Advancing Digital Property Rights: Thoughts for your Digital Estate

The UK Government has recently introduced to Parliament the “Property (Digital Assets etc) Bill” (the Bill), whose purpose is to confirm the existence of a third category of personal property covering digital assets such as cryptocurrencies. The Bill itself is very short, and only applies to England and Wales, stating that “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.” This follows the Law Commission’s recommendation to bring into law a third type of personal property to ensure that digital assets will not be treated ambiguously, or worse, deprived of legal status merely because they do not fit into traditional legal categories.   

Once implemented, the Bill should advance:

Certainty

England and Wales will be one of the first jurisdictions to recognise digital assets in law which will provide clarity and greater legal certainty on how certain assets will be treated.

Protection

Reducing doubt as to the legal nature of digital assets will confirm that the protections the law affords to traditional categories of property will exist for owners of digital assets, allowing for enforcement action to be taken in the event of theft or fraud and an extension of rights in disputes. Protections will also extend to creditors who may seek to rely on digital assets when seeking legal remedies.

Flexibility

The Bill is drafted in a manner that will allow the courts to consider new and emerging digital assets and developing features of existing assets. However, the Bill is careful not to list specific asset types and does not provide that any thing is capable of being personal property, although it does steer towards assets that are “digital or electronic in nature”. Whilst this will ensure that the law remains flexible and allow this new category to develop under the common law in the same way as traditional personal property rights have done, the courts may be asked in the future to clarify the precise ambit of such assets.

As the use of digital assets continues to grow with the modern economy, we are increasingly seeing greater value attributed to an individual’s “digital estate”. From a cross-border estate planning perspective, implementation of the Bill will provide comfort to such individuals who may seek to rely on English law for greater security and protection over their digital estate compared with other jurisdictions.

Succession planning opportunities will also come into play. For example, there will be even wider benefits to individuals who are resident outside of the UK but who are able to elect for English law to apply to the succession of their estate; and personal representatives of complex cross-border estates who are often overburdened with multi-jurisdictional issues in respect of estate management, distribution and taxation, should also feel the benefits of greater simplicity regarding digital assets.

The legal framework governing digital assets continues to evolve, mirroring the dynamic nature of the sector itself. It is pleasing to see English law at the forefront of legislative change providing a further demonstration of the UK’s commitment to adapt to and lead in this area. It remains to be seen what jurisdictions, within the UK or internationally, will follow suit.