The Property (Digital Assets) Bill: D’Aloia v Persons Unknown [2024] EWHC 2342 (Ch)

Unlocking Crypto Asset Ownership: The Property (Digital Assets) Bill and Its Legal Implications

The UK’s introduction of the Draft Property (Digital Assets etc) Bill in September 2024 marks a critical juncture in modern property law, addressing the evolving legal landscape surrounding digital and electronic assets.

Property (Digital Assets etc) bill introduced into Parliament - Law Commission

The Government has today introduced the Property (Digital Assets etc) Bill into Parliament. The Bill enacts the recommendations of the Law Commission of England and Wales. Its effect is to confirm the existence of a third category of personal property, into which crypto-tokens and other assets could fall. The Bill is available here and has … Read more >

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By affirming that digital or electronic entities can constitute objects of personal property rights, the Bill sets a foundation for courts to adapt to the complexities of a digital economy.

However, this legislative move, while significant, invites broader discussions about the future implications for property law and its adaptability to technological innovations.

Bridging the Gap in Property Law

Historically, English law has adhered to a binary classification of property—choses in possession and choses in action. This framework, rooted in Colonial Bank v Whinney (1885) 30 Ch D 261, has proven inadequate for digital assets like cryptocurrencies and NFTs. These assets defy traditional classifications due to their intangible and virtual nature, presenting a challenge for property rights recognition.

The judiciary has already taken steps to address these gaps. Cases like AA v Persons Unknown [2019] EWHC 3556 (Comm) [2020] 4 W.L.R. 35 and D’Aloia v Persons Unknown [2024] EWHC 2342 (Ch) have demonstrated the courts’ willingness to interpret existing legal principles in favour of recognising crypto assets as property.

In the latter, USD Tether—a stablecoin—was deemed a distinct form of property, setting a precedent for digital assets to attract personal property rights outside traditional categories.

Key Provisions and Their Implications

The Draft Bill’s simplicity belies its transformative potential. By explicitly stating that a thing need not be a chose in possession or a chose in action to qualify as property, the legislation removes any ambiguity over the recognition of digital assets.

However, the legislation refrains from defining the specific characteristics of digital or electronic assets that might qualify as property. This omission leaves the burden on the judiciary to develop these principles over time, guided by existing case law.

The criteria set forth in National and Provincial Bank v Ainsworth [1965] 1 AC 1175—definability, exclusivity, control, and permanence—remain crucial benchmarks, though their application to digital assets is still evolving.

Challenges and Policy Considerations

While the Bill’s passage would signify progress, significant challenges remain. For instance, not all digital entities will satisfy the criteria for property rights. Pure information, lacking exclusivity and control, may fall outside this scope.

Moreover, the dynamic and mutable nature of digital assets poses unique questions about their permanence and assignability.

Policy considerations also loom large. Courts will need to grapple with issues of privacy, freedom of speech, and the potential monopolisation of digital assets. These factors highlight the delicate balance between protecting individual property rights and fostering innovation in the digital sphere.