On 11 September 2024, the Property (Digital Assets etc) Bill (the Bill), was introduced into Parliament.
The Bill is the first piece of legislation to acknowledge and confirm the existence of a third category of personal property, known as “digital assets”. This new class of personal property could cover a wide range of property including carbon credits, crypto-tokens, electronic signatures, and non-fungible tokens.
Following recommendations from the Law Commission, the Government will form an expert group which will provide non-binding guidance on legal and technical issues relating to digital assets. This role has been given, by the Ministry of Justice, to the UK Jurisdiction Taskforce (the UKJT). The UKJT will be comprised of a group of experts and will be chaired by the Master of the Rolls.
The Law Commission recommended that a third category of property rights should be enshrined in UK legislation to “better recognise, accommodate and protect the unique features” of digital assets (Digital assets - Law Commission) In the Government’s response to the Law Commission’s report, the Justice Minister states that such legislative development “is vital to our ambition to maintain English and Welsh law as a global law of choice”. (Written statements - Written questions, answers and statements - UK Parliament)
The Bill states that:
“A thing (including a thing that is digital or electronic in nature) is not prevented from being the object of personal property rights merely because it is neither-
- A thing in possession, nor
- A thing in action.”
What might this mean for those who own digital assets?
The Bill provides the potential to close existing barriers to the legal recognition of digital assets. It also provides the opportunity for the clarification of uncertainties that have arisen in the development of the common law in this area. This will be welcome news to the markets and to market stakeholders, including the owners of digital assets, and those in legal relationships with them.
The new legislation, once enacted, could afford digital asset owners with important legal protections including the remedies and protections that have classically been afforded to the owners of existing categories of personal property.
Critically, this means the possibility of increased protections for those involved in scams and fraudulent schemes, of the kind which have and continue to blight the digital assets sector.
The introduction of the Bill is an important step towards future-proofing the ability of the UK’s legal system to deal with the constantly evolving world of digital assets, providing some certainty and certain guardrails, but not restricting adaptability to development or change. This could place the UK in a good position to remain a leader in the fintech field and achieve its ambition of becoming a global hub for crypto businesses.
Passage of the Bill
The date for the second reading committee is yet to be announced. As the Bill progresses through Parliament, it will be interesting to see whether the wide-reaching definition of “digital asset” will be maintained, or whether amendments will be proposed to narrow it down.
We will follow the progress of the Bill as it makes its journey towards Royal Assent.
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Written with the assistance of Madeleine Chambers, trainee solicitor, Burges Salmon.
Some digital assets (including crypto-tokens and cryptoassets) are treated as objects of property by market participants. Property and property rights are vital to modern social, economic and legal systems and should be recognised and protected as such.