- Prime Minister Rishi Sunak’s ambition to make the UK a crypto hub gets a boost.
- A bill to fold digital assets property laws is winning applause from the industry.
- Crypto supporters say development may provide Britain with an edge against the EU.
The UK’s property laws are flexible enough to accommodate digital assets, according to an influential legal body — and that’s great news for Prime Minister Rishi Sunak’s ambitions to transform Blighty into a crypto haven.
Or, more precisely, almost flexible enough.
The Law Commission, an independent body that reviews British legislation, is currently consulting on a draft law that will patch a small gap in the statute books.
This bill clarifies that digital assets — anything from domain names to crypto tokens and non-fungible tokens — can still be considered personal property even though they don’t fit neatly into existing legal categories.
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“The commission has said that 99% of the time, the law works [for digital assets],” Bittrex Global CEO Oliver Linch told DL News.
“And here is a tiny patch saying that crypto doesn’t stop being property just because it’s a digital asset.”
Big deal
Crypto watchers like Linch say that’s a big deal for the UK’s ambitions to be a crypto hub — a stated policy of the current government, and a long-held ambition of Sunak.
The UK crypto industry is getting regulatory clarity — with the government finalising crypto rules this year.
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Now it has legal clarity too, which will give post-Brexit Britain an edge over the European Union, according to market watchers.
Integrating crypto into society
Understanding how digital assets attract property rights is important.
Concepts of property touch on most parts of our economy, and getting this clarity for digital assets is about integrating them into society.
For example:
- Imagine you’re writing your will, and you’d like to leave your crypto to your kids.
- Or perhaps your crypto has been stolen and you want to order an exchange to freeze the assets.
- Or you sent Bitcoin to a friend as a gift.
Who owns what in each of these cases may seem straightforward because we are used to thinking of assets like cash, cars, or money in our bank account.
But when it comes to digital assets, UK lawyers and judges were worried that the law wasn’t clear, and new laws might have to be written.
So the Law Commission set out to clarify this.
Evolving legal landscape
That work culminated in a final report, published in 2023.
That report has been welcomed as a step in the evolving legal landscape for digital assets, lawyers say.
It stated that the common law of England and Wales — law built up over time primarily via precedent rather than by creating laws — was sufficiently flexible to allow for digital assets.
That meant the UK didn’t have to write new laws to accommodate crypto.
There was just one niggle — a question of what category of property digital assets fell into.
UK law recognises two categories of personal property — tangible things like cars, cash, furniture, iPhones; and intangible things like contracts, stocks, or debt.
But crypto doesn’t fall neatly into either.
Assets outside the law
That’s what the Law Commission’s bill intends to fix.
The short bill says that while digital assets don’t fit into either category of property comfortably, they still attract personal property rights.
It’s good that the Law Commission said that digital assets are some third thing, Adam Sanitt, head of disputes knowledge, innovation, and business support EMEA at law firm Norton Rose Fulbright, told DL News.
Without that steer, courts could have tried to lump them in with intangible assets.
That would have been problematic because intangible assets are creations of the legal system, while crypto is not.
“How digital assets are dealt with by the law, what rights you have to them, how you own them, how you transfer them to other people — that treatment is different, because digital assets don’t exist by virtue of the legal system but independent of it,” Sanitt said.
Consider the money in your bank account.
That is a creation of the legal system. If the UK decided to pass a law voiding your bank account, it could do that.
But if the UK passed a law banning Bitcoin, Bitcoin would not cease to exist.
“That’s why digital assets are so important — the government and the legal system cannot take them away from you,” Sanitt said.
‘That’s why digital assets are so important — the government and the legal system cannot take them away from you.’
Why this is big for the UK
The UK is well on its way to creating a regulatory framework for digital assets, with the government saying it will be finalised within the next six months.
And now the Law Commission has provided legal clarity too.
Linch said that may give the UK a competitive edge over the EU.
The bloc’s Markets in Crypto-Assets regulation, or MiCA, starts rolling out mid-2024. But it doesn’t touch on crypto’s status as property.
EU countries will have to review their own laws to see if they’re fit for purpose.
France and Liechtenstein, for instance, have both updated their civil codes to create legal frameworks for crypto.
Unidroit — an EU equivalent of the Law Commission — has created a set of principles that could be adopted on digital assets and private law that EU countries could adopt.
Nevertheless, “we’ve now got a situation where all the EU member states that haven’t done so already have to scramble around and figure out whether and how to change the basic property laws,” Linch said.
“All the UK’s got left to do is the comparatively straightforward regulatory side of things.”
The deadline for comment on the consultation is March 22.
After that, the bill will go to Parliament to be passed into law.
“Unless they get any earth-shattering responses to the consultation, I expect the commission to make that recommendation to the government, and then it’s up to the government to fit in that legislation,” Sanitt said.
Reach out to the author at joanna@dlnews.com.