Syed Rahman considers a proposed new law and its implications.
A Bill introduced today by the UK government looks set to see cryptocurrency classified as personal property.
If passed, The Property (Digital Assets etc) Bill would give owners of digital assets more certainty and protection than they currently have.
Introduced by the Ministry of Justice (MOJ) as a draft law to the House of Lords, the Bill will lead to assets such as cryptocurrency and non-fungible tokens having proprietary rights in law. In practice, this will mean that owners of such assets will have greater reliefs and legal remedies available to them, including greater protection against fraud. It will also assist judges hearing cases where ownership of digital assets is either in dispute or forms part of a settlement.
The Bill can be seen as an example of the law keeping up with the times. It may also boost the UK’s efforts to be viewed as being at the centre of the cryptoasset world. As digital assets have not yet been defined in English and Welsh legislation, ownership of them has been an area of relative legal uncertainty. The Financial Conduct Authority’s role in relation to crypto has been restricted to policing the marketing and selling of such assets, as well as regulating anti-money laundering concerns of crypto service providers.
Until now, the two categories of property under English law have been things in possession (eg: gold) and things in action (eg: a loan credit). The Bill introduces a third category, which will give holders personal property rights for digital assets.
Response
The Bill will have a second reading in the House of Lords on a date that has yet to be determined. It can be viewed as a response to a 2023 Law Commission report (which was commissioned by the MOJ) that wanted to ascertain the difficulties in recognising digital assets as property. The Commission emphasised that as digital assets are not tangible - and are becoming increasingly complex – they could not be neatly categorised under existing property legislation.
This Bill comes at a similar time to the judgment in D'Aloia v Persons Unknown Category A & Ors [2024] EWHC 2342 (Ch). This was the first case in which it was ruled that cryptocurrency attracts proprietary rights following a trial. Since 2019 there has been a trend set in that property rights are attracted by cryptocurrency. However, both this judgment and the Bill now seek to solidify this understanding and provide legislative backing.
The Bill is, however, very brief in its drafting, and this is likely to be intentional. It is only at its first reading and so there is plenty of opportunity for it to be refined and amended.
As it is currently drafted, there is the fear that the Bill is either:
- too broad in its drafting and does not deal with nuanced ancillary issues which may arise from its legal implications, or
- is too broad in that there is no clarity on the extent to precisely what matters it is intended to relate to.
