/>iOn 11 September 2024, the Property (Digital Assets etc) Bill (Bill) was introduced to the House of Lords and received its first reading. If enacted, the Bill will confirm that certain types of digital assets are capable of being recognised as personal property under English law.
Background
Traditionally, two distinct categories of personal property rights are recognised under English law: (i) rights relating to things in possession (i.e., tangible things); and (ii) rights relating to things in action (legal rights or claims enforceable by action).
In March 2020, the UK Ministry of Justice asked the Law Commission (Commission) to review how personal property law in England and Wales could apply to crypto-tokens and other digital assets, and to recommend reforms in this area.
The Commission published its report in June 2023 (Report), concluding that it would be helpful for the government to introduce legislation creating a “third category” of personal property rights for assets that are able to attract such rights, but do not fit into either of the two above-mentioned traditionally-recognised categories. Following the Report, the Commission published a consultation (Consultation) seeking feedback on a draft Digital Assets Bill (Draft Bill). For further information on the Report, Consultation and Draft Bill, please see our recent article (available here).
The Draft Bill, Bill and Explanatory Notes
The Draft Bill provided that “a thing (including a thing that is digital or electronic in nature) is capable of being the object of personal property rights even though it is neither – (a) a thing in possession, nor (b) a thing in action”.
By contrast, the Bill makes it clear that a “thing” is not prevented from being the object of personal property rights merely because it is neither a thing in action nor a thing in possession: i.e., “a thing (including a thing that is digital or electronic in nature) is not prevented from being the object of personal property rights merely because it is neither - (a) a thing in possession, nor (b) a thing in action” (emphasis added).
On the same day, the Ministry of Justice published explanatory notes (Notes) for the Bill. The Notes explain what each clause of the Bill will mean in practice, provide background information on the development of the policy, and provide additional information on how the Bill will affect existing legislation in this area.
Next Steps
The Bill will need to be approved by both the House of Lords and the House of Commons, and receive Royal Assent before it can become an Act of Parliament. If approved, the Bill is expected to apply to England and Wales only, and come into force on the day on which it is passed.
A copy of the Bill and the Notes can be found here and here, respectively.
