Bitcoin and NFTs could get more legal protection as ‘personal property’ under proposed UK law

UK Government he introduced a brand new bill in parliament that proposes recent legal protections for digital assets such as cryptocurrencies, non-fungible tokens (NFTs) and carbon credits.

The bill comes as the cryptocurrency sector faces a series of regulatory headwinds: In the U.S., the Securities and Exchange Commission (SEC) ruled that some crypto assets are securities, and earlier this 12 months, the SEC approved the primary U.S.-listed exchange-traded fund (ETF) to trace Bitcoin. Meanwhile, the European Union (EU) can also be rolling out recent rules to control cryptocurrencies and make it easier to trace transactions.

Great Britain is we’re working on similar regulationsbut recent Asset Bill (Digital Assets etc.) fairly, it’s about legalizing digital assets as “personal property,” meaning they’ve the identical rank as traditional assets.

The proposed law is a response to Report 2023 from the Law Commission, which outlined the necessity to update the present laws on personal property rights. The report noted:

As technology advances and people spend more time online, our relationship with digital assets will develop into even more essential… Our recommendations also aim to be certain that the private law of England and Wales stays a dynamic, globally competitive and flexible tool for market participants in the world of ​​digital assets.

Law Commission: Digital Assets – Final Report Summary

The concept of “personal property” is significant in law since it plays a central role in legal matters referring to bankruptcy, insolvency, theft, inheritance, divorce proceedings and more. Currently, the law in England and Wales (Scotland and Northern Ireland have separate legal systems) governs two categories of property: tangible goods such as cars, jewellery and money, known as “things in possession”. Separately, “things in action” concerns the protection of intangible assets such as shares, debts and mental property.

That leaves an enormous loophole for “digital” assets like Bitcoin and similar cryptocurrencies, as well as NFTs like digital art (which have modified hands for significant amounts in recent times). This recent, third category, if passed, would bring greater clarity to what constitutes personal property and make it easier for courts to resolve disputes.

For example, a court could issue a freezing order to stop someone from dissipating digital assets before a dispute is resolved, very like a court would for tangible goods. Or if someone steals their digital assets as a part of a fraud, they could pursue greater legal remedies.

Additionally, such a law would mean that digital assets could develop into a part of an individual’s estate for the needs of probate or bankruptcy proceedings.

What’s next?

The bill got here first published in draft form in July, but has now reached the primary reading stage within the House of Lords, where it’s going to must undergo a series of debates and amendments before going to the House of Commons.

There continues to be a protracted strategy to go before the law comes into force, but there are currently around Labour Party majority governmentso there’s a high probability that this bill will ultimately be passed – however it will not be clear in what form and with what provisions.

For example, what will likely be considered “digital assets” under the brand new laws? In theory, the term covers a wide selection of topics, such as email accounts and files, carbon credits and in-game digital assets. The Law Commission I admit this, noting that there’ll likely be “borderline issues” across the digital asset spectrum. He also recommends the so-called “customary law“approach”, indicating that the law may require a trial in court, during which the presiding judge issues a ruling in each individual case to determine precedents as as to if personal property rights ought to be granted to an asset in a specific case.

However, the Ministry of Justice and the Law Commission have been clear that the “main” digital assets they consider are protected are crypto-tokens such as cryptocurrencies and NFTs.