Property (Digital Assets etc) Bill

Lord Clement-Jones Excerpts

Second reading committee
Wednesday 6th November 2024 Grand Committee

[Lord Clement-Jones (LD)]

My Lords, I remind the Committee of my interests in the register. I add my thanks to the Minister for his clear introduction. I am an admirer of the work of the Law Commission, so it is intriguing to be debating the merits of this one-clause Bill with such a distinguished group of digital aficionados. Despite the brevity of the Bill, as the Minister has described, it has seen quite a careful run-up through consultation, response, report and draft Bill to help inform us. We have heard some great speeches today explaining why digital assets are important because of their impact, both negative and positive, on society and the economy.

The Law Commission has essentially recommended that we legislate to confirm that the outcome of the 1885 case Colonial Bank v Whinney, which decided that all personal things are either in possession or in action, is clearly superseded. Effectively, we are confirming that the common law of England and Wales has, over the last 10 years, clearly moved towards explicit recognition of a third category of things to which personal property rights can relate. In the words of the Law Commission, the courts have recognised that those things are

“capable of being objects of personal property rights at law”.

It was interesting to be reminded, while preparing for this debate, of the traditional forms of personal property. In the dim and distant past, I remember my supervising partner when I was an articled clerk—in the quill pen era—being very surprised when I had no idea how to draft an assignment of a chose in action. Actually, I had no idea what a chose in action was, despite two years of law at university. Anyway, young lawyers will now have to learn how to assign a digital asset as well.

The Electronic Trade Documents Act, mentioned by the noble Lord, Lord Holmes—it is also good to see the noble and learned Lord, Lord Thomas of Cwmgiedd—and which I was pleased to help on its way recently, was an exception in that it provided that electronic, or digital, trade documents could be treated as things in possession. Sadly, the Centre for Digital Trade and Innovation, soon to become an international centre, recently said that, while there are some signs of adoption, particularly among large commodity traders using e-bills of lading, the dial has yet to move on more general usage of the Act to make international trade faster, cheaper and simpler—as suggested in the impact assessment—especially for the SME sector. So, sadly, not all Law Commission efforts bear fruit quickly.

However, as the Law Commission discusses in its consultation paper, it did not think that the arguments for using possession as the operative concept for electronic trade documents were as persuasive in respect of other forms of digital asset. It concluded that

“it is not necessary or appropriate for legislation to define the boundaries of such a third category”.

We are essentially being asked to take an act of faith in the adaptability of the common law and to accept that

“the common law remains best placed to describe the parameters of third category things that are capable of being objects of personal property rights”.

This is in line with the first two of the principles that the Law Commission has explicitly and rightly adopted. The first is:

“Championing and supporting the inherent flexibility of the common law and making clear that, in general, it is sufficiently flexible, and already able, to accommodate digital assets”.


The second is:

“Statutory reform only to confirm the existing common law position or where the common law cannot develop the legal certainty the market requires”.


So we see reflected in this short Bill the Law Commission’s recommended legislation confirming the simple proposition that the fact that a thing is neither a thing in possession nor a thing in action does not prevent it being a thing to which personal property rights can relate. As we have heard today from a number of noble Lords—including the noble Lords, Lord Vaizey and Lord Holmes, and the noble Viscount, Lord Stansgate—this is designed to cover crypto tokens, such as bitcoin, ether and stablecoins, NFTs and carbon credits, which may not have rights or claims attached to them so they may not qualify as things in action.

Some lawyers say that there is already a high degree of legal certainty and that there exist certain types of intangible property that are already recognised by the law of England and Wales. In essence, the Law Commission says that the recommendation for statutory intervention seeks merely to confirm and support what it considers the existing position in law. It goes further in its belief that the common law can do the necessary job in further defining digital assets, saying that

“it is not necessary, appropriate or helpful for the law of England and Wales to adopt statutory definitions of digital things for the purposes of answering the question as to whether such things are capable of being objects of personal property rights”.

It continues:

“We think that this logic applies equally to defining hard boundaries of a category of thing to which personal property rights can relate, distinct from things in possession and things in action”.


So, broadly speaking, the Law Commission leaves detailed implications to be fleshed out through future judicial decisions and ongoing common-law development, perhaps with the expert panel.

This includes the important aspect of remedies. The commission concludes that

“the vitiating factors of mistake, misrepresentation, duress and undue influence apply similarly to contracts involving third category things as they do to contracts involving things in possession and things in action”.

We are taking quite a lot on faith here. However, when it comes to certain other aspects, such as the entry into operation and enforcement of collateral arrangements for crypto tokens and crypto assets, the Law Commission concludes that

“it is not possible for the common law alone to develop a legal framework”

and that

“such a regime would be beneficial for the law of England and Wales and would provide market participants with important legal tools that do not exist today”.

Some questions arise. What next steps are proposed for this? Is this another case for the expert panel to look at? Is the common law adequate to deal with transfers and intermediate holding arrangements?

There are a number of additional questions, to which I hope we will get the answers in the course of our Committee proceedings when we take evidence. For instance, the report touches on general consequences, such as clearer rules for inheritance, bankruptcy and insolvency proceedings. The noble Lord, Lord Meston, touched on the vexed issue of digital assets in wills, while the noble Viscount, Lord Stansgate, mentioned it in the context of divorce—happy days. What are the potential legal consequences of the Bill’s approach for the parties involved in digital asset transactions? How will this impact issues such as ownership disputes, inheritance, bankruptcy and insolvency?

The Bill leaves detailed implications to be fleshed out through future judicial decisions and ongoing common-law development. The report clearly states that the courts will play a critical role in shaping the contours of this new category. Are they fully equipped to do so? Is that the best way forward, rather than providing more granular definitions in the Bill itself? Is there any transition of existing digital assets required from their current legal status to their status as a result of the Bill? What are the potential risks or unintended consequences of the proposed legislation? Will the explicit recognition of digital assets as personal property have an impact on the financial, technological and legal sectors? How do stakeholders from those sectors view the proposed Bill?

While the Law Commission in its reports acknowledges the possibility of unintended consequences, it argues that the flexibility of the common law approach will allow for adjustments and refinements as necessary, rather than detailing specific risks, and I am certain that the Committee will want to explore that approach.

Finally, I have two questions that the Minister may be able to answer today. The report discusses potential impacts, such as increased legal certainty and more straightforward asset management, but it does not provide an in-depth analysis of sector-specific impacts. Do the Government propose to produce an assessment of the impact that the recognition of digital assets as personal property will have on various sectors, or do they believe that because of the confirmatory nature of the Bill, that is already baked in?

Then, on a matter that a number of other noble Lords raised today—the noble and learned Lord, Lord Thomas, and the noble Lords, Lord Vaizey and Lord Holmes—there is the whole question of how the proposed legislation aligns with existing international models. We heard mention of MiCA in the EU, while Dubai has digital asset legislation and a regulator, VARA, and the US will probably become more bullish about crypto assets under its new Administration. The noble and learned Lord, Lord Thomas, was also very clear about the importance of the competitive aspect in terms of choice of jurisdiction. This question remains largely unanswered in the report, with the Law Commission not detailing how the Bill will align with international legal frameworks or affect international transactions. What are the potential risks or unintended consequences of any of the proposed legislation in this respect?

Other questions were rightly raised about the future regulation of crypto assets and cryptocurrencies. On whether we are going as far as we should in this respect, the noble Lord, Lord Vaizey, and the noble Baroness, Lady Bennett, are pretty much on opposite sides of the equation. The noble Lord, Lord Meston, rightly made the point that the criminal law is ahead of the civil law—I see we are debating a statutory instrument on this subject on Monday. It may be beyond the Minister’s brief to be talking about the digital Michael Parkinson, but perhaps he could shine some light and give us a glimpse of the regulatory future as regards some of these digital assets.

There are many unanswered questions. I look forward to Committee, when I hope that we will get some more answers.

Property (Digital Assets etc) Bill [HL]

Lord Clement-Jones Excerpts

Report stage
Wednesday 30th April 2025 Lords Chamber

[Lord Holmes of Richmond (Con)]

My Lords, in moving Amendment 1, in my name, I will speak to Amendments 2 and 3 in this group.

It is a pleasure to open Report of the Property (Digital Assets etc) Bill. In doing so, I declare my technology interests as set out in the register, not least as adviser to Ecospend and Members Capital Management. I take a brief moment to thank all of those who have got the Bill to this stage, including Professor Green and her team at the Law Commission, everyone who was involved with our Special Public Bill Committee—particularly the clerk, Matthew Burton, and all his staff—and all colleagues who have shown an interest in and engaged with the Bill.

There is an extraordinary opportunity when it comes to digital assets and delivering clarity, consistency and certainty around their property classification. By 2030, it is estimated that somewhere between 10% and 14% of GDP will come from digital assets. To put it another way, transactions in 2030 involving digital assets will range between £10 trillion and £24 trillion. That is a huge opportunity for the planet and for the UK, not least because of our excellence in financial services and in fintech—financial technology—but, crucially, because of the great good fortune of English common law.

What we see with the Bill is the leading-edge deployment of that great tradition in the most modern of contexts. To take just one example, if we get effective dematerialisation of the capital markets, that will save £20 billion year-on-year in reduced costs and speeded up transactions. Clarification of digital assets will not only help capital markets but will assist with financial inclusion and financial market infrastructure transformation, impacting positively on our economy and, through that, our society. We should note that the world is watching as we pass this Bill—following, as it does, a suite of Bills from the Law Commission, not least the recent Electronic Trade Documents Bill, now Act.

This is a very good Bill, which does a very simple task of enabling a third category of property: taking a “thing in possession” and a “thing in action” and enabling a potential third category to accommodate digital assets which do not neatly fit within either of those current property classes. It is a good Bill, and it has been through an excellent Committee and Special Public Bill Committee procedure, but I believe it is worthy of stress-test through these amendments this evening.

Amendments 1 and 2 go to the very heart of the Bill and propose that the presumption that digital assets cannot be fitted within the existing two categories of property be reversed. Consider something such as an NFT, a non-fungible token. To put it in simpler terms, it is largely a piece of electronic software on the hardware of a digital ledger. It has an existence beyond its legal form, but it is difficult to possess in the way you would possess, for example, a bag of gold. In that sense, the Bill is structured to enable this third category. The amendment seeks to stress-test that and reverse that presumption, as we have seen in some of the recent judgments in Australia and Singapore.

I am not suggesting that this amendment is the right amendment; it is merely put to stress-test how the Bill is set out. It seeks to stress-test the claim made by Professor Green, when she gave evidence to our Special Public Bill Committee, that this amendment would take the bite out of the Bill. If indeed it would take the bite out of the Bill, then it would not satisfy my three Cs test of what the Bill needs to achieve if we are to realise the opportunities and the economic benefits from digital assets. Those three tests are: clarity, certainty and consistency.

Amendment 3 seeks to assist with this by suggesting codes of practice that could be brought to bear to assist the courts when they come to consider issues around digital assets. With that, I beg to move Amendment 1.

[Lord Clement-Jones (LD)]

My Lords, I am a great admirer of the noble Lord, Lord Holmes, and his passion for all things digital. But this is a good yet very modest Bill, and I not sure that we need stress-testing at this point in the proceedings. Through the Special Public Bill process that we have all been through over the last few months, we have kicked the tyres pretty hard already on this. We have taken evidence and had amendments in Committee, so I will be extremely brief and perhaps disappoint the noble Lord by not being in favour of any of his amendments.

--- Later in debate ---

[Viscount Stansgate (Lab)]

My Lords, rather like the noble Lord, Lord Clement-Jones, I am afraid I am also going to disappoint the noble Lord, Lord Holmes, because I do not think these amendments are necessary. But I agree with many of the things he said, especially about the evidence that we received. I had never been a Member of a Special Public Bill Committee before— I do not know how many of your Lordships in the Chamber tonight have been—but it is really a very interesting procedure. When I consider the length of the Bill compared with the height of the amount of evidence that we received both in writing and orally, I do not think I have ever seen such a strong proportion of that kind.

I want to say one thing about Amendment 4 and data centres. I agree that this is not really within the remit of the Bill. If it was not for the noble Lord tabling all these amendments, we would not have had a Report debate of any kind, so I thank him for that too. The House is beginning to understand, I think, that data centres use phenomenal quantities of electricity —it is staggering. I do not know how the future is going to unfold but when the noble Lord refers to them as the “foundries” of the 21st-century economy, I think he makes a very good point.

I am a member of the UK Engagement with Space Committee of your Lordships’ House and one of the many interesting things that is beginning to emerge there is that in the future data centres may be placed in space—where, incidentally, it is easier to keep them cool—and then you would send the data to and from. I agree that this goes much more widely than the debate on the Bill.

I conclude by saying that when the noble Lord says the world is watching, I agree with that too, because the Bill will allow common law to develop in the way that common law has done for decades. It will also entrench the central position of London as a jurisdiction for the arbitration of disputes and arguments about digital assets, and I think and hope that London will continue to do that. Therefore, there is that element to the Bill, which I strongly support, although I am in favour of the noble Lord withdrawing his amendment.

[Lord Clement-Jones (LD)]

My Lords, I can be extremely brief because I agree with much of what the noble Viscount, Lord Stansgate, has had to say. The noble Lord, Lord Holmes, is nothing if not consistent. We had data centres brought up in the Data (Use and Access) Bill and in this Bill, and I am sure he will ruthlessly bring up data centres on every possible occasion. Of course, the Government need a data centre strategy but the primary purpose of this Bill is very specific: to resolve the Colonial Bank v Whinney issue that the Law Commission wished to do. That is what we should be focused on today.

The Bill does not make digital assets property. It removes a legal barrier to their recognition as such by confirming that the traditional twofold classification is not exhaustive. That is all the Bill does, so I think that requiring a comprehensive economic impact assessment does not flow directly from this very narrow but useful Bill. I feel the same way about Amendment 5, which proposes a review within six months. Again, that goes way too far. Framing the review as being triggered

“due to any such digital assets being treated as property by virtue of this Act”

suggests that the Bill creates the property status, which is misleading.

I think the noble Lord, Lord Holmes, already knows all the arguments against his amendments so I shall carry on no further.

[Lord Sandhurst (Con)]

My Lords, an impact assessment is not practicable, whether in six months’ or three months’ time, we respectfully suggest. It would be premised on too many uncertainties. What we know is that the Bill will do no harm and is likely to do good. We have, if you like, the theoretical impact assessment of the Law Commission, which looked at all the issues in great detail. So, I suggest that we do not need this amendment, and we would not support it.

As to Amendment 5, six months’ time is, again, with respect, too short. I would suggest in parentheses that a review in five years’ time to see whether it is useful, whether it needs further amendment, how it is operating and what the effect is on the London market and litigation in London, could well be of value. Whether it needs a formal assessment or not is something that can be looked at four years down the road, but this is early days. We simply do not know enough. With respect to my noble friend, a review in a few months’ time will not help us at all. We do not support the amendment.

--- Later in debate ---

[Viscount Stansgate (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Holmes, and agree with his amendment. My only regret is that I did not sign it, because you can have four names on an amendment and, if I had another life, I would have immediately put my name to it. I echo his comments about the noble Lord, Lord Anderson of Ipswich, who was a wonderful chair of this Special Public Bill Committee. I may never sit on another such committee—who knows?—but it was an enjoyable and interesting experience. To match up the Long Title with what is called the operative clause in the Bill is a good and sensible thing. Apart from anything else, the Bill replaces an obscure late-19th century judgment of which I confess I had never heard before I went into the committee, but it is a Bill for the future and, with that, I wish it well.

[Lord Clement-Jones (LD)]

My Lords, I, too, add to our congratulations to the noble Lord, Lord Anderson, who was a very good chair. It was a very harmonious committee, as these Law Commission Committees tend to be. I am delighted to support the noble Lord, Lord Holmes, for a change, but it is very lucky we did not pass Amendment 1, that is all I can say.

[Lord Sandhurst (Con)]

My Lords, we support this amendment, for the reasons advanced by my noble friend Lord Holmes. I, too, add my thanks to the noble Lord, Lord Anderson of Ipswich, for all the hard work which he put in and to our excellent clerk, Matthew Burton. It is a pleasure now to see this Bill reach a happy conclusion, I hope.

Property (Digital Assets etc) Bill [HL]

Lord Clement-Jones Excerpts

3rd reading
Thursday 8th May 2025 Lords Chamber

[Lord Anderson of Ipswich (CB)]

My Lords, as the noble Viscount, Lord Stansgate, who is not in his place but currently on the Woolsack, said on Report, the two clauses of this Bill fully reflect neither the nearly 1,000 pages of learning that the Law Commission produced on the subject of digital assets, nor the almost equal volume of written and oral evidence received by the Special Public Bill Committee, variously approving the Law Commission’s approach and characterising the Bill as pointless or even dangerous. That the Committee, which I chaired, was able to consider these issues and debate them out with a degree of thoroughness in the Moses Room prior to a further debate, largely thanks to the noble Lord, Lord Holmes, on Report, is a tribute to our clerk, Matthew Burton, and all members of the committee—including not least the Minister—whose collective expertise was remarkable.

My only remaining concern is that, since the committee was entirely lacking in female members, it is entirely possible that we have succeeded in missing something obvious. The work of this House is now complete. I was delighted to hear just now that the Bill has been endorsed in Northern Ireland, and I wish it well on its onward journey.

[Lord Clement-Jones (LD)]

My Lords, first, I congratulate the Law Commission for its work on this Bill. The noble Lord, Lord Anderson, has mentioned the almost 1,000 pages of work from the Law Commission, its consultation paper, the final report, the supplemental report—no one accused the Law Commission of a lack of thoroughness as far as this two-clause Bill is concerned. Its purpose, as it said, was to ensure that the courts can respond sensitively to the complexity of emerging technology and apply the law to new fact patterns involving that technology. It also said:

“We conclude that the flexibility of common law allows for the recognition of a distinct category of personal property that can better recognise, accommodate and protect the unique features of certain digital assets (including crypto-tokens and cryptoassets). We recommend legislation to confirm the existence of this category and remove any uncertainty”.


As the noble Lord, Lord Anderson, has explained, we have thoroughly examined the resulting Bill under the Special Public Bill procedure, and it clearly fulfils that purpose, so I would like to thank our witnesses. I also thank the noble Lord, Lord Anderson, for his excellent chairing of the committee; our clerk, Matthew Burton; the Minister, of course; my fellow members for all their work on the Bill; and I agree with the Minister’s particular thanks to the noble Lord, Lord Holmes, for his stimulating and provocative input into our deliberations. But, as ever, there is more work to be done. The Law Commission recommended that the Government create a panel of industry experts who can provide guidance on technical and legal issues relating to digital assets, and I understand that the Ministry of Justice has asked the UK Jurisdiction Taskforce, an expert group chaired by the Master of the Rolls that produces non-binding guidance on areas of legal uncertainty, to take forward this work.

The Law Commission also made recommendations to provide market participants with legal tools that do not yet exist in England and Wales, let alone in Northern Ireland, such as new ways to take security over crypto tokens and tokenised securities. It recommended that this work be undertaken by a multidisciplinary project team. Whether the Minister can give us an update today, I do not know, but I very much hope that he will write to members of the committee, because that is unfinished business and it would be very useful to hear from the Minister about it.

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to follow my friend, the noble Lord, Lord Clement-Jones. In doing so, I declare my technology interests as set out in the register. Like other noble Lords, I have, rightfully, a long list of thanks, not least to all those witnesses who gave oral and written evidence to our Special Bill Committee; to Matthew Burton, our clerk, and all his team; to the Minister for his careful and thoughtful engagement, and all his officials; and not least to the noble Lord, Lord Anderson, for his excellent chairing of our Special Bill Committee.

This is a short Bill, but one with significant impact for the UK, and indeed beyond our shores, because through our legislative process, the world is watching what we do in this space. We have a great fintech tradition in this country, a great fintech ecosystem, and whether it is financial market infrastructure, dematerialisation of our capital markets or crucially important financial inclusion, digital assets have a critical role to play. With some trillions of the UK and world economy due to be transacted by digital assets by the end of this decade, the UK needs to ensure that it is well set for this future. The Bill does this through non-prescription, but using the great good fortune of English and Welsh common law, with its agility and its adaptability, as the Minister rightly said, for new technologies not yet even imagined.

It was an extraordinary pleasure to be part of this legislative process. My only question for the Minister is whether there is a schedule yet in the other place, so we can ensure that Bill becomes law as soon as possible. Not only does it send a signal to the world; it sends a signal to all those involved in digital assets in this country that with the financial centre of London and our fantastic fintech start-ups, scale-ups and larger businesses, London and the United Kingdom is an excellent place to be involved in digital assets business.