#DigitalAssetBill

technology used to create crypto-tokens means that they cannot be duplicated or “double spent”, which makes them different from other data. However, they do not easily fit into either traditional category of personal property. Because they cannot be physically possessed, they do not fall into the category of things in possession. However, they also cannot be things in action because their existence is not dependent upon their recognition by a legal system and claims made in relation to them.

Although there is some case law in the High Court that has found that certain digital assets, specifically crypto-tokens, can be property even if they are neither a thing in possession nor a thing in action, this is not definitive for the common law. There remains lingering uncertainty caused by comments in old case law that said the 2 categories of personal property are exhaustive, and that there can be no “third category”.

In response to this uncertainty, the Ministry of Justice commissioned the Law Commission for England and Wales to consider this issue. The Law Commission undertook extensive consultation on the issue of whether the law does or should regard crypto-tokens and potentially certain other digital assets as property.

A majority of consultees who responded to the Law Commission, including senior and specialist judges, lawyers, and technology companies, supported legislation in this area, on the basis that it would facilitate the law’s continued development in this area.

Following this consultation, the Law Commission published this bill in draft form, which confirms that a thing can attract property rights even if it is not a thing in possession or a thing in action. The Bill is a means of ‘unlocking’ the development of the common law. It confirms the approach taken in recent High Court judgments[footnote 1].

There are many different kinds of digital assets with different features, including crypto-tokens, non-fungible tokens, virtual carbon credits, digital files and domain names.