UK Government Moves on Digital Assets

The new Government has taken its first steps to advance the legal framework for digital assets in the UK. In a statement to the House of Lords, the Parliamentary Under-Secretary of State for Justice (Lord Ponsonby of Shulbrede) announced that three key recommendations of the Law Commission of England and Wales would be taken forward:

1. The Property (Digital Assets etc) Bill

In July 2024, the Law Commission published its final recommendations for a law to confirm that English common law recognises more than two forms of personal property. The Government has now introduced the Property (Digital Assets etc) Bill to disapply the sometimes-presumed rule—derived from dicta in the case of Colonial Bank v Whinney—that there are only two forms of personal property (ie, things in possession and things in action).

The Law Commission proposed, in its "Final Report on Digital Assets," that Parliament act to validate a position that has been recognised by the courts and many legal experts working with intangible forms of property. Its adoption will be welcomed, in order to overcome any lingering uncertainty about the legal status of digital assets as property under English law.

2. Expert Panel on Digital Assets

The Law Commission's "Final Report" also proposed the creation of a multidisciplinary expert panel to form views on some of the novel questions raised by the treatment of digital assets as a form of personal property; particularly, in relation to their control. Rather than establish a new body, the Government announced that the UK Jurisdiction Taskforce (UKJT) would be asked to take this work forward. The UKJT has real standing to take on this function, derived from its authoritative statements on the law of digital assets and smart contracts.

3. Digital Assets as Collateral

The Government also announced that HM Treasury is considering how to take forward the Law Commission's proposals to make certain amendments to the Financial Collateral Arrangements Regulations and formulate a statutory security law framework for digital assets. This need arises because of the imperfect alignment between legislation written for traditional finance (including book-entry securities) and the features of certain digital assets.

Conclusion

The work of the Law Commission to address the legal status of digital assets has been welcome. These moves by the Government to put the Commission's recommendations into effect are timely. There is still work needed to put digital assets on a level footing with other forms of property, but these first steps demonstrate the UK's commitment to see that it is done. The continuity between governments demonstrates that this is not a partisan issue but an advance that is needed to facilitate the digital transformation.