Client-Intermediary Relations in the Crypto-Asset World

20 Pages Posted: 12 Nov 2020 Last revised: 31 Mar 2021

See all articles by Louise Gullifer

Louise Gullifer

University of Cambridge - Faculty of Law

Henry Chong

affiliation not provided to SSRN

Hin Liu

University of Oxford

Date Written: September 23, 2020


In a world where financially valuable assets are increasingly being stored in digital form, questions arise as to the legal categorisation of such assets. The question of whether crypto-assets can constitute property has been the subject of some recent litigation and thus legal analysis. If the answer to such question is in the affirmative, as the recent Cryptopia case suggests, this raises a plethora of further questions that need to be resolved by the courts before investors, regulators and accountants alike can approach digital assets with a sufficient degree of legal certainty. One such question, on which this paper focuses, concerns the relationship between a crypto-asset intermediary (such as a crypto-asset stock exchange or custodian), and its clients that store crypto-currencies or crypto-securities (‘clients’).

This question is of practical importance because the vast majority of crypto-assets are kept by intermediaries, yet we simply do not know with any reasonable certainty the basis on which these assets are being held. Most agreements between clients and intermediaries are extremely vague, and are silent as to the legal relationship between the parties. Yet, since common law courts will have to determine the legal category into which the agreement falls, they should be guided by a consistent set of principles that allow them to characterise agreements with a degree of certainty and practical justice that is acceptable to commercial parties. This is essential for the determination of clients’ entitlements on the intermediary’s insolvency, a question of high public policy importance which has arisen frequently in recent litigation. In addition, as crypto-assets are (at least at present) not subject to extensive regulation, intermediaries of such assets will not be constrained by many regulatory requirements in relation to investor protection. The determination of the precise legal relationship between the parties, therefore, becomes of even greater public policy importance. This paper addresses the situation where the applicable law to the question of the proprietary characterisation of the client-intermediary relationship is the common law.

This paper argues that the most likely (default) relationship between a crypto-asset intermediary and a client is one of trustee and beneficiary, although there are also other possible legal characterisations, namely outright title transfer, ‘quasi-bailment’, and mere obligations sounding in contract. Ultimately, in a particular case, the legal characterisation of the relationship, as well as the precise obligations undertaken by the intermediary, will depend on the client-intermediary agreement itself. In many cases it is difficult to determine whether a particular client-intermediary agreement gives rise to one type of legal relationship or another, but all turns on the interpretation of the agreement in accordance with settled principles of construction and characterisation. Furthermore, it is uncertain whether the law will develop in a way such that bailment analysis will be accepted in the context of crypto-assets, for the objections relating to possession, transmission and (possibly) exclusivity would need to be surmounted before the concept can be applied. In the final analysis, it is concluded that the most likely type of legal relationship that would appear in practice is the trust, because this accords with the objective intention of the parties who wish to have commercial certainty, and (possibly) wish to comply with the relevant regulatory requirements within the particular jurisdiction in question.

Keywords: Crypto-assets, custodian, intermediary, trust, bailment

Suggested Citation

Gullifer, Louise and Chong, Henry and Liu, Hin, Client-Intermediary Relations in the Crypto-Asset World (September 23, 2020). University of Cambridge Faculty of Law Research Paper No. 18/2021, Available at SSRN: or

Louise Gullifer (Contact Author)

University of Cambridge - Faculty of Law ( email )

10 West Road
Cambridge, CB3 9DZ
United Kingdom

HOME PAGE: http://

Henry Chong

affiliation not provided to SSRN

Hin Liu

University of Oxford ( email )

United Kingdom
+44 7342 243487 (Phone)

HOME PAGE: http://

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