The Property (Digital Assets etc) Bill, which enacts the recommendations of the Law Commission of England and, was introduced in Parliament yesterday.

The Law Commission’s digital assets report in June 2023 concluded that certain digital assets, including crypto-tokens and non-fungible tokens (NFTs), are capable of attracting personal property rights. However, because they are fundamentally different both from physical assets, and from rights-based assets like debts and financial securities, they do not fit easily within traditional categories of personal property. The commission recommended that legislation should confirm the existence of a “third” category of personal property. The Commission published a draft bill to implement this recommendation in July 2024.

Previously, digital belongings were not definitively included in the scope of English and Welsh property law – leaving owners in a legal grey area if their assets were interfered with.

The draft Bill makes clear that a thing is not prevented from being the object of personal property rights merely because it is neither a thing in action nor a thing in possession. This reflects the trajectory of recent case law, but removes the lingering uncertainty that remains in the absence of a definitive statement from an upper court.

The UK government has also announced that it accepts the recommendation to set up an expert group who can provide guidance on technical and legal issues relating to digital assets. The Ministry of Justice has asked the UK Jurisdiction Taskforce (UKJT), an expert group chaired by the Master of the Rolls that produces non-binding guidance on areas of legal uncertainty, to take forward this work.

The new law will therefore also give legal protection to owners and companies against fraud and scams, while helping judges deal with complex cases where digital holdings are disputed or form part of settlements, for example in divorce cases.

Justice Minister Heidi Alexander said: “Our world-leading legal services form a vital part of our economy, helping to drive forward growth and keep Britain at the heart of the international legal industry.

“It is essential that the law keeps pace with evolving technologies and this legislation will mean that the sector can maintain its position as a global leader in cryptoassets and bring clarity to complex property cases.

“Today’s news also means the UK legal sector will be better equipped to respond to new technologies, attracting more business and investment to the legal services industry which is already worth £34 billion a year to the economy.

“It is estimated that English law governs £250bn of global mergers and acquisitions, and 40% of global corporate arbitrations, so keeping the law up to date is vital to ensuring that the UK remains the law of choice internationally.”

The Law Commission’s recommendations on other matters including collateral arrangements for crypto-tokens are still under consideration.

Further information about the digital assets project, including recommendations, can be found on the project page.