Digital assets are to be formally recognised in law with the Property (Digital Assets etc) Act receiving Royal Assent this week. Previously many digital assets, including cryptocurrency or non-fungible tokens, had undefined legal rights. The updated legislation will formally recognise digital assets as personal property in the eyes of the law and can be treated like traditional assets.
The amendments reflect the work of the Law Commission, whose work on digital assets resulted in recommendations in 2023 a ‘third category’ of personal property be established alongside the historic and traditional categories of personal property that have been previously recognised
- things in possession (generally, tangible things) and
- things in action (personal property that can only be claimed or enforced through a court action).
In its report the Law Commission proposed the introduction of ‘legislation to confirm the existence of a distinct third category of personal property under the law which can better recognise, accommodate and protect the unique features of digital assets. The report does not set out clear boundaries for this third category, arguing instead that common law is the best vehicle to determine which objects can fit within it. This will allow for a nuanced approach to recognising that things such as crypto-tokens, export quotas or different types of carbon emissions allowance can be objects of personal property rights.’
The inclusion of this third category had been signalled with its inclusion in the Bill earlier this year
Minister for Courts and Legal Services, Sarah Sackman KC MP, said:
This new law will keep Britain at the heart of the international legal industry. By clarifying the status of digital assets, we remove uncertainty, simplify disputes, and cement the UK’s position as the centre for fintech innovation.
This government doesn’t adapt to change but leads it. Through our Plan for Change we will continue to boost growth across the £42.6 billion legal services sector.
The government say the new bill ‘ensures that the legal system is equipped to tackle tomorrow’s digital challenges today’ and as well as ‘providing greater protection against scams, digital assets like cryptocurrency can be passed down through inheritance and recovered by creditors during bankruptcy, just like traditional assets.’ There are also greater protections for people in the event digital assets are stolen. Costly disputes may be avoided as businesses have greater legal certainty over the status of their crypto, bringing them into the same framework as jewellery and other goods.