On 30 July 2024, the Law Commission of England and Wales published a supplemental report and draft Bill proposing the establishment of a third category of personal property to encompass certain digital and other assets. This initiative aims to clarify the legal status of digital assets, such as crypto-tokens and non-fungible tokens (NFTs), confirming their capability to attract personal property rights.
In its June 2023 digital assets report, the Commission concluded that digital assets are fundamentally different from both physical assets and rights-based assets like debts and financial securities. As such, these digital assets do not neatly fit within the traditional categories of personal property. The draft Bill seeks to address this by affirming that an object can be the subject of personal property rights even if it is neither a thing in action nor a thing in possession. This legislative move mirrors recent case law developments but aims to eliminate the remaining uncertainties in the absence of a conclusive statement from the appellate courts.
The Commission’s consultation on the draft Bill in February 2024 garnered various responses, leading to amendments in the wording, though not the substance, of the draft. This feedback process underscores the Commission’s commitment to refining and ensuring the legislation’s relevance and applicability.
The government’s approach towards cryptocurrency and digital assets has been one of cautious progression. By supporting the Law Commission’s initiative, the government demonstrates its recognition of the evolving digital landscape and the need for a legal framework that accommodates new forms of property. This proactive stance is crucial in fostering innovation while ensuring robust legal protections for digital asset holders.
Categorizing crypto assets as a distinct form of personal property marks a significant step forward for the digital economy. This legal recognition paves the way for greater clarity and security in transactions involving digital assets, potentially boosting investor confidence and encouraging further adoption of blockchain technology. It also sets a precedent for other jurisdictions to follow, potentially leading to more harmonized international regulations.
The establishment of a third category of personal property for digital assets could have far-reaching implications. It would not only provide clear legal backing for ownership rights but also facilitate the development of new financial products and services. This move signals a forward-thinking approach, positioning England and Wales as leaders in embracing and regulating the digital asset revolution.
(Source: https://lawcom.gov.uk/project/digital-assets/, https://cloud-platform-e218f50a4812967ba1215eaecede923f.s3.amazonaws.com/uploads/sites/30/2024/07/Digital-assets-as-personal-property-supplemental-report-and-draft-Bill-web-version.pdf)
