The bill confirms the existence of a third category of personal property into which digital holdings including cryptocurrency, non-fungible tokens and carbon credits could fall.

Previously, digital belongings were not definitively included in the scope of English and Welsh property law.

The new law will therefore "give legal protection to owners and companies against fraud and scams, while helping judges deal with cases where digital holdings are disputed or form part of settlements, for example in divorce cases."

The action being taken on digital assets is in response to the Law Commission’s report in 2023. The Ministry of Justice commissioned the report to identify any barriers to the recognition of digital assets as property under English and Welsh private law and to recommend solutions. 

The Bill has been introduced into the House of Lords under the special parliamentary procedure for Law Commission bills.

The Government also announced in a written statement that it accepts the recommendation to set up an expert group who can provide guidance on technical and legal issues relating to digital assets. The Ministry of Justice has asked the UK Jurisdiction Taskforce (UKJT), an expert group chaired by the Master of the Rolls that produces non-binding guidance on areas of legal uncertainty, to take forward this work.

See also the press release from the Law Commission regarding the new bill.

Building upon the foundation laid by the DARE Act 2020, the legislation introduces comprehensive reforms designed to address the evolving landscape of digital assets and cryptocurrency markets.

Key highlights of DARE 2024 include:

1. Expanded scope: The law now encompasses a wider range of digital asset activities, including advisory or management services, digital asset derivatives and staking services. The Securities Commission also has the flexibility to add additional activities as the space evolves.

2. Enhanced digital asset exchange requirements: Digital asset exchanges must adhere to increased investor and consumer protection requirements including stringent systems and controls requirements, which enhance the integrity and security of transactions.

3. Robust custody framework: New provisions bring custody of digital assets or custodial wallet services under DARE 2024 and enhance the protection of client interests by requiring accessibility of digital assets, among other provisions.

4. Staking framework: DARE 2024 introduces a first-of-its-kind disclosure regime for staking digital assets belonging to clients or the operation or management of a staking pool as a business.

5. Comprehensive stablecoin framework: The Act provides a clear definition for stablecoins, provides for the registration of existing stablecoins, specifies acceptable forms of reserve assets and establishes new requirements for custody and management, segregation, reporting and redemption of reserve assets. The issuance of algorithmic stablecoins is expressly prohibited.

6. Digital asset issuers: Investor protection measures are enhanced by the inclusion of fit and proper standards for digital asset issuers, in addition to new disclosure and financial reporting requirements. 

Other notable provisions of DARE 2024 are "robust standards addressing conflicts of interest and connected third-party relations." The Act also addresses the categorization of non-fungible tokens as either "financial or consumer assets", provides for liquidity and reporting requirements, prohibits privacy token issuance and introduces certain restrictions on proof-of-work mining. 

In its press release, the Commission said:

"After closely examining the regulatory systems in major countries, the FSC, along with the Korea Financial Intelligence Unit (KoFIU), and the Financial Supervisory Service (FSS) decided to apply the following supremacy principle when enforcing laws on NFTs. First, NFTs shall be scrutinized to see if they qualify as securities under the purview of the Financial Investment Services and Capital Markets Act (FSCMA). Then, NFTs shall be seen in light of the Act on the Protection of Virtual Asset Users to determine if they qualify as virtual assets.

 "The legal characteristic of NFTs should be determined by the issuers, distributors, and dealers of NFTs based on their practical characteristics after considering wide-ranging factors, such as the issuance and circulation structure, agreement and advertisement, business and service content, and so on."