Litigating the ledger: the future of crypto disputes

In recent years, the UK has taken significant strides in reshaping the regulatory landscape for crypto assets. With the aim of striking a balance between innovation and investor protection, the FCA's latest measures, ranging from financial promotions rules to the expansion of anti-money laundering (“AML”) oversight signal a tougher stance that is already giving rise to legal uncertainty and disputes.

As of 2024, the UK approach, by virtue of the FCA, has shifted from cautious observation to active intervention. The extension of the financial promotions rules to cryptoasset businesses, whether UK-based or overseas, has introduced new friction points. These rules require firms to ensure that all marketing communications are “clear, fair, and not misleading,” (COBS 4.2). Failure to comply is not just a regulatory breach, but an invitation to litigation.

Worldwide, disputes are likely to surface on several fronts. Prime amongst these will be miss-selling allegations. Hordes of investors who have witnessed cryptoasset values plummet will be scrutinising whether firms adequately disclosed risks in accordance with the new FCA standards. These claims are likely to echo the wave of financial product mis-selling litigation seen in previous decades. Indeed, the US has already witnessed a wave of miss-selling disputes in high profile cases like FTX, Celsius and Voyager where platforms misled investors about the safety, regulatory status or financial health of their offerings, leading to billions in losses and convictions of fraud.

In addition, overseas firms targeting UK customers will now fall under the FCA’s scope for financial promotions. This cross-border reach creates legal grey areas ripe for challenge, particularly regarding enforcement and jurisdiction. It remains to be seen how this will impact other jurisdictions like the US, where enforcement against cross-border crypto disputes involves a mix of domestic actions and international cooperation.   

With the FCA increasing scrutiny, firms that fall short of the new requirements may face regulatory sanctions. Disputes between firms and regulators will become more common, especially as the definitions for crypto assets and qualifying promotions continue to evolve. AML may also prove to be problematic. As crypto exchanges and wallet providers grapple with extended AML obligations, internal compliance failures may result in whistleblower claims, internal investigations, and conflicts with law enforcement.

The US administration has dismantled key enforcement bodies—including the DOJ’s National Cryptocurrency Enforcement Team—and nullified expanded IRS broker reporting rules, demonstrating it is actively rolling back oversight in favour of industry growth. This deregulatory trajectory stands in stark contrast to the UK’s proactive stance, where the FCA has introduced concrete measures to protect consumers and maintain market integrity. However, according to Atlantic Council’s analysis, such divergence risks exposing UK consumers to heightened systemic vulnerabilities, as cross‑border capital flows into less‑regulated US markets may undermine the safeguards built into the UK’s regime. In response, UK regulators are likely to face mounting pressure to further calibrate domestic rules—both to prevent regulatory arbitrage and to ensure that consumer protection remains robust amidst this global divergence.

Comment

The FCA has made it clear that cryptoassets are no longer in a regulatory grey zone. The UK is developing a more stringent and proactive approach aimed at consumer protection.  This includes staged consultations and rule‑making milestones designed to bring cryptoassets into a “fully regulated asset class” by 2026.This contrasts to the US enforcement driven approach where a strict regulatory framework has been abandoned in favour of post-incident investigations and court rulings. This bifurcation will require proactive UK rule‑making and international coordination with the EU to safeguard consumers and preserve market integrity.

For stakeholders across the crypto sector, from startups to exchanges, to institutional investors and even individual traders - the evolving legal and regulatory expectations raise the stakes. The path to compliance is no longer negotiable, but the interpretation of those compliance duties is far from settled.

As the FCA continues to tighten the reins, we are uniquely placed to help clients manage the fallout. Whether it is advising on compliance, mitigating disputes, or representing clients in regulatory proceedings, lawyers will be instrumental in guiding businesses through this rapidly shifting landscape. In the world of crypto regulation, uncertainty breeds disputes, but it also creates opportunity. As the regulatory fog lifts,  our disputes team will help you charter a safe and compliant course through the storm.