NFTs, cryptocurrency, digital assets: What are they under English law?

This content originally appeared on NRF Connections.

Digital assets, what are they really? You can’t physically hold them, they’re not legal rights, but they are personal property. So how should they be treated under English law?

The Law Commission has published its final report on the reform and development of English law relating to digital assets, ultimately taking a minimal and targeted, but innovative and incremental approach – creating a third category of personal property known as “digital objects”. Although not explicitly defined by the Law Commission, they suggest that a digital asset must exhibit ‘rivalrousness’ – its use by one person interferes with or prevents anyone else from using it. A key recommendation was that the government should create a panel of experts, including technical experts, practitioners, academics and judges to advise on legal issues involving digital assets.

If taken forward, the reforms will pave the way for greater protection for holders of cryptoassets, including victims of fraud, and support the government’s ambitions to make the UK a global centre for technological innovation and development. Courts will be able to develop proprietary remedies and set out criteria for different types of custody, intermediary and collateral arrangements, giving crucial certainty to DeFi structures and exchanges.

It will be interesting to see how these reforms are received, and where the next steps of this journey will lead.