Redefining ownership: How the Property (Digital Assets etc) Bill will protect digital assets

Published:

15 April 2025

Background

A recent report by Elliptic, revealed that ‘over $100 million worth of NFTs were publicly reported as stolen through scams’ between 2021 and 2022. Phishing attacks are one of the main methods used by scammers who convince victims to hand over the private key to their crypto or NFT wallet, or their personal information, which they then use to steal their cryptocurrency funds or NFT assets.

In response to the Law Commission’s 2023 Digital Assets report, the UK government introduced the proposed Property (Digital Assets etc) Bill. This bill aims to afford digital assets the same legal protections as those that fall within the two existing legal categories of possessions, by clarifying their legal status. The bill has completed its second reading in the House of Lords, where it was first introduced into Parliament, and is currently passing through the report stage.

Currently in the UK, there are two categories of possession – “things in possession” and “things in action.” The first category refers to objects which are capable of possession; they are tangible or moveable assets, such as a car or a bag. The second category refers to property which can only be claimed through legal proceedings, for instance a contractual right or owning shares in a company. Digital assets, such as crypto-tokens and NFTs, do not neatly fall into either of these traditional categories of possession, and therefore are not protected in the same way. Owners of digital assets are therefore far more vulnerable to instances of fraud and theft due to this lack of legal protection.

The Impact of the Bill

In September 2024, the UK government introduced the Property (Digital Assets etc) Bill which intends to clarify that digital assets are capable of being personal property, despite not falling into the current categories of possession. The main provision of the bill states (at Section 1) that:

‘A thing (including a thing that is digital or electronic in nature) is not prevented from being the object of personal property rights merely because it is neither—

(a) a thing in possession, nor

(b) a thing in action.’

The wording of this provision is particularly important, because it does not state that any “thing” can be property, but rather that a “thing” which is neither a “thing in possession” nor a “thing in action” is not prevented from being property for this reason alone. The bill therefore recognises that digital assets, which belong to neither of the traditional categories of possession, are capable of being personal property. However, it remains up to the courts to provide further clarity on what “things” (i.e. what sorts of digital assets) fall into this third category of possession over time.

Hinesh Shah, a forensic accountant at Pinsent Masons, has remarked that the bill ‘marks a landmark moment for digital assets in the UK’ which ‘positions the UK as a global leader in the rapidly evolving crypto industry’ by clarifying the legal status of these assets and providing legal protection to owners against fraud, theft, and scams. In addition, by leaving the wording of the bill open, there is room for new types of digital assets to be recognised as personal property (as and when they are created), which is particularly important due to the ever-evolving nature of the digital space.

Sara Esfandyari, a commercial litigator at Pinsent Masons, also remarked that by recognising that digital assets can be a form of personal property, ‘the law has made it easier for claimants to recover stolen or misappropriated funds.’ Some of the legal protections which the bill will provide to owners of digital assets are rights in disputes, enforceable action in instances of fraud or theft, and their inclusion in bankruptcy or insolvency procedures so that digital assets could be given as a form of repayment to creditors.

Conclusion

The Property (Digital Assets etc) Bill is an important step towards the legal recognition and clarification of digital assets. This clarity will generate greater confidence among owners that their assets are protected, firmly cementing the UK’s status as a global leader in the industry and encouraging business and greater investment in this area.

However, The Law Commission’s Digital Assets Final Report recognised that statutory reform may not address all the legal challenges associated with digital assets. Since it has been left to the courts to clarify what sorts of digital assets will be considered as property, some uncertainty remains which may take some time to remedy as cases are brought to court.

By Katherine Marlow, Student Blog Writer at QMLAC and LLB Law Student.

This blog is for information only and does not constitute legal advice on any matter. While we always aim to ensure that information is correct at the date of posting, the legal position can change, and the blogs will not ordinarily be updated to reflect any subsequent relevant changes. Anyone seeking legal advice on the subject matter should contact a specialist legal representative.