Property Rights Revolution or Legal Mirage? — A Critical Analysis of the Property (Digital Assets etc.) Bill

By Yan Ki Erika Tam

The Property (Digital Assets etc.) Bill is a compact legislative intervention with wide reaching potential. Its declared aim is simple: to make clear that digital items such as crypto tokens and non-fungible tokens qualify as personal property, despite existing in electronic form. This clarification addresses a long-standing doctrinal uncertainty. However, the key question is whether the Bill will provide reliable protections for consumers and businesses in practice.

In substance, the Bill confirms that an electronically recorded item may be treated as personal property, even if it cannot be shoehorned into the traditional categories of tangible goods or conventional legal claims. The Law Commission’s report endorsed this approach, recommending that courts develop the law gradually through individual cases rather than Parliament setting out exhaustive rules.

Supporters identify several pragmatic benefits. Firstly, by removing the opening dispute about whether a digital holding can be property, courts can focus on factual issues, such as who exercised control and whether an asset was misappropriated. Secondly, recognising property rights for a digital holding allows owners to pursue familiar remedies, including recovery orders and injunctions. Lastly, this recognition also indicates that English and Welsh law can be trusted for resolving digital asset matters, helping to support commercial activity.

Not all observers regard the Bill as essential. Recent case law has already recognised certain digital holdings as capable of being treated as property in appropriate circumstances, such as in AA v Persons Unknown [2019] EWHC 3556. Some therefore view the Bill as largely confirmatory rather than transformative. This view stresses the likelihood that a statutory restatement may not alter the core practical issues litigants face, such as tracing assets on distributed ledgers, securing cross border cooperation, and resolving priority disputes in insolvency. Confirming property status may remove one preliminary argument, but it does not by itself deliver the procedural or international tools needed to make recovery reliable.

Practitioners point to Clause 1, which states a thing is not prevented from being property “merely because it is neither—(a) a thing in possession, nor (b) a thing in action.” By explicitly separating digital assets from these two traditional categories, the clause risks leading judges to create a distinct new class of property. While this risk is real, the consequences are not certain. On one hand, a new judicially created class could lead to a split in legal theory, more litigation while courts elaborate bespoke rules, and temporary uncertainty for lenders, custodians and insolvency practitioners. On the other hand, common law judges often prefer to adapt existing principles where sensible, and market pressure for predictable rules tends to push courts toward continuity rather than radical reinvention. In short, the drafting could produce problems, particularly in the short term, but whether those problems become acute depends on how judges respond and whether Parliament or regulators supply clarifying text or procedural tools.

Even if the Bill clears the threshold question of property status, several pressing problems remain. First, recognising an item as property does not make it straightforward to recover after it has moved across platforms or jurisdictions. Tracing value on distributed ledgers and securing co-operation from overseas intermediaries require procedural powers and international assistance that the Bill does not provide. Second, insolvency remains an area of acute uncertainty. When a platform or custodian fails, courts must still decide whether customer balances are held separately or form part of the insolvent estate. That question affects creditor rankings and recovery rates and is not resolved by a declaratory provision alone. Third, the nature of control in many digital systems complicates simple concepts of ownership. Access credentials, shared custody arrangements and self executing code can blur who holds what in the traditional sense.

Another criticism is that Parliament has shifted the heavy lifting to judges. Case law can evolve useful principles, but it does so incrementally and on the facts of individual disputes. Market participants that need predictable rules for lending, custody and insolvency planning may find a sequence of judicial decisions an inadequate substitute for clearer statutory or regulatory guidance.

The Bill is a timely and important step, making clear that digital assets deserve property status and removing a major legal obstacle. Yet it represents only an opening move. For this recognition to have any real-world impact, it must be followed by practical tools for cross-border enforcement, statutory guidance on insolvency priority and minimum standards for custody. In the end, the Bill's success depends on two things: how judges interpret the new law and whether lawmakers do the extra work to make these property rights actually work in the digital economy. Without these further changes, its impact may remain more symbolic than substantive.