UK Proposes New Law to Protect Bitcoin and NFTs as Personal Property

The U.K. government has introduced a new bill to Parliament that proposes new legal protections for digital assets such as cryptocurrency, non-fungible tokens (NFTs), and carbon credits. This move aims to legitimize digital assets as “personal property,” bringing them to a similar footing as traditional assets.

Key Takeaways

• The U.K. government has introduced a bill to protect digital assets like Bitcoin and NFTs as personal property.

• The bill aims to update current legal provisions around personal property rights.

• If passed, the law would make it easier for courts to adjudicate disputes involving digital assets.

• The bill is currently in the first reading stage in the House of Lords.

Background

The proposed law comes in response to a 2023 report from the Law Commission that highlighted the need to update current legal provisions around personal property rights. The report noted that as technology advances and humans spend increasing amounts of time online, our relationships with digital assets will become ever more important.

The concept of “personal property” is crucial in law, as it plays a central role in legal cases relating to bankruptcy, insolvencies, theft, inheritance, divorce proceedings, and more. Currently, the law in England and Wales legislates around two categories of property: Tangible goods such as cars, jewelry, and cash, known as “things in possession,” and intangible assets such as shares, debts, and intellectual property, known as “things in action.”

The Gap in Current Law

This leaves a significant gap for “digital” assets such as Bitcoin and similar cryptocurrencies, as well as NFTs like digital art. This new, third category, if passed into law, would bring greater clarity to what constitutes personal property and would make it easier for courts to adjudicate disputes.

For example, a court could issue a freezing injunction to prevent someone from dissipating a digital asset before a dispute is resolved, similar to how the court already does for tangible products. Or, if someone has their digital asset stolen as part of a scam, they could avail greater legal remedies.

Moreover, such a law would mean that digital assets could form part of a person’s estate for the purpose of inheritance or bankruptcy proceedings.

What’s Next?

The bill was first published in draft form in July and has now reached the first reading stage in the House of Lords. It will have to go through various debates and iterations before it progresses to the House of Commons.

There is still some distance to go before the bill becomes law, but the U.K. currently counts a majority Labour Government, so there is a good likelihood it will eventually be passed. However, the exact form and provisions of the law are still unclear.

For example, what will count as a “digital asset” under the new legislation? In theory, that term covers a broad range such as email accounts and files, carbon credits, and in-game digital assets. The Law Commission acknowledges this, noting there will likely be “boundary issues” across the digital asset spectrum. It also recommends a “common law” approach, indicating the law may have to be tested in court with the presiding judge ruling on a case-by-case basis to set precedents on whether an asset in a given case should be afforded personal property rights.

However, the Ministry of Justice and the Law Commission are clear that the “main” digital asset it sees the law protecting is that of crypto tokens, such as cryptocurrencies and NFTs.

Sources

• Bitcoin and NFTs may get greater legal protections as 'personal property' under proposed UK law | TechCrunch, TechCrunch.

• Bitcoin and NFTs may get greater legal protections as ‘personal property’ under proposed UK law, MSN.