April 4, 2022

What to Know; High Court Bars Use of Bitcoin as Security

The High Court recently refused to allow security for costs to be provided in the form of bitcoin in Tulip Trading Limited v Bitcoin Association for BSV and others [2022] EWHC 141 (Ch). This is understood to be the first attempt to provide security in the form of cryptocurrency.


Tulip Trading Limited is a company registered in the Seychelles owned by Dr Craig Wright, who claims to be “Satoshi Nakamoto”, the inventor of Bitcoin. Dr Wright claims to own US$4.5 billion worth of bitcoin, but that his private keys were hacked, copied and destroyed, and as a result, he lost access. The defendants are open source software developers working on cryptocurrency wallets. Dr Wright claims in the substantive proceedings that they owe him a fiduciary or tortious duty to re-write or edit the underlying software code to enable him to access the bitcoin. The defendants challenged the court’s jurisdiction and sought security for costs of the jurisdiction application, which the court ordered. In response, the claimant offered to pay security for costs in bitcoin.

The claimant proposed to provide security by: 

  1. Transferring the value of security ordered in bitcoin to its solicitors plus a 10% buffer to account for any fluctuations in value; and 
  2. Instructing its solicitors to provide an undertaking that the bitcoin would be used to satisfy any adverse cost orders made.

The draft order also included a mechanism to top up the value of the bitcoin to the value of the security ordered if it fell in value.

Legal principles

The court cited the principles set out by Popplewell J in Monde Petroleum SA v Westernzagros Ltd [2015] EWHC 67 (Comm):

"It is conventional to order security to be given either by payment into Court or by the provision of a guarantee from a first class London bank. That practice recognises that the security should be in a form which enables the defendant to recover a costs award made in its favour at the trial from funds which are readily available, such that there is little risk of delay or default in enforcement. Although security may be ordered in an alternative form, that form should be such as to fulfil the same function, so as to allow simple and swift enforcement of a costs order from a creditworthy source. In practice any such alternative form of security must be as at least equal to, if not better than, security by payment into Court or provision of a first class London bank guarantee.”

The claimant argued that since it did not have a bank account it was impracticable for it to obtain a bank guarantee. It also argued that it could not provide cash as security because this would involve exchanging digital assets for pound sterling, which could incur capital gains tax liability. 

The claimant failed to provide evidence of (1) its overall financial position; (2) whether it could raise the necessary funds from (or obtain a bank guarantee with the assistance of) outside sources, e.g. Dr Wright, or other backers or interested parties; (3) whether it could raise the necessary funds by using the bitcoin as security; and (4) how it is funding its own legal costs.


The court took judicial notice of the high level of volatility in the value of Bitcoin, and this was the focus of the decision. 

The court’s reasoning is succinctly put and is worth setting out in full:

“[Security in the form of Bitcoin] would not result in protection for the defendants equal to a payment into court, or first class guarantee. It would expose them to a risk to which they would not be exposed with the usual forms of security: namely of a fall in value of Bitcoin, which could result in their security being effectively valueless. The top-up provisions proposed by the claimant do not fully meet this risk, because if the claimant did not comply with the order, there would be a substantial risk that enforcement of the obligation could not be achieved before judgment in the jurisdiction applications. Furthermore, the draft order envisages any liability for costs to be satisfied by the transfer of the Bitcoin, which would be an additional occasion when the defendants would be subjected to the risk of a fall in value.”


Courts are exceedingly reluctant to accept security for costs in any form other than payments of cash, or promises to pay cash from banks, parent companies, solicitors or insurers. There is no precedent for the court accepting comparable assets such as financial securities like intellectual property assets, gold, or shares as security for costs. This is even though such assets are transacted widely, are well established with low volatility and, like Bitcoin, must be converted to cash before they can be widely used as currency.

One example is AP (UK) Ltd v West Midlands Fire & Civil Defence Authority [2001] EWCA Civ 1917, where Longmore LJ considered whether a charge over land could be provided as security for costs. He stated that while this might be apt for a domestic dispute, it was not for a commercial dispute where parties have ready access to banks as part of their commercial business. Alternative, valuable, forms of security should not be automatically discounted, but “the court would still wish to know why an undertaking from the [holder of that asset] would not … be sufficient and if it was not sufficient, why, no bank was apparently prepared to lend on the property offered as security.” In particular, Longmore LJ found this an inadequate form security for costs because it came with risks, being enforcement of the charge and a forced sale. This decision was not cited by the court in Tulip Trading.

In this case, by focusing on volatility as the sole concern, the High Court has potentially opened the door to the use of cryptocurrency if the form of the offer can adequately meet the risk of fluctuation in value. For example, if the quantum of bitcoin offered as security greatly exceeds the potential costs awarded, or if a more stable cryptocurrency is proposed. In addition, the door is potentially opened to other alternative asset classes as security for costs, such as financial securities or gold.

Arjun Dhar was a contributing author to this insight.