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.

The Law Commission's June 2023 final report concluded that certain digital assets, including crypto-tokens and non-fungible tokens (NFTs), are "capable of attracting personal property rights." However, because digital assets "differ significantly from physical assets, and from rights-based assets like debts and financial securities, they do not fit within traditional categories of personal property."  The Commission recommended that legislation should confirm the existence of a “third” category of personal property.

The Law Commission has prepared draft legislation to reflect this recommendation and is seeking views on the draft clauses as to their potential impact. 

The deadline for responses is 22 March 2024.

The government has confirmed its final proposals for cryptoasset regulation in the UK, including its intention to bring a number of cryptoasset activities into the regulatory perimeter for financial services for the first time. 

This document provides the government’s response to the consultation and call for evidence on the future financial services regulatory regime for cryptoassets, which was published on 1 February 2023. 

It summarises the feedback received by HM Treasury in response to the consultation, and details how this has influenced further development of the government’s approach. 

The Government asked the Law Commission to carry out an analysis of the law in England and Wales to see how it can respond to the emerging technology and to make recommendations for reform to ensure the law is capable of accommodating both crypto tokens and other digital assets.

The Commission's recommendations aim to provide a "comprehensive legal foundation for digital assets" which will "allow these new technologies to flourish, enabling a diverse range of market participants to interact with and benefit from them."

In its report, the Commission shows that the common law of England and Wales is "well placed" to provide a "coherent and globally relevant regime" for existing and new types of digital assets.

Although digital assets "do not fit within traditional categories of personal property", the Commission said the flexibility of common law can "accommodate a distinct category of personal property to better recognise and protect their unique features". The Commission also recommended legislation to "confirm the existence of this category and remove any uncertainty."

The Law Commission made four recommendations: 

1. Legislation to confirm the existence of a distinct third category of personal property under the law which "can better recognise, accommodate and protect the unique features of digital assets." The report does not set out clear boundaries for this third category, arguing instead that "common law is the best vehicle to determine which objects can fit within it." This will "allow for a nuanced approach to recognising that things such as crypto-tokens, export quotas or different types of carbon emissions allowance can be objects of personal property rights."

2. Creation of a "bespoke legal framework that better facilitates the entering into, operation and enforcement of collateral arrangements relating to crypto-tokens and cryptoassets."

3. Statutory law reform to "clarify whether certain digital assets fall within the scope of the Financial Collateral Arrangements (No 2) Regulations 2003."

4. Creation of a panel of "industry-specific technical experts, legal practitioners, academics and judges to provide non-binding advice to courts on complex legal issues relating to digital assets."

Commenting on the publication of the report, Professor Sarah Green, Law Commissioner for Commercial and Common Law, said:

“The use and importance of digital assets has grown significantly in the law few years. The flexibility of the common law means that the legal system in England and Wales is well placed to adapt to this rapid growth.

“Our recommendations for reform and development of the law therefore seek to solidify the legal foundation for digital assets. We also aim to ensure that the private law in England and Wales remains a dynamic, globally competitive and flexible tool that enables further technological innovation.”

Justice Minister, Mike Freer, said:

“We must ensure our law remains equipped to meet the complexities of these technologies well into the future, and we will carefully consider these findings as we look to further strengthen the future of our globally-renowned legal system.”

The Law Commission published:

Summary of the report

Full Report

Press release

In response to a written question to the Treasury by Harriett Baldwin MP, Mr Griffith said that the Royal Mint is not proceeding with the launch of a NFT "at this time" but will keep the proposal under review.