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.

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[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.

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[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.