Are Cryptoassets Property Under English Law?

Co-authored by Anne Lim

In May 2019, the UK Jurisdiction Taskforce (the "UKJT") of the LawTech Delivery Panel published its public consultation paper on the status of cryptoassets and distributed ledger technology, as well as the enforceability of smart contracts, under English private law. While much of the literature around cryptoassets in the legal context has been centred on their regulation, the UKJT's consultation paper focuses on the legal characterization of these instruments themselves. In this article, we consider how cryptoassets can be defined using the existing vocabulary of English private law and the implications of this characterization.

There is still no single agreed definition of cryptoassets. The consultation adopts a broad definition of the term as being "often used to describe something which is, or of which at least a component is, represented by certain data (often, although not necessarily, recorded on a distributed ledger) which, by virtue of the design of a broader system, can only be updated upon the satisfaction of specific conditions."

Under what circumstances would a cryptoasset be characterized as personal property?

This question is fundamental to realizing both the inherent nature and the developing potential of cryptoassets as a means of acquiring, holding and trading international securities. Characterizing a cryptoasset as personal property allows the law to recognize the legal rights of investors in this increasingly valuable asset class.

English personal property law developed in circumstances very different from today's digital age, but has proved itself capable of innovation in the service of commercial practice. Taking that as the starting point, a close examination of cryptoassets reveals a striking resemblance with traditional types of personal property. In particular, "security tokens"1 "capture" the obligations of the issuer under a security; the token is a means of recording and transferring title to the securities. The traditional analogue is the bearer security, which is a type of "documentary intangible" - which means that, by legal fiction, the instrument is deemed to constitute and not merely evidence the debt of the issuer.2

"Exchange tokens"3 differ from security tokens and bearer securities because they do not represent or constitute financial claims against an issuer. However, they also share functional similarities with recognized types of bearer instruments - for example, they can be...