UK Government Introduces Bill To Protect Digital Assets

According to TechCrunch, the U.K. government has introduced a new bill to Parliament aimed at providing legal protections for digital assets, including cryptocurrencies, non-fungible tokens (NFTs), and carbon credits. This legislative move comes as the crypto sector faces various regulatory challenges globally. In the U.S., the Securities and Exchange Commission (SEC) has classified certain crypto assets as securities and approved the first U.S.-listed exchange-traded fund (ETF) to track Bitcoin. Similarly, the European Union (EU) is implementing new laws to regulate cryptocurrency and enhance transaction traceability. The U.K.'s new Property (Digital Assets etc) Bill seeks to legitimize digital assets as “personal property,” aligning them with traditional assets. This initiative follows a 2023 report from the Law Commission, which highlighted the need to update legal provisions around personal property rights. The report emphasized the growing importance of digital assets as technology advances and people spend more time online. It also aimed to ensure that the private law of England and Wales remains competitive and flexible for market participants in the digital asset space. The concept of “personal property” is crucial in legal contexts such as bankruptcy, insolvencies, theft, inheritance, and divorce proceedings. Currently, the law in England and Wales categorizes property into tangible goods, like cars and jewelry, and intangible assets, such as shares and intellectual property. This leaves a gap for digital assets like Bitcoin and NFTs. The proposed third category would clarify what constitutes personal property, making it easier for courts to resolve disputes. For instance, a court could issue a freezing injunction to prevent the dissipation of a digital asset before a dispute is resolved, similar to existing measures for tangible products. Additionally, if a digital asset is stolen, greater legal remedies would be available. The law would also allow digital assets to be included in a person’s estate for inheritance or bankruptcy proceedings. The bill, initially published in draft form in July, has now reached the first reading stage in the House of Lords. It will undergo various debates and iterations before progressing to the House of Commons. Although there is still a long way to go before the bill becomes law, the current majority Labour Government increases the likelihood of its eventual passage. However, the specific provisions and definitions, such as what constitutes a “digital asset,” remain unclear. The Law Commission acknowledges potential “boundary issues” across the digital asset spectrum and recommends a “common law” approach, where courts may need to set precedents on a case-by-case basis. The Ministry of Justice and the Law Commission have indicated that the primary focus of the law will be on protecting crypto tokens, such as cryptocurrencies and NFTs.