How the Property (Digital Assets) Bill Enhances Legal Protections for Businesses
The Property (Digital Assets etc) Bill was introduced to the House of Lords on 12 September 2024, marking a significant step towards providing a clearer legal framework for digital assets in the UK. This Bill, which received its second reading in Grand Committee on 6 November 2024, was brought forward in response to recommendations by the Law Commission’s 2023 report and its comprehensive consultation on digital assets.
This legislation is especially important for businesses dealing with digital assets such as Cryptocurrencies, NFTs and virtual carbon credits since it establishes legislative regulations governing the nature of digital assets as objects of personal property rights. This new legal framework is critical if disputes arise as it provides a systematic and dependable base for addressing digital asset issues, minimising legal conflicts and increasing protections during litigation.
A New Kind of Property
The new Bill confirms that digital and electronic assets can be considered property rights even if they do not fall into the traditional categories of “things in possession” (tangible property) or “things in action” (intangible rights such as debts and contractual claims). This means that digital assets will be legally recognised as a distinct type of property, based on the common law principles that are already applied to property in the UK. The Law Commission has stated that, while common law will continue to evolve in this field, a legislative basis for digital assets will provide clarification and decreased litigation costs and court time by providing a certain level of welcome predictability.
Following the Bill’s passing, businesses involved in digital asset transactions will be able to more securely maintain ownership, enforce rights and rely on these assets in financial and operational affairs.
Supporting the Resolution of Digital Asset Disputes
This Bill addresses numerous issues that businesses may encounter while dealing with digital assets. Historically, litigation involving digital assets has faced challenges due to the ambiguous status of digital property. The Bill strengthens the legal foundation for claims, whether they are connected to ownership disputes, breach of contract, or wrongful transfers, by recognising digital assets as a type of property.
For example, if a third party obtains unauthorised control of digital assets, the Bill allows for the ability to pursue legal remedies with more certainty and confidence. Importantly, it encourages the adoption of protective measures such as freezing orders, which can prevent further loss of digital assets while disputes are being resolved. This statutory framework allows for faster, more effective action to secure assets and defend financial interests in commercial disputes.
Improved Access to Injunctive Relief
In commercial litigation, injunctive relief (particularly freezing orders) is an important tool for protecting assets that may be readily moved or disguised. Digital assets, given their inherently transferable nature, can be particularly vulnerable to unauthorized transactions or concealment. The Bill’s recognition of digital assets as property allows clients to pursue injunctive relief more readily, improving their ability to protect assets during litigation.
For businesses holding significant digital assets or relying on digital property in transactions, this adds a valuable layer of security. Securing interim remedies in complex digital asset disputes will ensure your interests are safeguarded.
Broader Implications for Risk Management and Financial Security
In addition to assisting in litigation, the Bill has consequences for broader business operations. As the government’s recent Property (Digital Assets Etc.) Bill factsheet alludes to, digital assets classified as personal property can be used as security for loans, become part of an estate for inheritance purposes, and be available to creditors if a business declares for bankruptcy. This increased clarity improves businesses the ability to use digital assets as collateral and incorporate them into long-term financial planning, knowing that they are protected by property rights.
The government has also formed an expert group, engaging the UK Jurisdiction Taskforce (UKJT) to provide non-binding guidance on complex legal areas surrounding digital assets. This initiative, together with the Property (Digital Assets etc) Bill, promotes a balanced approach, that combines statutory and common law development to offer stability while allowing the courts to resolve nuances as they occur.
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