Is There a Point to the Property (Digital Assets etc) Bill?

The Property (Digital Assets etc) Bill was introduced into the House of Lords on 11 September 2024 and the factsheet was published in early November. The bill was proposed by the Law Commission in their digital assets report from June 2023, followed by a supplementary report in early 2024. The bill is very short and simply provides that just because an asset—and the title gives away that the Commission has crypto-assets in mind—is not a chose in possession or chose in action does not preclude its being property. In fact, the bill is unnecessary and redundant. Following the reasoning in the Law Commission’s report the Government cites three key benefits of the legislation.

First, the bill is said to ensure that crypto-tokens and other digital assets can be properly recognised as personal property. But they are so recognised already. In Tulip Trading Ltd v Bitcoin Association of BSV [2023] EWCA Civ 83, [2024] 3 WLR 16 Birss LJ for example clearly recognised bitcoin as property at [24] in the Court of Appeal. It would be a very brave Supreme Court that tried to roll back on this now.

Secondly, the bill reduces litigation costs by removing the need to decide whether something can be property even if it does not fall into the traditional categories of property in England. This, however, assumes that digital assets cannot be fitted into that traditional twofold categorisation. Assets are either tangible (which bitcoin, non-fungible tokens etc) are not, or they are intangible. Intangible property is a pretty heterogenous category. It includes debts, copyright, design rights and other IP rights. It includes corporate shares and digital assets. These are all different. Some can be enforced only against one or more persons (like debts), but others like copyright are erga omnes rights enforceable against the world. Rights to digital assets could sensibly be seen—as Kelvin Low has argued—in this way as rights erga omnes that the owner be able to manipulate the system/blockchain to secure for themselves the benefit of the asset in question.

Thirdly, the Government points to several common law jurisdictions and international developments, saying that the bill follows international trends and the way the common law is developing anyway. The idea seems to be that we would be left behind if we do not adopt the bill and that the international trend proves the Law Commission and the Government right. But we won’t be left behind, and the trend (such as it is) proves no such thing. In New Zealand in Ruscoe v Cryptopia [2020] NZHC 728, [2020] 2 NZLR 809 [123-124] Gendall J seemed to accept that crypto-assets could be choses in action; he certainly did not say they were a ‘third category’. In Singapore Jereyetnam J explicitly accepted that digital assets were choses in action in ByBit FinTech Ltd v Ho Kai Xin [2023] SGHC 199, [35-36]. In Australia the idea of the third category has come in for some quite heated criticism from Jackman J of the Federal Court of Australia, who, in his United Nations Day Lecture ‘What Has Taxonomy Ever Done for Us? UNCITRAL’s 2023 “Taxonomy of Legal Issues Related to the Digital Economy”’, has argued the bill is based on a fundamental misconception about the nature of choses in action. Relying on Cain’s Case (1954) 91 CLR 540 he said that a chose in action is merely property which does not confer possession of a tangible thing and a ‘third category’ is unnecessary in Australia. The Unidroit Principles on Digital Assets and Private Law do not in themselves suggest or require the adoption of a third category of personal property, although they do follow the Law Commission in one regard at least by introducing the idea of control which I have criticised elsewhere (D Sheehan ‘Digital Assets, Blockchains and Relativity of Title’ [2024 JBL 78). The DIFC Digital Assets Law no 2 of 2024 does explicitly state in article 9 that digital assets are neither choses in possession nor choses in action, but the consultation paper that preceded the law makes heavy reference to the Law Commission’s work and the article 8 definition of a digital asset is highly reminiscent of that in the Law Commission’s report. The Government also cite a need to “unlock” the development of the common law and argue that the bill confirms what is already true. Judge Farnhill in D’Aloia v Persons Unknown [2024] EWHC 2342, however, in saying that USDT (a type of stablecoin) was neither a thing in possession nor in action made heavy reference – following counsel – to the work of the Law Commission. This is all quite self-referential and misleading. It is self-referential because the Government is in effect saying that the Law Commission are right because English common law and international statutes are moving the same way but that is because they followed the Law Commission. It is not an argument as to why the Law Commission are right. It is misleading because the jurisdictions the Government cites do not—or at least do not all—support its position.

So, what is the point of the Property (Digital Assets etc) Bill? If the benefits the Government refers to in its support are illusory at best, there seems not to be one.

Duncan Sheehan is a Professor of Business Law at the University of Leeds.