The Property (Digital Assets etc) Bill[1] is the outcome of the Law Commission’s 2023 report[2] on digital assets which highlighted the lack of protection for digital assets.
What digital assets does the Bill encompass?
Digital files, digital records, email accounts, domain names, in-game digital assets, digital carbon credits, crypto-tokens and non-fungible tokens (NFTs) (not an exhaustive list). However, the technology which is used to create such digital assets is not included within the Bill. For example, cryptography, distributed ledgers, smart contracts and associated technology are outside the scope.
What changes does the Bill propose to introduce?
By recognising digital assets as personal property, the Bill would grant them legal protections similar to those afforded to physical assets. This would change the way in which digital assets were treated in a variety of legal contexts.
What does this mean for business owners?
- Legal protection: Businesses would have enforceable rights in cases of fraud or theft involving digital assets.
- Dispute Resolution: Clear legal status for digital assets would simplify resolving disputes and handling digital assets in legal cases.
- Passing to Beneficiaries: If digital assets are recognised as personal property in the UK, they will be able to be left to a beneficiary under a Will (or intestacy). The implication of which was explored in a recent Gardner Leader article by Hannah Wallbridge here.
- Investment Attraction: Enhanced legal clarity could attract more investment in the UK’s digital asset sector boosting economic growth.
- Bankruptcy and Insolvency: Digital assets could be included in bankruptcy proceedings, providing a more comprehensive framework for asset recovery for creditors and how digital assets will be handled within insolvency proceedings.
The Bill (which will only apply to England and Wales) is a positive step towards the law keeping pace with the current technological developments and recognising that protection for these types of assets is vital if the UK is to remain at the forefront of the global market. Digital assets are increasingly important within modern society not just as valuable objects in themselves but also as a means of payment or to represent or be linked to other things or rights.
Assuming the Bill is passed, it may be some time before its full impact on UK business can be assessed.
The parliamentary impact assessment[3] foresees a reduction in court time over disputes which digital assets attract, reduction in the level of legal analysis required of firms dealing with crypto-assets and subsequently also encouraging digital asset platforms selecting English & Welsh jurisdiction or basing operations in the UK enhancing the competitive position of England and Wales on the international stage.
[1] Published on 12 September 2024
[2] Law Commission – Digital assets: summary
[3] Impact Assessment template (publishing.service.gov.uk)
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