The new Property (Digital Assets etc) Bill (“the Bill”) had its first reading in the House of Lords on 11 September 2024. In brief, the Bill allows for a new third category of property that would encompass digital or electronic things and allow them to be recognised as an object that attract personal property rights.    

History 

In 2023 the Law Commission published a report on digital assets. The Ministry of Justice commissioned the report, in recognition of the legal uncertainty when dealing with digital assets. Digital asset is a phrase that encompasses a wide range of things including the cloud, crypto-currency and non-fungible tokens. See our previous article on digital assets here.

Digital assets are often treated as property by individuals but not necessarily by the law. This grey area is due to there only being two accepted categories of property: 

  1. “things in possession” such as gold, money, or physical assets (“chose in possession” being the more traditional name for these); and
  2. “things in action”, such as shares or contractual rights (“chose in action”). 

Digital assets often do not fit neatly into either category. 

The Commission found that whilst the common law tests for the recognition of personal property were able to recognise digital assets in some cases, the introduction of legislation would bring greater clarity. 

The Bill 

The Bill, which was drafted by the Law Commission, is noticeably short, consisting of only two small sections and does not specifically name any digital assets. Instead, the Bill refers to a category of things that are “digital or electronic in nature”. The effect of the Bill is to confirm that if “a thing” is not a “thing in possession” or a “thing in action” then it can still be a “thing” and capable of ownership. In effect this opens the door to a new definition of property outside of these two established groups. 

The Bill’s explanatory notes say that a detailed breakdown of all the possible digital assets that could fall into the new category has been deliberately omitted. The rationale is that the current common law tests for identifying property can be used effectively and are more adaptable to evolving technologies than statutory definitions. 

Impact

The Government has said that the Bill will provide legal protection for those that own digital assets in the event of fraud and assist in situations where such property is held as part of a person’s estate on death. The Government has also confirmed that it is going to set up an expert group to provide guidance on technical and legal issues relating to digital assets.

So while the Bill is a helpful step, there is still a long way to go in the Bill’s stated purpose of providing clearer protections to those who own these kinds of property.  

In particular, taking control of digital assets can be a difficult process for Executors. At the moment the approach is fragmented in approach between service providers. The Bill is perhaps a small step in the process to seeing wider common standards adopted. 

More Information

If you would like to speak to us on how to deal with digital assets that you own, what steps you can take to secure them for your family, or how to administer someone’s estate that includes digital assets please do get in touch with us. 

This post was written by Emily Boyd-Nash, Trainee Solicitor in our private wealth team