A well reasoned and refreshingly deep take on the status of cryptoassets has been set out by the 'UK Jurisdiction Taskforce' of the 'Lawtech Delivery Panel', which is well worth a read. While carrying no legal weight, we expect the gravitas of the authors may lead to it being persuasive in commercial discussions, and in future caselaw.
The unconventional nature of the document allows it to both get into the weeds, and contemplate more hypotheticals, than the average judgement, which gives it wide scope.
The report starts by noting the cornerstone attributes of property under English law: definability, identifiability by third parties, capability of being assumed by third parties, permanence/stability, certainty, exclusivity, control and assignability. Each is considered in turn.
As one would commercially expect, cryptoassests are held to be property, and capable of being owned, even though not physically possessed.
The more philosophical stumbling block that being information might prohibit a crypotasset from being property is dismissed, on the grounds that cryptoassets possess certainty, exclusivity, control, assignability and permanence in a way that mere information generally lacks. The authors do note however that this is unlikely to apply to a private key in isolation.
The taskforce notes that a cryptoasset cannot be possessed (which required a physical relationship) (compared to ownership which does not). From this, much of the remaining analysis falls into line:
- the following are not permitted in respect of cryptoassets as they require possession:
- documentary intangibles;
- document of titles;
- instrument under Bills of Exchange Act 1882;
- goods under Sale of Goods Act 1979
- the following are, as they only require property / ownership:
- equitable charges
Applying different reasoning, a cryptoasset is not a 'negotiable' as that requires applicable statute or mercantile usage - neither of which seem to be the case, and is not a register constituting title, as that would require specific legislation (such as with the Land Registry).
Other highlights from the report are:
- the view that a cryptoasset is neither a chose in possession, nor a chose in action - dismissing the 1885 principle that property must be one or the other - on the basis that courts are quite used to recognising this 'third' (read: catch-all) form of property;
- the observation that an 'on chain' transfer is not in legal terms a transfer or assignment of the cryptoasset , but the destruction of the initial cryptoasset, and the creation of a new cryptoasset (reminiscent of a teleportation machine) - which we expect will be the source of many legal hiccups in the future;
- and the authors throwing their hands up regarding conflict of laws, effectively requesting legislation to clarify in which situations English law would apply to cryptoassets, although to their credit do propose a framework for this
Overall, the report is a welcome effort to provide a view on a new and complex area - while not able to provide authority, it does give a robust opinion on these matters, which helps give a clear framework to agree and disagree with, help to get people 'on the same page' on many of these issues, and we expect for many, address broad categories of uncertainty, replacing them with narrower, now more tightly defined, question marks.
In general ... [under English law] cryptoassets are therefore to be treated in principle as property. Cryptoassets ... cannot be the object of a bailment, and only some types of security can be granted over them, though we see no obstacle to the granting of other types of security.