Redefining Ownership: How the Digital Assets Bill Bridges the Gap Between Law and Technology
The introduction of the Property (Digital Assets etc.) Bill marks a significant step forward in recognising digital assets as a new form of personal property under the law.
Historically, property in common law has been divided into two main categories: “things in possession,” such as physical objects like cars or laptops, and “things in action,” which refer to intangible rights like debts. Digital assets, however, do not fit neatly into either of these categories, and this bill seeks to clarify their legal status.
One of the core aims of the bill is to confirm that digital assets can indeed be the subject of personal property rights, even though they cannot be physically touched or held. Unlike physical items that can be stolen or damaged in the real world, digital assets such as cryptocurrency or NFTs exist primarily in a virtual space, independent of any legal recognition. This creates a challenge for the traditional way in which property rights and protections are applied.
Physical, Intangible and Digital Assets
Historically, the distinction between physical and intangible property worked well. For example, a physical item, like a laptop, could be stolen or damaged, and the law provides remedies for such losses.
In contrast, intangible rights, such as those over debts, cannot be "stolen" in the traditional sense, which is why different remedies apply. However, digital assets blur the lines between these two classifications. They share traits with physical objects because they can be transferred or lost, but they also have the intangible nature of a legal right, which makes their legal categorisation complex.
In response, the bill introduces a new framework. It acknowledges that digital assets don’t perfectly fit into either of the traditional categories of personal property. By recognising them as a distinct class of property, the bill empowers courts to apply more appropriate remedies to disputes involving digital assets. This change is crucial for the modern world, where technologies like distributed ledger systems allow digital assets to exist in a way that’s more analogous to physical possessions than traditional intangible rights.
An essential part of this legal shift has been the involvement of the Law Commission, whose Final Report on Digital Assets has helped shape the bill. The judiciary, too, has played a key role by advocating for clear legislative backing to guide common law as it adapts to these new forms of property. The establishment of a “Control Panel,” a multi-disciplinary expert group, will ensure ongoing guidance is available as technology evolves, helping courts and participants understand digital asset ownership.
The bill is intentionally concise, as common law is expected to play a significant role in shaping how digital assets are treated. As legal experts and courts encounter new types of digital assets, they will develop case law to address the unique issues that arise. This approach allows the legal system to adapt to technological changes, rather than being constrained by rigid statutory definitions.
Adapting Property Law for the Digital Age
In practical terms, this means that those involved in the digital assets space can move forward with greater confidence. The legal protections for digital assets are growing clearer, and participants are beginning to adjust their strategies accordingly, knowing that their holdings will be recognised and protected by law. However, challenges remain, and the full implications of this bill will likely be revealed as courts begin to interpret and apply its principles in specific cases.
The recognition of digital assets as property under English law reflects a broader trend of courts adapting to technological and regulatory advancements. Over the years, courts have acknowledged various new types of assets as objects of property rights, including milk quotas, EU emissions allowances (EUAs), and waste management licences. These rulings were based on the characteristics of traditional property that can be clearly defined, recognised by third parties, assumed by others, and demonstrated a degree of permanence.
A notable case involves Bitcoin, where the Court of Appeal highlighted its "rivalrous" nature meaning that one person’s ownership prevents another from holding it simultaneously. This trait, common to physical possessions, also applies to many digital assets, highlighting their legitimacy as property. Similar to Bitcoin, voluntary carbon credits and other digital assets share this feature, prompting the Law Commission to regard them as objects of property rights.
Interestingly, the courts have not strictly categorised digital assets as either things in possession or things in action. In fact, the High Court has suggested that cryptocurrencies, while not fitting perfectly into either traditional category, should still be regarded as property. This view, echoed by many who responded to the Law Commission’s consultation, signals that a third category of personal property has emerged, one that sits between physical and intangible property and is becoming increasingly recognised in English law.
These developments, along with the introduction of the Digital Assets Bill, indicate that legislation is beginning to catch up with the complexities of modern assets. Courts have already set precedents by applying property principles to new forms of technology, and the Digital Assets Bill aims to formalise and extend this recognition to a broader array of digital assets.
The Property (Digital Assets etc.) Bill doesn’t solve every issue regarding digital assets, but it is a crucial step toward integrating them into the broader framework of property law. It reflects a recognition that the law must evolve alongside technology, providing a foundation for future developments in this area.
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