On September 11, 2024, the UK government presented the Property (Digital Assets etc) Bill to Parliament, marking a significant step in recognizing digital assets as legitimate personal property under the laws of England and Wales. This legislation aims to extend to digital assets the same legal protections enjoyed by traditional forms of personal property. Prior to this, English law recognised two key types of property, being the rather delightfully-named ‘chose in possession’ (a thing one can hold) and a ‘chose in action’ (a thing giving rights, for example the right to sue for a debt payment).
This new Bill, and the legal analysis that predated it, have taken the very significant step of realising that Bitcoin does not sit easily in either of these categories. As we have argued in our submissions to the Treasury and to Parliament, it is an entirely new kind of thing, but no less worthy of respect and protection under the law.
It’s worth remembering that this is where we were just over a year ago – with the Treasury largely ignoring our initial advice on the nature of Bitcoin:
Bitcoin Policy UK immediately responded to this Treasury report with a further piece of evidence, urging the Treasury to think again, and to recognise that Bitcoin was indeed a financial asset, albeit one that they might not have been familiar with before:
Following this initial disappointment, the Law Commission took a more considered view of the evidence; as we noted at the time:
They – unlike the Treasury – understood that because digital assets are not tangible and differ significantly from physical assets, and also from rights-based assets, they did not readily fit within traditional categories of personal property. Case law had already begun to recognise this fact, and the Law Commission recommended a change in legislation to codify the law that the courts had already begun to create via precedents.
The new bill (the Property (Digital Assets etc) Bill is a wonderful example of just how succinct and punchy primary legislation can sometimes be. This is it:
While the Bill itself is short, the key points are significant:
- Definition of Property: The bill introduces a third category of personal property, described as a “thing (including a thing that is digital or electronic in nature),” which covers digital assets like cryptocurrencies, NFTs, and carbon credits, alongside traditional categories of “things in possession” and “things in action.”
- Legal Clarity: The bill addresses the ambiguity identified in the 2023 Law Commission report on digital assets. While English and Welsh common law has been adaptable, certain digital assets didn’t fit neatly into existing property law categories, leading to legal uncertainties.
- Implications for Property Rights:
- Protection Against Theft and Fraud: Owners can now take legal action if their digital assets are compromised.
- Dispute Resolution: Tools like freezing injunctions become applicable to digital assets.
- Insolvency Proceedings: Digital assets can now be included in bankruptcy estates for creditor repayment.
- Broad Scope: The term “digital asset” remains intentionally broad, encompassing everything from cryptocurrencies to digital records, though the Law Commission’s focus was narrower, emphasizing cryptocurrencies.
- Flexibility in Law: The bill avoids a precise definition of “thing,” allowing common law to evolve and adapt to new types of digital assets, ensuring the law remains relevant in a rapidly changing digital landscape.
- Global Positioning: By recognizing digital assets legally, the UK is aiming to improve its status in the global fintech and cryptoasset markets, potentially attracting more business and investment due to this enhanced legal certainty.
- Future Steps: While the bill focuses on implementing the first recommendation from the Law Commission, other suggestions like creating a specialized panel for digital asset issues and legal reforms for collateral arrangements are pending further action.
This legislative move not only provides a safer environment for digital asset holders but also does somewhat support the UK’s ambition to be at the forefront of the digital economy, adapting its legal framework to accommodate and regulate the evolving nature of digital ownership and commerce.
It may go some way to undoing the harm done both to customers and to the industry in general by the poorly-conceived policies from the FCA, which the team at Bitcoin Policy UK will continue to fight.
