By: Wade Shaver
Members of the UK Government have introduced a new bill in Parliament that would effectively classify cryptocurrencies and non-fungible tokens (“NFTs”) as personal property, granting them greater legal protections. The Property (Digital Assets Etc.) Bill was introduced on September 11, 2024. While the Bill faces various challenges, it represents a significant development in the law surrounding digital assets if it is passed.
Cryptocurrency and NFTs are innovative digital assets that operate on blockchain technology. Cryptocurrency, like Bitcoin and Ethereum, is a decentralized form of digital money that enables peer-to-peer transactions without the need for intermediaries like banks. It relies on cryptographic techniques for security and is often used for various purposes, including online purchases and investment. On the other hand, NFTs represent unique digital items, such as artwork, music, or collectibles, that are verified on the blockchain, ensuring their authenticity and ownership. Unlike cryptocurrencies, which are fungible and can be exchanged on a one-to-one basis, NFTs are distinct and cannot be replaced or exchanged for one another, making them particularly valuable in the realms of art and digital culture.
Personal property refers to movable assets owned by individuals, encompassing a wide range of items such as vehicles, furniture, electronics, and personal belongings. Unlike real property, which includes land and buildings, personal property is not fixed to a specific location and can be easily transferred from one person to another. This category is divided into two main types: tangible property, which includes physical items you can touch and see, and intangible property, which refers to non-physical assets like stocks, copyrights, and digital assets. The legal rights associated with personal property often involve ownership, use, and transferability, and these rights are typically protected by laws that vary by jurisdiction.
The Property (Digital Assets Etc.) Bill would provide cryptocurrency and NFT owners with greater protections in cases of scams and allow these assets to be included in their estates for inheritance and bankruptcy proceedings. New Zealand Courts have found that cryptocurrency is personal property, while also treating both cryptocurrencies and NFTs as property for tax purposes. Additionally, multiple U.S. states have proposed legislation relating to cryptocurrencies and NFTs, some of which would classify these digital assets as personal property. Many of these bills would provide greater legal protections to owners of digital assets.
Defining cryptocurrency and NFTs as personal property at the federal level comes with several pros and cons. Such a classification could provide much-needed legal clarity and protection for owners, making it easier to enforce ownership rights and resolve disputes. This clarity could foster greater investment and innovation in the digital asset space, as individuals and businesses would feel more secure in their transactions. Additionally, a federal standard could simplify regulatory compliance, making it easier for platforms and users to navigate the legal landscape.
However, there are potential downsides to be considered. Defining these digital assets as personal property would invite more stringent regulations, which could stifle creativity and innovation within the rapidly evolving blockchain ecosystem. Moreover, it may create challenges in taxation, as determining how to tax transactions involving NFTs and cryptocurrencies can be complex. The unique nature of these assets also raises difficulties in determining their classification: for instance, how to differentiate between digital collectibles and more traditional forms of property. Balancing the need for regulation with the desire for innovation will be crucial as policymakers navigate this evolving landscape.
Overall, this bill is an important and necessary step for the future of property rights as they pertain to digital assets. The positives of defining cryptocurrency and NFTs as personal property outweigh the potential drawbacks. By providing legal clarity and protection, this classification empowers owners and fosters confidence in the digital asset space, driving greater investment and innovation. The concerns about increased regulation and taxation complexities are valid, but they should not deter us from establishing a robust legal framework that supports the evolving nature of these assets. With thoughtful and adaptive regulations, we can protect consumers while encouraging creativity and entrepreneurship in the blockchain ecosystem. Striking the right balance between regulation and innovation is essential for harnessing the full potential of digital assets and ensuring their responsible integration into our economy.
Student Bio: Wade Shaver is a third-year law student at Suffolk University Law School. He is a staff member for the Journal of High Technology Law. Wade graduated from the University of North Carolina at Chapel Hill in 2019 where he double majored in History and the interdisciplinary study of Peace, War and Defense (PWAD).
Disclaimer: The views expressed in this blog are the views of the author alone and do not represent the views of JHTL or Suffolk University Law School.
