In the UK, the Property (Digital Assets etc) Bill has been introduced into the House of Lords, marking the a leading moment in digital assets being given formal recognition as a kind of personal property.
A key issue under the common law is that personal property (that is everything which isn't land, or 'real' property as it is known at law) is that things were considered to be either a chose in possession (being a thing which could be owned like a computer or a pen) or a chose in action (traditionally a thing which a court could make orders to enforce rights in relation to - such as a share or a debt). Digital assets do not neatly fit into either the category of being a chose in possession, as strictly speaking no one ever has possession of digital assets, merely a password which can update the record of ownership on a ledger, and they do not easily fit within chose in action, as there is no issuer and no one to enforce the ownership right of a digital asset against in many circumstances.
Despite this problem, the practical approach in insolvency courts has been to recognise digital assets as property for the purposes of insolvency. This has extended to injunctive actions as was recently seen in the Australian Federal Court where Justice Collier said:
I am satisfied that, at an interlocutory level, the definitions ...[relevant to the case]... are sufficiently broad to encompass cryptocurrency assets in appropriate circumstances...
Justice Jackman recently published a speech arguing that digital assets were simply choses in action and that no third category of personal property was needed, warning that:
the rigidity of a statute would inhibit experimentation, and suffers from the problem that you cannot regulate something in advance of its invention.
The proposed Bill is extremely short and as and in the identical form to that which was proposed by the UK Law Commission despite that position having been criticised by some scholars.
It reads as a clarifying law as follows:
If passed, the Bill will put an end to arguments that digital assets, being software or data objects, are incapable of being property by virtue of that characteristic, and help regulators and judges apply existing laws in a way that aligns with how people have been treating digital assets for some time (like property). While not applicable outside of the UK, it will no doubt have influence over other common law countries considering how to address fundamental definitions surrounding digital assets.
Minister for State and Justice, Heidi Alexander said that the UK government would convene an expert group to advise the UK government:
I believe the UKJT is uniquely placed to convene the expertise needed to consider the issues around control of digital assets.
Expert advice to policymakers has a key role in ensuring the law can align to the technology which it is regulating.
By Michael Bacina
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