Cryptoassets ‘should be treated in principle as property’ under English law

Legal statement on cryptoassets and smart contracts details how English law would accommodate these new commercial phenomena.

The statement, authored by Lawrence Akka QC, David Quest QC, Matthew Lavy and Sam Goodman and published by the UK Jurisdiction Taskforce, argues that cryptoassets should in principle be treated as property because they “have all of the indicia of property” and are not disqualified by reason of their distinctive properties.

The authors state: “Why does it matter if a cryptoasset is capable of being property? It matters because in principle proprietary rights are recognised against the whole world, whereas other — personal— rights are recognised only against someone who has assumed a relevant legal duty.

“Proprietary rights are of particular importance in an insolvency, where they generally have priority over claims by creditors, and when someone seeks to recover something that has been lost, stolen or unlawfully taken. They are also relevant to the questions of whether there can be a security interest in a cryptoasset and whether a cryptoasset can be held on trust.”

The authors also respond to the view that cryptoassets operate extralegally.

“Some take the view that the design of cryptoassets means that there is no need for traditional legal rules or processes. Law is irrelevant, it is sometimes said, because dealings are effected by non-legally-binding consensus between users, because cryptographic authentication and validation using strong encryption methods makes dealings irreversible, and because decentralisation and disintermediation means that there is no responsible party who can be compelled to act at the direction of a court.

“We do not agree. The design of cryptoassets may create some practical obstacles to legal intervention but that does not mean that cryptoassets are outside the law.”