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#bitcoin
#property rights
#UK
A Law to define the boundaries within which Bitcoin and digital assets can be legally considered private property. This is what the UK's Ministry of Justice is contemplating. On September 11, alongside Labour MP Heidi Alexander, the ministry introduced a bill to Parliament titled The Property (Digital Assets etc) Bill.
The UK government announced this through a press release, stating that digital assets are currently "not included within the scope of property law," leaving owners "in a legal gray area in case of interference with their assets."
According to the government, the new law would "provide legal protection to owners and businesses against fraud and scams, while also aiding judges in managing complex cases where digital assets are disputed or part of agreements, such as in divorce cases."
It has not yet been decided if and when the bill will be discussed in Parliament, and thus, when it will be voted on. However, the significance of this first-mover initiative is worth analyzing because, if implemented, it could become a benchmark for other jurisdictions in the future.
The Bill
The proposal is based on a report prepared by the Law Commission, an independent body established by the Law Commissions Act of 1965, whose main function is to review and reform the country's laws.
The document argues that digital assets cannot be easily classified as either "things in possession" or "things in action," thus proposing the addition of a third category.
Traditionally, British law distinguishes between things in possession (physical assets, like a car or house) and things in action (legal rights, such as debts or bonds).
According to the commission, digital assets do not fully fit into either of these categories and should, therefore, be assigned to a third category. This category would be called digital objects, and items within it should meet three fundamental criteria:
- Independent Existence: Digital assets must exist independently of individuals and the legal system. This is true for Bitcoin, which exists within the timechain.
- Non-Duplicability: When an individual uses or possesses a digital asset, another individual cannot possess it at the same time, similar to traditional money.
- Not Belonging to Traditional Categories: The assets cannot be simultaneously classified as things in possession or things in action.
More specifically, the commission believes digital assets can be considered property when they allow for:
- Making payments for goods and services;
- Transferring or communicating value through electronic means;
- Expanding market reach and access;
- Speculating and investing.
The Role of Common Law
One of the most interesting aspects of the UK's approach is the reliance on Common Law to determine which digital assets can be the subject of property rights.
British Common Law is a legal system based on precedents and judicial interpretation of laws. It is mainly distinguished from the civil law system (like the Italian or French systems) by characteristics such as binding precedents—court decisions constitute precedents that must be respected by courts in future cases with similar facts—and the central role of judges who not only apply existing laws but often interpret norms to fill legislative gaps.
In such a system, jurisprudence can adapt to the specifics of each case, treating digital assets more flexibly than traditional written laws.
The Limits of Interpretation
According to the Law Commission, digital assets—including cryptocurrencies and NFTs—have the potential to be treated as items of personal property. English Common Law has already shown some flexibility in integrating certain instruments into property categories, recognizing that they can be subject to personal rights such as control and transfer.
However, a significant limitation of the document is the constant generalization of the term "digital asset" or "digital object." Bitcoin, other cryptocurrencies, stablecoins, NFTs, tokenized assets, etc., are all included in this category.
While it is true that Bitcoin perfectly meets the requirement of independent existence, the same cannot be said for everything else. Other cryptocurrencies, including Ethereum, NFTs, stablecoins, and tokenized assets, exist due to the presence of companies or consortia that manage and determine their rules, maintenance, and ultimately, existence.
Paradoxically, Bitcoin has much more in common with what the Law Commission calls things in possession (house, car, etc.) than with the rest of the digital assets.
Private Property in Bitcoin
Just as ownership of a property is manifested through control of physical keys, ownership of bitcoin is realized through the control of cryptographic keys. The keys to a house are not the house itself but grant access to it to their possessor. Similarly, private keys in Bitcoin are not the bitcoins themselves but constitute the exclusive power to control and transfer them. This element of exclusivity—whoever possesses the keys holds access—is a foundation of property rights: in Bitcoin, the same principle applies in digital form.
Asymmetric cryptography is the means by which Bitcoin achieves its end: enabling the exercise of private property in the digital realm without the presence of trusted intermediaries.
An exercise that offers more guarantees than those we have been accustomed to for decades. Real estate, precious metals, bank accounts—all these are elements whose private property is subject to the protection of the bank or the law and thus dependent on an intermediary, whether private in the case of the bank or public in the case of the legal system. Numerous historical events demonstrate this, such as the confiscation of gold by the US government in 1933 and the forced withdrawal from Italians' bank accounts by the Amato government in 1992.
Indeed, the same exercise of ownership that Bitcoin allows cannot be associated with the rest of the digital assets, where the very existence of the digital asset depends on one or more intermediaries.
Fortunately, as highlighted above, the document delegates much of the interpretative responsibility to the judges of individual cases thanks to the form of Common Law: it will be up to them not to fall into the trap of generalization.
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