Digital assets

Current project status

• Initiation: Could include discussing scope and terms of reference with lead Government Department
• Pre-consultation: Could include approaching interest groups and specialists, producing scoping and issues papers, finalising terms of project
• Consultation: Likely to include consultation events and paper, making provisional proposals for comment
• Policy development: Will include analysis of consultation responses. Could include further issues papers and consultation on draft Bill
• Reported: Usually recommendations for law reform but can be advice to government, scoping report or other recommendations

We published our final report, which includes our law reform recommendations to Government, on 28 June 2023. On 22 February 2024, we launched a short consultation exercise on draft legislation that would confirm the existence of a “third” category of personal property, in accordance with one of our recommendations in our final report. We seek responses by Friday 22 March 2024.

Download the consultation paper on the draft legislation (February 2024)

Download the report (June 2023)  

Download a summary of the report (June 2023)

The problem

Digital assets are increasingly important in modern society. They are used for an expanding variety of purposes — including as valuable things in themselves, as a means of payment, or to represent or be linked to other things or rights — and in growing volumes. Electronic signatures, cryptography, smart contracts, distributed ledgers and associated technology broaden the ways in which digital assets can be created, accessed, used and transferred. Such technological development is set only to continue.

Some digital assets (including crypto-tokens and cryptoassets) are treated as objects of 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.

Over the last 15 years, personal property law in England and Wales has proven sufficiently flexible to accommodate digital assets. However, as the digital asset market and related technology continue to change, there remains some residual legal uncertainty and complexity.

The project

The UK Government asked the Law Commission to make recommendations for reform to ensure that the law is capable of accommodating both crypto-tokens and other digital assets in a way which allows the possibilities of this type of technology to flourish.

In our final report, we conclude that the common law system in England and Wales is well placed to provide a coherent and globally relevant regime for existing and new types of digital asset.

We conclude that the flexibility of common law allows for the recognition of a distinct category of personal property that can better recognise, accommodate and protect the unique features of certain digital assets (including crypto-tokens and cryptoassets). We recommend legislation to confirm the existence of this category and remove any uncertainty. On 22 February 2024 we published a short consultation on draft clauses which would implement this recommendation.

To ensure that courts can respond sensitively to the complexity of emerging technology and apply the law to new fact patterns involving that technology, we recommend that Government create a panel of industry experts who can provide guidance on technical and legal issues relating to digital assets.

We also make recommendations to provide market participants with legal tools that do not yet exist in England and Wales, such as new ways to take security over crypto-tokens and tokenised securities. We recommend this work is undertaken by a multi-disciplinary project team.

Our recommendations for reform and common law development aim to create a clear and consistent framework for digital assets that will provide greater clarity and security to users and market participants. Our recommendations also support the Government’s goal of attracting technological development to cement the position of England and Wales as a global financial hub for crypto-tokens and crypto-assets.

The analysis, recommendations and conclusions in the report were informed by the detailed responses we received to our call for evidence, published in May 2021 and our consultation paper, published July 2022. Thank you to those consultees who responded to our call for evidence and/or our consultation paper or who have otherwise met and corresponded with us during our project.

Download the consultation paper (July 2022) here.

Download a summary of the consultation paper (July 2022) here.

Download responses to the consultation paper (July 2022) here.

Our digital assets project builds on the conclusions in the Legal Statement on the Status of Cryptoassets and Smart Contracts and the Legal Statement on Digital Securities by the UK Jurisdiction Taskforce of the LawTech Delivery Panel (the UKJT).

Contact

To contact us, or to be added to our mailing list and receive updates about this project, please email digitalassets@lawcommission.gov.uk

Related projects

You may also be interested in our work on the following:

Electronic trade documents

Smart contracts

DAOs

Digital assets and ETDs in private international law: which court, which law?