Property (Digital Assets etc) Bill [HL]

Lord Holmes of Richmond Excerpts

Report stage
Wednesday 30th April 2025 Lords Chamber

Moved by

[Lord Holmes of Richmond]

1: Clause 1, page 1, line 5, leave out “a thing in” and insert “capable of”
Member's explanatory statement
This amendment, connected to another in the name of Lord Holmes of Richmond, seeks to provide a statutory basis for recognising digital assets as property, while removing any presumption that these assets cannot be accommodated by the existing two categories of personal property rights.

[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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[Lord Holmes of Richmond (Con)]

My Lords, I thank all noble Lords who participated in this short debate. I say particularly to my friend, the noble Lord, Lord Clement-Jones: disappointing? Never. The whole purpose of tabling these amendments has been set out eloquently through the debate and what I was seeking to achieve was to have those arguments on the Floor of your Lordships’ House. I am delighted that that is exactly what has occurred, so I am more than happy—not disappointed at all—to withdraw the amendment.

Amendment 1 withdrawn.

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Moved by

[Lord Holmes of Richmond]

4: After Clause 1, insert the following new Clause—
“Review: impact of digital assets being treated as property by virtue of this Act(1) On the day on which this Act is passed, the Secretary of State must publish an economic impact assessment of digital assets being treated as property by virtue of this Act.(2) The impact assessment under subsection (1) must include, but is not limited to—(a) the estimated change in demand for, and use of, digital assets and the impact of this on data centre power usage, and(b) the current level of data centre provision and its ability to meet any increase in demand for digital assets.”

[Lord Holmes of Richmond (Con)]

My Lords, in moving Amendment 4 I will speak also to Amendment 5 in my name. I will be very brief with these because I accept that they go some way beyond the central thrust of the Bill.

My main reason for bringing these amendments back on Report is to make the point, and have it on the record, about the impact of data centres and the fact that they are in many ways the foundries, the furnaces, that are fuelling this fourth industrial revolution, not least when it comes to digital assets but also, of course, when it comes to AI and other new technologies. So it is imperative to think on the implications of, I hope, a massively expanding digital assets ecosystem and economy in this country, and the underlying policy implications for many other government departments.

I also brought the amendment back because, having been told that data centres were not an issue to be brought in the Data (Use and Access) Bill, I thought, well, if not the Data (Use and Access) Bill, why not the Property (Digital Assets etc) Bill? They will continue to be an area of contention rather than consensus, of potential negativity rather than positivity, if all government departments relevant to the issue do not come together and decide what the UK’s data centre strategy is, not least in terms of the provision of that resource for digital assets. If the Government get that right, it should be a purely positive path, but looking at issues around PUE and the siting and fuelling of these data centres is critical.

In brief, Amendment 5 seeks to make it clear that no further regulations will be required in relation to digital assets, stablecoins and other tokenised forms as a consequence of the Bill passing. I beg to move.

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[Lord Ponsonby of Shulbrede (Lab)]

My Lords, at the outset, I acknowledge the long-standing advocacy for technological innovation of the noble Lord, Lord Holmes. I also pay tribute to his deep commitment to ensuring that our regulatory framework is fit for purpose in an increasingly digital world.

These amendments would mandate reviews of the impact of digital assets being treated as property by virtue of the Bill’s provisions. One amendment requires the Government to publish an economic impact assessment of the Bill on the day the Act is passed. As noble Lords will know, the Government published an impact assessment when introducing the Bill. I hope it will assist and reassure noble Lords if I highlight some of the most salient points.

As the impact assessment sets out, the Bill is expected to bring clarity to personal property law, reduce uncertainty for businesses and ensure England, Wales and Northern Ireland remain leading locations in which to innovate. Due to limited data, it is very hard, if not impossible, to quantify these benefits. However, we think the Bill will help ensure our laws remain competitive on an international stage.

The impact assessment considered the potential for the Bill to encourage the use of digital assets. However, this impact is highly debateable, given the Bill merely confirms the position that has been gradually emerging through case law in recent years. It is not expected or intended that the Bill will cause a significant increase in uptake of digital assets.

The same amendment calls for the impact assessment to cover the estimated change in demand for, and use of, digital assets. The assessment would also have to cover data centre power usage, the current level of data centre power provision and its ability to meet any increase in demand for digital assets. This follows on from the points the noble Lord, Lord Holmes, made in Committee. He mentioned that he would like to hear that the Government are committed to data centres being fuelled through renewable energy and a discussion around where data centres would be located, given the value they can bring to the country. Although these are important points, they sit outside the remit of the Bill.

I say to my noble friend Lord Stansgate that whether a data centre is in space or not is also outside the relevant part of the Bill.

Furthermore, it would likely be impossible to accurately estimate the long-term effect of the Bill on data centres. There are many greater influences on these areas, such as cloud computing, AI and general data storage. This will make it extremely difficult to assess the impact of the Bill. Therefore, such a review could result in speculative or misleading conclusions.

The other amendment calls for reviewing the

“need for further regulation of stablecoins and tokenised deposits”

within six months of the Act passing. Here, I reiterate that the Bill does not specify how the courts will treat these particular digital assets. If they were considered personal property under the Bill, this would not affect the need—or not—for regulation. The Bill deals only with a discrete matter of private law. Therefore, the proposed review is unlikely to yield any meaningful conclusions.

Moreover, issues around regulating stablecoins and tokenised deposits are already being addressed. The Government’s forthcoming financial services regulatory regime of crypto assets will include a new regulated activity for stablecoin issuance in the UK. Overseas-issued stablecoin will be regulated in the UK in line with other crypto assets. This will ensure that the Financial Conduct Authority can properly manage stablecoin-specific risks.

In addition, the Prudential Regulation Authority has published its views on the risks associated with tokenised deposits and how it expects banks to address those risks. Where tokenisation does not change the underlying economics and fundamental nature of a depositor’s claim, the PRA’s prudential regulatory framework will treat a tokenised deposit similarly to a traditional deposit. Where banks intend to take tokenised deposits from retail customers, the PRA expects this to be done in a way that meets the PRA’s rules for eligibility for depositor protection under the Financial Services Compensation Scheme.

The Bill takes a minimalist approach to achieve the specific aim of unblocking the common law on personal property. While I am very pleased that I have had the opportunity to debate these amendments, the Government fear that they could cause unnecessary bureaucracy and regulatory duplication, which could increase uncertainty rather than alleviate it.

As set out already, we think there are significant benefits of the Bill, such as bringing clarity to English, Welsh and Northern Irish law and keeping it world leading. We will, of course, monitor those benefits closely in the future. Given that, I ask the noble Lord to withdraw his amendment.

[Lord Holmes of Richmond (Con)]

My Lords, I thank all noble Lords who have contributed to this brief debate and say, again, “Job done: mission accomplished”, on the record, I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

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Moved by

[Lord Holmes of Richmond]

6: Title, line 1, leave out “capable of” and insert “not prevented from”
Member's explanatory statement
This amendment seeks to restate the long title more clearly, so that it is consistent with the operative Clause of the Bill.

[Lord Holmes of Richmond (Con)]

My Lords, in moving my Amendment 6, I thank the noble Lord, Lord Anderson of Ipswich, and, indeed, the Minister, for adding their names to it. I also take the opportunity again to thank the noble Lord, Lord Anderson of Ipswich, for the excellent job he did in chairing, steering and keeping us focused through our Special Public Bill Committee procedure.

Amendment 6 is incredibly simple and straightforward: it takes the Long Title of the Bill and makes a change so that it fits perfectly with the operative clause within the Bill. As noble Lords will be aware, the Long Title has no operative impact. So, why go to the trouble of making the change? Firstly, for issues of clarity, consistency and certainty—to tidy up the Bill at this stage. But, far more importantly than that, because, as mentioned in earlier groups, the world is watching when we pass this legislation, and the signal that the Bill sends out is critically important. That signal—the signposting—means that, if anyone, anywhere on the planet, merely reads only the Long Title, they will get from that the purpose of the Bill, what it is all about and how it is going about it. It is a simple, straightforward amendment, which I am delighted the Minister has put his name to.

Lastly, as these are almost the last words I will say on the Bill, I will say just two things. We hear very often in these parts about a black hole measured in various billions. What about the opportunities enabled through the Bill for a goldmine? A digital, virtual, intangible goldmine, yes, but a potential digital assets goldmine measured in the trillions. The Property (Digital Assets etc) Bill is future facing, future-proofing, growth enabling ground-breaking and good for innovation, investment, citizen, consumer and the country. I beg to move.