Property (Digital Assets etc) Bill [Lords]

14:22:00

I beg to move, That the Bill be now read a Second time. The Property (Digital Assets etc) Bill is a pivotal step in the evolution of our legal system—one that ensures that the law remains relevant and pre-eminent in the digital age. As we set out in our plan for change, this Government are fully committed to providing investors and businesses with stability and certainty. This Bill will help to provide that certainty for people and businesses who own and transact with digital assets. This will help drive economic growth by encouraging innovation, attracting investment and reinforcing the UK’s position as a global hub for digital finances and technology.

Does the Minister agree with me that although the Bill is small, it is very much mighty? It is important that we get the Bill on the statute book because we want this country to be ahead of the game on these issues.

My hon. Friend is right. We want the UK to remain the pre-eminent jurisdiction of choice for legal services, as it currently is. This evolution of our law will enable it to remain a global hub for digital finance and tech. Overall it is a Bill that reflects our legal heritage, embraces technological innovation and prepares our nation for the future. To appreciate the significance of the Bill, we must begin with the foundations of property law in England and Wales. For centuries, our legal system has categorised personal property as two distinct types: first, things in possession—tangible items that can be physically held or possessed, such as a book, jewellery or gold; and secondly, things in action—intangible rights that can only be claimed or enforced through legal action, such as debts, shares or contractual rights. These categories have served us well for hundreds of years, providing clarity in ownership and facilitating commerce. They have helped to create legal certainty in matters ranging from succession and insolvency to trust structures and collateral arrangements. The digital revolution introduced a new class of assets—digital assets—that do not fit neatly into either of the traditional categories. As things stand, we look to 19th-century case law, which sets out that a thing can only be property if it fits into the two traditional categories of things in action and things in possession. The unique characteristics of digital assets, like crypto tokens, challenge the boundaries of these legal categories. Unlike physical objects, digital assets cannot be held in one’s hand. Unlike debts or contractual rights, digital assets have an independent existence in the world that is not dependent on their recognition by a legal system. Yet certain digital assets possess the characteristics that the common law recognises as making them suitable to attract property rights. For example, certain digital assets, like crypto tokens, are rivalrous, meaning their use by one person prevents simultaneous use by others. By contrast to crypto tokens, some digital things, like Word documents, are not rivalrous and so are not recognised by the common law as being capable of attracting property rights. For example, if I were to send you, Madam Deputy Speaker, a Word document, I retain a copy, but if I transfer a crypto token, I no longer possess it. This is due to the underlying blockchain technology that ensures immutability, scarcity and non-duplicability—features that make certain digital assets capable of attracting personal property rights even if they are not a thing in possession or a thing in action. Recent case law has begun to recognise that certain digital assets can attract personal property rights. However, these decisions have not come forward in precedent-setting courts, and thus the legal landscape remains uncertain. This ambiguity risks stifling innovation, as innovators are unsure what protections they have or whether they will be able to monetise their creation. It also puts off investors from investing in crypto tokens in favour of more traditional and predictable forms of investment. If we do not act, we risk our global competitors getting ahead and putting in place the kind of certainty in their own legal systems that will divert investment away from this country. Recognising the urgency of this issue, in 2020, under the previous Government, the Ministry of Justice commissioned the Law Commission to review the legal framework surrounding crypto tokens and other digital assets. The commission’s 2023 report was unequivocal: certain digital assets should be recognised as capable of attracting property rights, and legislation was needed to reflect this. The Government have responded decisively. The Property (Digital Assets etc) Bill is the result—a concise yet powerful piece of legislation that affirms our commitment to legal clarity, economic growth and technological leadership. The Bill contains a single operative clause. It recognises that a thing, including a thing that is digital or electronic, is not prevented from attracting personal property rights merely because it is not a thing in possession nor a thing in action. The Bill allows the courts to develop a further category of personal property through our common law. Importantly, the Bill does not attempt to define which digital assets may qualify, nor does it prescribe the legal consequences of falling within this category. These matters are rightly left to the common law, which, with its flexibility and nuance, is best suited to assess each asset on its characteristics. This is in accordance with long-established common-law tests for property. This approach reflects the strength of our tradition. It capitalises on the adaptability and flexibility of the common law by empowering the courts to apply established legal tests to emerging technologies. This ensures that our legal system remains responsive, relevant and resilient. We stand today at the intersection of law and innovation, where centuries of legal tradition meet the boundless potential of the digital age. The Bill is not just legal reform: it is an important step for our law and for the global digital economy, because digital assets are here to stay. From crypto tokens to voluntary carbon credits, these assets are reshaping how we transact, invest and interact—and yet, until now, our private law has struggled to keep pace. This Bill changes that. First and foremost, the Bill provides legal certainty. It confirms that certain digital assets can be recognised as personal property. This is a fundamental shift. It means that individuals and businesses can now rely on clear legal rights and protections when dealing with things such as crypto tokens. That is because certain digital assets can now attract the same legal protection as other forms of property, which means that owners of things such as crypto tokens can enforce their rights if the asset is stolen. Whether it is theft, insolvency or inheritance, the law will now stand ready to protect those property rights. By clarifying the legal status of digital assets, the Bill reduces ambiguity and streamlines litigation. That is because the courts will no longer have to spend time debating whether further categories exist or trying to force digital assets into the traditional categories. That clarity will save time, reduce costs and ensure fairer outcomes for all parties involved. As I have said, the Bill also supports our ambition to be a centre of innovation and growth. It encourages fintech start-ups, scale-ups and global enterprises to choose English and Welsh or Northern Irish law for their transactions, knowing that these legal systems are equipped to handle the complexities of digital assets. The Bill thus unlocks practical economic benefits. It assists in allowing digital assets to be included in estates for inheritance and claimed by creditors in insolvency. These capabilities will fuel innovation, support new financial products and drive economic growth. Crucially, the Bill does not attempt rigidly to define every type of digital asset. Instead, as I have said, it allows the common law to evolve, giving our courts the flexibility to adapt to technologies that have not yet even been imagined. That is one of the hallmarks of a progressive, forward-thinking legal system such as ours. This Bill attracted significant cross-party support in the other place. For example, it was described by Lord Holmes as “a short Bill, but one with significant impact for the UK, and indeed beyond our shores”.—[Official Report, House of Lords, 8 May 2025; Vol. 845, c. 1695.] It was also described as a Bill that “sends a signal to all those involved in digital assets” that “London and the United Kingdom is an excellent place”—[Official Report, House of Lords, 8 May 2025; Vol. 1696, c. 845.] to do business. In the same vein, Lord Sandhurst noted that the Bill was “small but perfectly formed” and that it will “make an important contribution to the development of the law...and assist judges and litigants in ensuring that necessary protection is given to activities and things in the digital sphere...which might otherwise fail to be protected”.—[Official Report, House of Lords, 8 May 2025; Vol. 845, c. 1696.] Those are not just words of praise: they are affirmations of the Bill’s importance, clarity and potential to shape the global legal and economic landscape. One noble Lord remarked on Third Reading that “the world is watching”, and rightly so. We have a proud tradition of legal excellence and a thriving fintech ecosystem. With trillions of pounds in global economic activity expected to be transacted via digital assets by the end of the decade, we must ensure that our legal infrastructure is not only fit for purpose, but fit for the future. This Bill is a critical step in realising that potential. Of course, the Bill underwent much scrutiny in the House of Lords, and two amendments were made to it. The first extended the territorial scope of the Bill to include Northern Ireland. We are glad that our laws can be aligned in this area and that the benefits of this Bill will be felt more widely. The second amendment was to the Bill’s long title. That was to ensure consistency between the title and the Bill’s operative clause. I am certain that we now have the best possible version of this Bill before us. The Property (Digital Assets etc) Bill is a testament to the strength and adaptability of our legal tradition. It reflects our commitment to innovation, our respect for the rule of law and our ambition to lead on the global stage. It was described in the Lords as “future facing, future-proofing, growth enabling ground-breaking and good for innovation, investment, citizen, consumer and the country”.—[Official Report, House of Lords, 30 April 2025; Vol. 845, c. 1297.] I could not agree more. It is a Bill for the future—a future in which digital assets play a central role in our economy, our society and our lives. By passing this Bill, we are not only clarifying the law, but shaping that future. Let us seize this opportunity and send a clear message to the world that we are ready, willing and able to lead in the digital age.

I call the shadow Minister.

14:33:00

I rise on behalf of the official Opposition to express our support for the Property (Digital Assets etc) Bill. I do not have the benefit of being a learned Member like the Minister, so I have enjoyed getting to understand what property law looks like in the UK. As the Minister said, this Bill comes before this House from the other place, where it has already received careful and considered scrutiny. I particularly acknowledge the contributions made there by the noble Lord Holmes of Richmond, whose deep expertise in digital and emerging technologies greatly enriched the debate, and the noble Lord Sandhurst, who rightly described this Bill as “a necessary but appropriately constrained measure.”—[Official Report, House of Lords, 6 November 2024; Vol. 840, c. GC284.] This Bill both preserves the inherent flexibility of the common law and provides just enough statutory clarity to support continued innovation and legal certainty in a fast-moving world. Recognising the need in 2020, the previous Conservative Government asked the Law Commission to examine how the law of personal property should respond to digital assets. The commission undertook extensive consultation and concluded that some assets defy current classification. In response, it recommended confirming in statute that assets need not be things in possession or in action to attract property rights, paving the way for a third category of personal property and ensuring that our common law can continue to evolve with confidence and coherence. This may be a short Bill, but it carries significant weight for not just the UK’s legal framework, but our global reputation as a leader in digital innovation. As other jurisdictions watch how we respond to technological change, this Bill reaffirms the UK’s commitment to legal clarity, innovation and economic competitiveness. We have a world-leading fintech ecosystem, and with trillions of pounds in digital asset transactions expected globally by the end of the decade, the UK must ensure that it remains at the forefront, supporting innovation, financial inclusion and the future of capital markets. This Bill also complements a wider programme of regulatory reform already under way in the UK. Since 2023, firms promoting crypto assets have been subject to Financial Conduct Authority rules, including mandatory risk warnings and a 24-hour cooling-off period for new consumers. Anti-money laundering rules apply, and crypto firms must register with the FCA. In 2025, the Government published draft legislation to bring a wider range of crypto assets activities, such as trading platforms and custody services, under full financial regulation. The FCA and the Bank of England are also consulting on new rules for stablecoins, prudential safeguards and the safe custody of digital assets, while the Bank explores the future of a potential central bank digital currency, the “digital pound”. Those efforts, taken together with this Bill, represent a joined-up and forward-looking approach to digital asset regulation in the UK. As the Minister explained, for centuries the law has recognised two traditional categories of personal property: things in possession, referring to tangible objects such as a bar of gold, and things in action, such as debts or contractual rights enforceable only through legal process. However, the rise of the digital economy has introduced a growing range of assets that defy those historical classifications. From crypto tokens and digital files to in-game items and carbon credits, individuals and businesses now interact with a third category of asset. This Bill introduces that third category of personal property by confirming what the courts have been increasingly willing to suggest: that a thing is not precluded from being treated as property merely because it does not fit the traditional mould. It does so in a deliberately modest way, allowing the common law to evolve with technological change, rather than attempting to predict or prescribe it. As Lord Sandhurst put it in the other place, we should champion the flexibility of the common law and legislate only to reinforce and clarify developments already emerging within it. This Bill strikes the right balance: it is principled in substance but careful in its implications. It gives confidence to our courts, clarity to commercial actors and reassurance to individuals navigating digital ownership. We welcome the Government’s amendment in the other place to extend this legislation to Northern Ireland and the agreement of the Northern Ireland Assembly to that extension. I understand that the Scottish Government have consulted separately on the question of recognising crypto tokens as property under Scots law. Let me take a moment to welcome the Government’s stated intention in the impact assessment of reducing the burden on businesses by improving clarity in this space. At a time when digital assets are increasingly used as a means of payment, representation or value storage, it is vital that our legal architecture keeps pace—not to control innovation, but to support it with the rule of law. We on the Conservative Benches are committed to ensuring that our legal system remains fit for the 21st century and can accommodate new technologies while safeguarding rights and responsibilities. While we are pleased to support this Bill, let us not lose sight of the broader context. After a year of downgraded growth forecasts, our economy contracting, unemployment and inflation rising and borrowing costs creeping up, the UK urgently needs legal reforms that drive up competitiveness and economic growth. Like the recent reforms to our international legal procedures, it is no coincidence that this Bill stems from a review commissioned by the last Conservative Administration—a Government who really understood the importance of forward-thinking legal reform to support technological and financial innovation to drive economic growth.

I call the Liberal Democrat spokesperson.

14:38:00

I rise in support of the Property (Digital Assets etc) Bill, which stands to bring our legal framework into the 21st century and better equip it to meet the challenges and opportunities of the digital age. This Bill is firmly rooted in the rigorous work of the Law Commission, which was followed by careful scrutiny in the other place. I thank peers for their work on the Bill, particularly Lord Tim Clement-Jones for scrutinising it on behalf of the Liberal Democrats. This Bill confronts the long-standing legal ambiguity about how our common law system treats digital assets. As the Minister explained, and as I vaguely remember from my days at law school, the law as it stands recognises two primary forms of personal property—things in possession and things in action. However, we live in an ever-changing digital world, in which everything is much more based on digital than that common-law approach allows for. Digital assets, which cannot be physically possessed and often do not constitute a claim against another person, do not fall into the two traditional categories. Without clarity about the law, we risk undermining individual rights and weakening legal solutions in cases involving crypto assets, non-fungible tokens and other digital holdings. That is why this Bill matters; it ensures that digital things are not denied property status simply because they do not fall into the two normal categories. That is why the Liberal Democrats welcome the Government’s decision to accept the Law Commission’s recommendations. This Bill is appropriate at this time, when we are seeing a growing use of digital assets across a variety of sectors. They are being used as investments, stores for value and tokens of identity and ownership by more and more people than ever before—recent figures from the Financial Conduct Authority indicate that nearly 12% of UK adults now hold crypto assets, a figure that has more than doubled since 2021. However, victims of fraud, those seeking restitution in cases of insolvency, or simply those wishing to assert ownership over what they rightfully hold have been operating in a murky legal landscape. This Bill leaves room for common law to develop in that sphere of property. That will help the law to reflect the ever-evolving nature of technology, but it must be monitored over time to ensure that regulation ultimately aligns with the need to protect individuals’ rights and support the economy. We know that digital assets mean potential risks—whether fraud, abuse, or volatility—but ignoring them or failing to regulate them effectively will not make those risks disappear. A legal vacuum only increases the risk of criminality and injustice, while a clear, modern legal framework empowers the honest majority, boosts confidence and supports innovation. This Bill is measured, cautious and essential. It provides legal clarity, upholds property rights, and ensures that our laws remain relevant in the digital world. It is supported by the Law Society, by legal practitioners, and by the Liberal Democrats. I hope everyone in this Chamber supports it, too.

14:42:00

With the leave of the House, let me say how grateful I am to those who have contributed to today’s debate, in a rare expression of consensus. I welcome the comments of the hon. Member for Bexhill and Battle (Dr Mullan) and of the hon. Member for Woking (Mr Forster). The quality of the discussion, both in this House and in the other place, reflects the significance of the Bill that is before us. As I have said, it is the product of rigorous analysis and wide consultation. I pay tribute to the Law Commission for its landmark report, and to the many practitioners, academics, businesses and organisations that have engaged so constructively throughout the process. At its heart, the Property (Digital Assets etc) Bill is about ensuring that our legal system keeps pace with technological change. It is a clear, confident step into the future, one that reaffirms the UK’s place as a global leader in legal innovation, financial services and digital commerce, and it is a central part of this Government’s plan for change and for growth. For those reasons, I commend the Bill to the House. Question put and agreed to. Bill accordingly read a Second time. Property (Digital Assets etc) Bill [Lords]: Programme Motion made, and Question put forthwith (Standing Order No. 83A(7)), That the following provisions shall apply to the Property (Digital Assets etc) Bill [Lords]: Committal (1) The Bill shall be committed to a Committee of the whole House. Proceedings in Committee, on Consideration and on Third Reading (2) Proceedings in Committee shall (so far as not previously concluded) be brought to a conclusion two hours after their commencement. (3) Any proceedings on Consideration and proceedings on Third Reading shall (so far as not previously concluded) be brought to a conclusion three hours after the commencement of proceedings in Committee of the whole House. (4) Standing Order No. 83B (Programming committees) shall not apply to proceedings in Committee of the whole House, to any proceedings on Consideration or to proceedings on Third Reading. Other proceedings (5) Any other proceedings on the Bill may be programmed.—(Christian Wakeford.) Question agreed to.