The legal status of Digital Assets
The problem
Digital assets are increasingly important in modern society. They are used for an expanding variety of purposes, including as means of payment for goods and services or to represent other things or rights, and in growing volumes. Cryptoassets, smart contracts, distributed ledger technology and associated technology have broadened the ways in which digital assets can be created, accessed, used and transferred. Such technological development is set only to continue.
Digital assets are generally treated as property by market participants. Property and property rights are vital to modern social, economic and legal systems and should be recognised and protected as such. While the law of England and Wales is flexible enough to accommodate digital assets, certain aspects of the law need reform to ensure that digital assets are given consistent recognition and protection.
For example, the law recognises that a digital asset can be property and that a digital asset can be “owned”. However, it does not recognise the possibility that a digital asset can be “possessed” because the concept of “possession” is currently limited to physical things. This has consequences for how digital assets are transferred, secured and protected under the law.
Reforming the law to provide legal certainty would lay a strong foundation for the development and adoption of digital assets. It would also incentivise the use of English and Welsh law and the jurisdiction of England and Wales in transactions concerning digital assets.
This work described on this page is linked to our proposals for the digitalisation of trade documents such as bills of lading and bills of exchange, which also require to be “possessed” in the eyes of the law.
