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

Our consultation closed on Friday 4 November 2022. We plan to publish a final report with our law reform recommendations in 2023.

Download the consultation paper (July 2022) here.

Download a summary of the consultation paper here.

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. While the law of England and Wales is flexible enough to accommodate digital assets, our consultation paper argues that certain aspects of the law now need reform. This will ensure that digital assets benefit from consistent legal recognition and protection, in a way that acknowledges the nuanced features of those digital assets

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.

The project

The UK Government has 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.

We have already begun work on this issue in on the context of electronic trade documents; see link above.

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

 

The consultation paper

We published our consultation paper on digital assets on 28 July 2022. We argue that the law of England and Wales has gone some way to accommodate the rise of digital asset technologies. However, we consider that there are several key areas that require law reform, to recognise and protect the rights of users and maximise the potential of digital assets.

The consultation paper examines how existing personal property law does — and should — apply to digital assets (including crypto-tokens and cryptoassets). Because they are not tangible, some digital assets have many different features to traditional physical assets and to other intangible things that can attract property rights. Their unique qualities mean that many digital assets do not fit easily into traditionally recognised private property law categories or definitions.

The consultation paper argues the law must therefore go further to acknowledge these unique features, which in turn would provide a strong legal foundation for the digital assets industry and for users. Through these reforms, the legal system would help to create an environment that is more conducive to digital assets and their markets.

Our proposals are designed to ensure that the law remains dynamic, highly competitive, and flexible, so that it can support transactions and other arrangements involving digital asset technology.

The reforms also aim to help to achieve the UK Government’s stated goal of the jurisdiction of England and Wales becoming a global hub for digital assets, and in particular, for crypto-tokens and crypto-token systems.

The consultation paper seeks views and feedback from legal experts, technologists and users. Our consultation closed on 4 November 2022.

The consultation paper is available here.

The consultation paper was informed by responses received to a call for evidence on digital assets which we published in April 2021. We also published an interim update paper in November 2021. Both can be accessed at the bottom of the page, together with copies of the responses received to the call for evidence.

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

Conflict of laws and emerging technology