Digital assets now recognised as personal property

In 2023 the Law Commission recommended recognition of digital assets as a third type of property. This adds them to traditional categories of tangible things you possess and those you can legally claim or enforce. It didn’t clearly define them, instead leaving it to the common law courts. This provides flexibility to respond to innovations and new technology without further legislation. However, it could take some time to provide certainty about crypto tokens, digital and social media content, for example. 

 

Clarifying the status of digital assets will provide more certainty and simplify disputes. The government says it will ensure the legal system can tackle challenges including protection against scams. It will also allow bequests of digital assets like cryptocurrency as an inheritance and recovery by creditors during bankruptcy proceedings. There is also greater protection for people in the event of theft. Businesses will have greater legal certainty over the status of digital assets, covered by the same framework as other goods. 

 

We will have to wait to test definitions in the courts, on the basis that personal property can include digital or electronic things. 

 

So far there’s very little case law about how to recognise digital assets that effectively handles and protects ownership. The new law will provide legal remedies for: 

 

The government says it intends to support UK businesses to use crypto assets and encourage investment. 

 

From 2027 it says they will have legal clarity to help increase consumer confidence and provide protection. This will include regulation by the Financial Conduct Authority in the same way as other of financial product and service providers. The intention is to make it easier to detect suspicious activities, enforce sanctions and hold providers to account. 

 

Because digital assets don’t always come with documentation, identifying them is a key issue. And, of course, if you own something you may later access and transfer it to someone else. This means good record keeping is important. 

 

Access. Your loved ones may not know you own the assets and may not find and access them without clear instructions. Keeping copies of digital assets such as photos on a hard drive is a good idea. You will probably want to keep up-to-date records of your digital assets, usernames and passwords. However, security is then a significant issue. You may want to keep these records at your bank or in a digital vault, for example. 

 

Value. Digital assets with a monetary value included in your estate could attract Inheritance Tax. This could include funds in a PayPal account or online store, bitcoin, or digital media collections. You can create a list of these assets and keep it with your Will to help your executors. You can name someone to receive them if you wish. 

 

Online subscriptions and downloads. In many cases, licences cover subscriptions and downloads, so you don’t own them. Whether you can leave them to a beneficiary will depend on the terms of the agreement. You may assign them to others if they don’t have a monetary value like an email address or social media account.