission to arbitration (s.103 (2) (d)).

The English High Court confirmed that generally English courts would give effect to arbitration awards as required by the New York Convention. It held, however, that the Final Award on the arbitral tribunal’s jurisdiction does not bind the Court when enforcement is sought. Bright J followed the House of Lords decision (especially per Lord Mance and Lord Collins of Mapesbury) in Dallah Co v Ministry of Religious Affairs of Pakistan [2011] 1 AC 763 that a tribunal’s decision on its own jurisdiction does not bind courts of England which is a different (non-supervisory) country when asked to enforce the award. Further, under s.103 (3) of the AA, the English court will form its own view of the award’s consistency with English public policy. Bright J referred to Alexander Bros Ltd (Hong Kong SAR) v Alstom Transport SA [2020] EWHC 1584 (Comm) in which Cockerill J said:

‘[71] “public policy” as referred to in s.103 (3) of the Arbitration Act means the public policy of England and Wales (as the country in which enforcement is sought) in maintaining the fair and orderly administration of justice. The classic formulation as to what is seen as contrary to public policy is “the fundamental conceptions of morality and justice” of the forum ….

The English court is therefore not obliged to enforce an arbitration award merely because the arbitrator decided that the award is not contrary to public policy to which the English court thinks is.

Bright J referred to the authority of the Court of Appeal in Lipton v BA City Flyer [2021] EWCA Civ 454. This case law confirmed that the Court of Justice of the European Union (CJEU)’s decisions in C-168/05 Mostaza Claro [2007] 1 CMLR 22 and C-40/08 Asturcom Telecomunicaciones SL [2010] 1 CMLR 29 bind the English courts: ‘the proposition that consumer protection as regards the fairness of contractual terms had “equal standing to national rules which rank, within the domestic legal system, as rules of public policy’.

The Judge further considered FSMA and the objectives for consumer protection, market integrity and competition, each of which is unquestionably and expressly identified by the Parliament as a matter of public policy. The Judge concluded that this statute is an expression of UK national policy and that ss. 19, 23 and 26 are part of the UK public policy. Therefore, recognition and enforcement of the Final Award would be contrary to the UK’s public policy and would cause significant disadvantages and problems to Mr Chechetkin to have even arbitrated the dispute in California under JAMs Rules. Accordingly, the Final Award was not recognised or enforced by the English court and Payward arbitration claim failed.


The crypto industry will no doubt develop further, and it will impact on many other industries such as investment, technology and innovation, finance and trade. The success of a crypto industry depends on reliable legal system and mechanisms. The UK Government and English courts have demonstrated commitment to legitimate businesses and consumers. In address novel legal issues arising from cryptoassets, the English courts have responded promptly and positively and are prepared to enforce consumer protection. No doubt further regulatory framework for cryptoassets will be developed in the UK. Disputes are likely to increase concerning cryptoassets which are becoming more accepted and demanded in the market.

This article is written for knowledge sharing. It does not form legal advice. Readers are reminded to seek independent legal advice for their specific enquiries and needs.

File under:

United Kingdom, cryptoasset, consumer law and regulations, financial services, banking, trade, energy & natural resources, regulations / regulatory compliance, No5 Chambers


Cryptoasset, consumer protection, anti-money laundering, FATF, terrorist financing, proliferation financing, wildlife trafficking, international law