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The International Lawyer

The International Lawyer, Volume 55, Number 2, 2022

Digital Property Law - New Structure and New Reconciliation

George A Walker


  • The digital coin marketplace was $760 billion at the end of 2017 and rose to over $1 trillion and then $3 trillion by 2021.
  • While prices have been volatile, it is expected that the digital coin marketplace will again recover due to the many new forms of blockchain and distributed ledger applications under development and with over 29,000 private digital coins and tokens in existence.
  • Substantial amounts of new wealth may be created in a decentralised form with large amounts of other financial assets being transferred onto distributed ledgers or platforms.
Digital Property Law - New Structure and New Reconciliation
Richard T. Nowitz via Getty Images

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The digital coin marketplace was $760 billion at the end of 2017 and rose to over $1 trillion and then $3 trillion by 2021, following an earlier collapse in prices during the “Cryptocurrencies Crisis” in 2018 and then again in summer 2022, after the failure of Luna coin. While prices have been volatile, it is expected that the digital coin marketplace will again recover due to the many new forms of blockchain and distributed ledger applications under development and with over 29,000 private digital coins and tokens in existence. Substantial amounts of new wealth may be created in a decentralised form with large amounts of other financial assets being transferred onto distributed ledgers or platforms, especially through tokenization and the conversion of physical and financial assets into digital entries. Unfortunately, significant difficulties remain in understanding and classifying these assets under the law.

Particular issues arise in relation to property law. It remains unclear whether new digital currencies and other items can constitute property under current definitions in many legal jurisdictions. Consequential issues then arise in classifying them under the law, especially in relation to remedies and recovery. Property law can act as a form of residuary or default law. This is significant because many rights of actions, remedies, and recovery are determined depending upon whether the right is proprietary or non-proprietary in nature, which designation cannot be disapplied through party direction or agreement. More traditional areas of law can be adjusted and reapplied in response to changing circumstances, although this can be a slow, cumbersome, inconsistent, and intellectually and theoretically demanding process. The necessities of rapid and dramatic technological change may not wait for slower, less-flexible corrections in legal theory and practice. Law reform must support social and technological advance and innovation.

Technology essentially created a new self-regulatory model based on programming and automation, especially through the increased use of computer code, smart contracts, and pre-programmed functions. One of the core objectives of many programmers and computer technicians is not for code to work with or supplement law but for code to replace law outright. This creates a form of new juridical and technological separation, exclusion, or exceptionalism without state intervention or control. As with many other areas of law, property law creates underlying rights and duties that cannot be disapplied by simple agreement and code as noted. Essential rights and protections cannot be removed by party direction or agreement alone. The residuary effects of law and the relations between law and code in the digital space create massive uncertainty.

The purpose of this paper is to begin examining these issues from a new legal perspective. This includes developing an original body of new core terminology and a digital asset classification system. The nature of digital economies is noted initially. The meaning and relevance of digital rights, assets, and claims are reviewed. The nature of property is examined in further detail with the construction of a new set of constitutive property and title-rights conditions. The nature of digital assets, currency and money, legal tender, digital ledgers, and smart contracts are considered. Some national decisions and rulings on the nature of these rights and assets are reviewed. A provisional set of closing comments and conclusions are drawn.

I. Digital Economy

Markets and society have been subject to substantial change and reform in recent decades. This reform was originally driven by advances in computing, telephony and mobile telephony, the Internet, social media, emerging information technology (InfoTech), new data technology (DataTech), and now financial technology (FinTech) and regulatory technology (RegTech), as well as government use of technology (GovTech) and the law of technology (LawTech) more generally. The reform created a new world of immediate contact and communication between the peoples of the world in real time and without physical or geographical limits, and increasingly with only low or no associated costs, delays, or technological limits.

Labour and production have been subject to substantial innovation over time, especially with the increased use of technology and robotics in manufacturing and the parallel expansion of the online services sector. Markets were historically impacted by the mechanisation of production and the mobilisation and specialisation of labour. Adam Smith’s original seventeenth-century division of labour immediately before the beginning of the Industrial Revolution remains relevant, although the division is now more complex in modern digital, robotic, fragmented, shared, or split-time, co-working, multi-tasking, and increasingly remote and online service economies and interconnected and interdependent global markets.

Value and wealth in the ancient world were held in the form of cattle and livestock, and then land and physical property. Wealth shifted to gold and silver during Greek and Roman times. That shift was followed by the growth in holding personal property and consumer consumption and the rise of new merchant classes beginning in the Renaissance. Subsequently, wealth moved to holding written financial instruments, early forms of security and government bonds, and the later construction of diversified portfolios of investments in the nineteenth and twentieth centuries. The new financial world increasingly consists of digital assets including dematerialised securities and government stocks and, most recently, digital currencies, tokenisation (including non-fungible tokens (NFTs)), complex chains of digital financial claims with distributed ledger technology (DLT), and decentralised finance (DeFi).

The law adapted and developed with these changes. Much of this development was achieved through selective and piecemeal statutory amendment and with judicial recognition of the surrounding new digital and technological environment created. Many core legal concepts and areas of law are based on ancient ideas that may be of increasingly little or no relevance in the new landscape. Technology is used in new areas of legal practice like TechLaw and LegalTech. Nevertheless, these areas are limited, and a more fundamental revision is required in legal thought and theory to accommodate the larger changes that are currently taking place in business and society. The term “LawTech” refers to this new digitally, informationally, and technologically driven area of legal language and theory.

Large parts of the world are moving towards the creation of extended complex digital societies with code-embedded and code-enabled commerce and business, while governments and finance are being reduced to bits and bytes with clips and apps. The law often lacks the language and core terminology needed to discuss these changes, let alone resolve them fully. This challenge is even more acute in the dynamic, innovative, and technology-driven financial markets and landscape of the early twenty-first century.

Modern information, data, and knowledge societies are being created without any clear definition and content. Specifically, difficulties arise in determining the meaning and nature of terms such as information, data, knowledge, ideas, archives, language, meaning, and communication. Nevertheless, a series of interconnected or dependent definitions is developed for the purposes of this paper. Information is defined as any single point or statement of fact, opinion, or law. Data is defined as information collected or processed within specific limits, guidelines, parameters, constraints, or conditions, with data consequently representing structured or controlled information. Knowledge is defined as understanding, appreciation, or awareness, which is essentially processed information or data that can be used to secure some identifiable policy objective or purpose. Ideas are defined as mental representations of facts, opinions, or other intellectual abstractions. Records or archives are defined as stored, accumulated, or assembled information or data held over time. Language is defined as any set of characters, symbols, gestures, or sounds used to convey meaning. Meaning can be understood in terms of intent or sense. Communication is concerned with the transfer of information, data, or ideas.

Financial markets were specifically subject to substantial revision and reform. The revision and reform involved the digitalisation, dematerialisation, disintermediation, and, most recently, monetisation of virtual financial systems and the growth of the ValueNet. All of this led to the emergence of several new key trends based on the digitalisation, personalisation, socialisation, democratisation, globalisation, and virtualisation of products, services, the Internet, and society.

These innovations are supported by associated developments in the areas of the Industrial Internet and the Internet of Things (IoT), the Machine Net, machine communication, and machine learning (including natural language processing (NLP)), biotechnology (BioTech), nanotechnology (NanoTech), robotic technology (RoboTech), and Artificial Intelligence (AiTech), in addition to underlying digital technology (DigiTech), Data Technology (DataTech), FinTech and RegTech. Further developments have assisted these innovations in the area of informatics and, in particular, legal and financial informatics and the construction of new infosystems or infospheres and dataspheres or data biomes.

In light of these events and initiatives, it is necessary to begin developing a new language or form of analysis in the legal and financial law area. This may be considered in terms of a soft revolution in light of the digital, code, or software nature of these reforms and the importance of the changes underway but limited to more specialist attention than the subject has received until now. This will include the use of the current growing bodies of LegalTech and LawTech, which apply technology to existing legal functions, while this can also be considered to include a new area of TechLaw more generally and FinLaw, which parallels FinTech. As part of this process, the nature of legal rights, assets, and claims with property law and the emerging area of new digital property law can be considered in further detail with the meaning of information, data, and knowledge already having been explained.

II. Digital Rights, Assets, and Claims

A number of issues arise regarding determining the nature of legal rights, assets, and claims and in defining and classifying digital rights and assets, specifically digital currencies. These have been treated in distinct ways under different legal systems. Difficulties arise in defining relevant terms and in classifying them. Specific problems exist in distinguishing the law of persons, things, actions, choices in possession, and choices in action under English law, which illustrates the wider difficulty of new technology assimilation and accommodation in modern law and regulation. Separate issues arise in determining the nature of digital money, legal tender, digital ledgers, title transfer, and smart contracts.

A. Legal Rights, Assets, and Claims

Most legal systems are constructed based on underlying rights. A legal right can be defined as referring to any interest or entitlement recognised and subject to protection by law. All rights are concerned with legal relations between persons, including property, with property arguably only expressing the relationship between persons and things enforceable against other persons. All actions, including property claims, are only against other persons, rather than things. Legally enforceable rights can be classified as either in rem, ad rem, or in personam. Legal systems have historically been referred to as being derived from common law or civil law, although both are essentially constructed using rights either expressed in terms of remedies or rights of action (writs) and substantive rights.

Legal rights can generally be considered to consist of rights to act in a certain way, hold property, claim payment or contractual performance, protect these interests directly through court action, or be protected indirectly against unlawful interference or action by others. For the purposes of this paper, an entitlement can be defined as corresponding to a legal right and interest in any recognised entitlement. Parties may hold other lesser or subordinate interests that do not directly attract legal protection, such as non-protected information or possibly licenses. An asset is anything of value. Assets are generally understood to correspond with property, although this can include all rights. Parties can hold rights in rights. One can identify three different sets of rights of action with private law rights, public actions for judicial review, and criminal or administrative protections or prosecutions.

The nature of rights has been subject to separate theoretical examination, with further distinctions and sub-divisions being drawn over time. Writing in 1917, the American jurist Hohfeld attempted to clarify the meaning of the legal term “right” by distinguishing it from other interests, privileges, powers, or immunities. Hohfeld discusses these in terms of jural, or legal, opposites and correlatives. Hohfeld specifically distinguished between paucital and multital rights, with paucital only being enforceable against a single person and multital against more than one person. Hohfeld was, nevertheless, more interested in legal relations more generally than with rights specifically and with aggregate or complex jural interests. Hohfeld’s divisions have been questioned subsequently by other writers. Hohfeld may be restated for modern use under this paper to be understood in terms of claims, freedoms, capacity, and exclusion or release.

Assets generally consist of immovable, real or heritable property, and moveable or personal property. Immovable property is made up of land, including the rights attached to the land, and moveable property is made up of either tangible, or possessory, assets and intangibles or things. Only a restricted number of rights arise regarding land, which are referred to as the numerus clausus under English law, and with a parallel division in Scots law. Real property is defined under 26 CFR in the United States. Moveable property is then made up of physical items that can be held or claims against other parties, which cannot be held. This generally corresponds with the distinction drawn under English law between choses in possession and choses in action. In the United States, property consists of real and personal property whether tangible or intangible. Intangible property is defined under 2 CFR in the United States.

Property is generally considered in law to be concerned with rights or interests in things rather than things directly. Proprietary rights are enforceable against society generally rather than personal rights, which are only actionable against specific individuals. Property law can more generally be considered to include the law of real property or land, personal property, and the law of trust. Real and personal property are distinct from rights in rem and in personam which are of Roman origin. Actions in rem were for recovery of a thing and actions in personam were to recover damages from a person. Some things may be subject to ownership and others not. Substantial difficulties remain in confirming the nature of property under English law.

Difficulties accordingly continue to arise in defining and classifying existing property laws and associated rights, as well as incorporating new information and digital rights and assets in law. Traditional systems have to consequently be clarified, and new terms developed, to deal with innovative forms of assets and claims. More traditional theories of property can be reviewed and restated. A new consolidated theory of property can then be constructed for the purposes of this text and, specifically, to incorporate or subsume new forms of digital property, rights, and entitlements.

B. Property

There is no clear meaning of the term “property.” The history of property can be understood in terms of origin, occupation, and acquisition. The English philosopher, John Locke (1632-1704), explained property in terms of an original acquisition from nature through the application of labour. The Scottish philosopher, David Hume (1711-1776), described property in terms of resolution and avoidance of conflict with the Scottish philosopher, Adam Smith (1723-1790), stressing the importance of property in commerce and government. The Swiss philosopher, Jean-Jacque Rousseau (1712-1778), and the German philosopher, Immanuel Kant (1724-1804), referred to property in terms of social contract and consent and the philosophy of property in terms of justification and distribution. Property has been criticised by other writers as the basis for capitalism and social and economic exploitation and abuse including by Marx and Engels. These writings can be summarised for the purposes of this paper as constituting a series of origin or occupation, labour value, consent, contract, and conflict theories.

Property in economics can be understood to refer to any resource or asset of value. Economics has generally considered property in terms of resource allocation and efficiency (following Posner) as well as the assumed inherent benefit of private property over public property holding models (after Demetz). A series of more specific economic theories can be identified although aspects of this overlap with wider social, philosophical, and legal studies. These include classical liberalism, utilitarianism, pragmatism, legal positivism, and modern libertarianism approaches. A separate cycle theory can be constructed. Property can also be examined from a philosophical approach, which separates private property (dominium) and state sovereignty (imperium) and incorporates separate justification sub-theories, again with the need to balance private use and public welfare.

A number of further theories of property can be constructed in law. These principally consist of a thing or “rem” theory, social construct theory (or social constructivist theory), use or rights theory, separation theory, and exclusion theory. These can be summarised in terms of asset, social, entitlement, independence, and prevention ideas. Use or application approaches have been developed in the form of a number of separate bundles of rights (BOR) theories over time. While property law has traditionally been principally understood in terms of an ad rem or a BOR theory following Hohfeld and Honore, more recent writings have focused on separation and exclusion. This adopts a narrower approach to property, considering it in terms of non-interference and the duty of others to respect an individual’s exclusive rights.

A new attachment theory is developed for the purposes of this text, which identifies a series of five constitutive property conditions to determine existence and then five core title rights to specify the degree of relevant associated control that can be exercised. This is partly ontological and partly functional, with property essentially assessed in terms of conditional or contingent existence and then attributed rights. This is supported by a new private law trinity (or quinity) created with a parallel restatement of causes or remedies constructed.

C. Personal Property

Property is generally divided in law into real property and personal property. Personal property under English law consists of real chattels (leasehold interests in land) and personal chattels, which comprise either choses in possession or choses in action. Civilian law systems have adopted a similar division, with things being distinguished between immoveable and moveable tangible (corporeal) and intangible (incorporeal) items. The civilian division is based on immoveable and moveable tangibles and intangibles and the English law separation between real and personal. Real is wider than immoveable and includes all common law interests in land other than leases which are classified as real chattels. Personal is also wider than moveable and includes all interests and everything that is not real property.

In terms of property, English law generally distinguishes between land and movable property with movables consisting of either chose in possession (tangible) or chose in action (intangible) assets. Intangibles consist of pure intangibles or claims and documentary intangibles. Documentary intangibles include negotiable instruments and other non-negotiable transferable instruments. Negotiability can only be established by statute or mercantile customs, with custom being a matter of proof. Documentary intangibles include bills of exchange, cheques, and promissory notes, as well as bearer securities, depository receipts, certificates of deposit, and bills of lading. It has been confirmed on numerous occasions that the class of recognized instruments and law merchants are not closed, as opposed to with real numerus clausus. Dispute remains as to whether a bill of exchange and other documentary intangibles can be created electronically. Rather than tending to replicate paper-based title transfer and payment systems, new technology can be considered to develop alternative means to create and transfer rights.

Difficulties, nevertheless, remain in classifying specific things such as information, intellectual property, and new digital rights and assets. Information is not an interest or entitlement as such, although it becomes subject to legal protection once an appropriate interest is identified, such as in terms of controlling the release of personal information or receiving disclosable public information as defined above. This corresponds with private data protection and public data provision. Information arguably becomes an asset once it has commercial value and can be transferred independently. This includes intellectual property, although it may also cover other information that is transferable for value. One of the consequences of the emergence of new digital and information societies is that substantially more types, sources, and amounts of information or data acquire commercial value and have to be classified as such.

Intellectual property rights are generally treated as choses in action, although patents are stated by statute to be personal property, and not a thing, in action in England and Wales. The reasons for this were unclear and reflected earlier historical disagreement on the nature of intellectual property rights. It is understood that this was to simplify transfer and avoid the rules governing the assignment of choses in action. The Parliamentary draftsman of the Patents Bill considered the Act as creating a new form of sui generis personal property and described this as reflecting property in goodwill. In Scotland, a patent or application for a patent would constitute incorporeal moveable property, which may be assigned, licensed, or secured. Intellectual property rights create corresponding or correlative duties which prevent interference by third parties.

D. Digital Rights and Asset Classification

Digital rights can be understood to consist of any legal right held in a digital form. This will include pre-existing rights that are converted into a digital format or legal rights created within a digital system. These rights are referred to in this paper as consisting of either transfer or conversion rights and origin or creation rights. Digital currencies and other digital assets can be considered not to be based on digital information units but digital data. Code is necessarily controlled and structured, which creates data points or entries rather than raw information. Blocks can be considered to constitute electronic parcels of transactional data. These can be referred to as ideational constructs, although they arguably still exist as entries and justify legal recognition and protections as such.

A number of further difficulties arise in classifying legal rights and digital rights. Legal systems often adopt different classification structures for private and public rights and obligations, as well as international rights and obligations under public international law. European law may be classified either as a part of public international law or independently.

Separate issues arise in determining the nature of digital currencies and other digital assets under English law and other laws. This specifically requires a more detailed examination of the classification of rights, obligations, and property. It is also necessary to attempt to understand the nature of digital coins, digital securities, and other potential digital assets within existing taxonomies. It is possible to re-examine existing judicial authority in this area and to construct a new definition of digital property as intangible, personal, moveable assets. Further questions arise as to whether digital coins would constitute money and legal tender, as well as the nature of digital ledgers, digital title, and digital smart contacts. These questions are considered below.

1. Persons, Things, and Actions

English law generally adopts the same general structure and divisions as drawn under Roman law and, specifically, under Gaius and Justinian. Private law is stated principally to be made up of the law of persons, things, and actions. Things may either be corporeal or incorporeal, with intangible things consisting of rights (inheritance, usufruct (the right to enjoy the property of another), and servitudes) and obligations however acquired. This structural “trinity” was followed by English common law writers including Bracton and Blackstone, with Maitland explaining the simplification of common law actions and the merger of law and equity following Glanvill’s earlier enumeration of writs. The distinction between persons and things was itself derived from actions under Roman law. All actions related to things, with personal actions only being a sub-category of actions based on personal obligation. Justinian further distinguished between real actions, or actiones in rem (rei vindicatio), and personal actions, or in personam (condictio). Justinian divided things into corporeal and incorporeal things, which included obligations and other legal rights.

English law distinguished between chattels real (land) and chattels personal. This distinction was based on a parallel division between real and personal rights. Chattels personal were “things moveable.” Chattels personal could either be in possession or in action. Chattels personal were recoverable by action. A number of specific rights were attached to land, with other rights arising with personal property. No separate division was drawn under English law between moveable tangible and moveable intangible property, except in relation to debt and rights of action under contract. Everything that was not land or property in possession was property in action.

Considerable difficulties arise in practice, with many of these terms often used in inconsistent or contradictory manners. One way to clarify this is to distinguish between the nature of property as things with actions or remedies, as originally proposed by Gaius and Justinian. Terms such as “immovable” and “movable” would relate to the nature of things, including property, with real and personal being concerned with actions or remedies. Property would then consist of land with corporeal and incorporeal moveable items, as well as obligations and other rights. The terms “property” and “asset” can be restricted to refer only to corporeal or incorporeal items. Obligations are rights to receive performance under contract, or otherwise including delivery. Certain other rights were listed by Justinian, although these may now be clarified to refer to rights to act in some way or to receive financial payment. The entitlement to payment may be considered to constitute a special form of right, as many contractual, tortious, or other remedies reduce themselves to payment. Private law rights may then be restated or summarized in terms of possession, payment, and provision (or performance), which creates a form of sub-trinity in the private law area within things and persons and things and actions.

One effect of these revised divisions is that a party can hold property rights in tangible and intangible assets, and real actions are available with respect to tangible and intangible property. Personal actions and remedies only arise when there is an underlying personal obligation between the parties to find the cause of action. Real and personal actions both involve things, with the only difference being whether or not there is a separate, underlying personal obligation involved.

Further specific issues arise with respect to the nature of ownership and possession in law. English law considers ownership in terms of a residue or legal rights not otherwise granted. Ownership (or dominium) has been described as the primary real right under Scots law, which is distinct from other subordinate real rights (jura in re aliena), including lease, life, rent, and security. It is, nevertheless, accepted that the distinction between primary and subordinate real rights is not complete. Ownership may be reclassified for the purposes of this paper as consisting of a form of status, condition, or relationship, rather than a specific right. Ownership then exists as an aggregation of rights that are conferred on the holder of the item. For the purposes of this paper, therefore, ownership may be restated and expanded to consist of the rights to use or hold, encumber (charge), bequest (by will or trust), transfer (by way of gift or sale), and cancel or destroy. Possession may either be considered to constitute a right to hold physically or constructively or be used to describe a simple statement of fact in any particular case.

2. Choses in Possession and Choses in Action

Specific difficulties arise in determining the nature of digital currencies and assets under English law and, in particular, whether they constitute choses in possession or choses in action. Rights may also be distinguished, as noted, as either being real, meaning that such rights attach to an item or property, or personal, meaning that such rights are only enforceable against a specific individual. Choses in action are not capable of clear definition and generally include anything that is not choses in possession. As such, choses in action have been treated as a residuary category of property under English law.

The extended and inclusive nature of recognized choses in action derived from historical English law. A “[c]hose in [a]ction is a known legal expression used to describe all personal rights of property which can only be claimed or enforced by action, and not by taking physical possession.” Choses in action include “a large number of things which differ widely from one another in their essential characteristics.” Specifically, choses in action cover all actions in debt, breach of contract, negligence and tort, and the recovery of possession or ownership of real or personal property. This coverage has been extended to include bonds, bills of exchange, notes, cheques, company shares, public stock, bills of lading, insurance policies, and other documents of title to goods, as well as intellectual property rights. Equitable rights have also been added, as well as the English law of easements, trusts, and other equitable interests in property. As such, it is virtually impossible to give any accurate and complete definition to this term.

Choses in action were originally treated as incorporeal things under medieval law. The range of rights covered was then extended during the sixteenth, seventeenth, and eighteenth centuries, partly in response to the exigencies of the emerging commercial law and the development of a separate equitable jurisdiction to correct the perceived limitations of the common law in England. A chose in action was originally limited to personal actions and then extended to real actions in the sixteenth century, and further extended subsequently. Justice Channell summarized the nature of choses in action in 1902, in that they could only be enforced by action and not by possession. Holdsworth accepted that the English law of choses in action could “hardly” be referred to as “satisfactory.” The effect of this is that the category of choses in action under English law already includes property in the form of documentary intangibles and negotiable instruments, as well as intellectual property, and can arguably be extended to include any new rights recoverable by action, which could include new digital rights or assets.

English courts have, nevertheless, adopted a strict and unitary division of things as either consisting of choses in possession or choses in action, with no intermediate category between them. In 1885, Lord Justice Fry ruled, “According to my view, all personal things are either in possession or action. The law knows no tertium quid between the two.” This was qualified by Stephen Morris QC in Armstrong DLW GmbH v. Winnington Networks Ltd, although restated by Lord Justices Moore-Bick and Floyd in Your Response Ltd v. Datastream Business Media Ltd.

In Colonial Bank, Lord Justice Fry had to consider whether shares constituted choses in action under Section 44 of The Bankruptcy Act 1883, after the trustee in bankruptcy claimed shares following the borrower’s bankruptcy. Lord Justices Lindley and Cotton concluded that shares were not choses in action. Lord Justice Fry referred to “choses in suspense” and “choses in action,” although he considered them to be the same and with a wide meaning beyond simple debt. Lord Justice Fry believed that shares were like a debt, based on the benefits received by the shareholder which corresponded with a partnership interest. Choses in action were a residuary form of property law. The House of Lords rejected the majority position of the Court of Appeal, considering the matter as one of statutory interpretation following Lord Justice Fry and concluding that shares were things (choses) in action. Lord Blackburn confirmed the residuary use of the term. The House of Lords did not rule on the meaning of property and whether personal property was a closed area of law beyond choses in action and choses in possession.

The dual and binary classification of English law adopted by Lord Justice Fry is subsequently based on a misappreciation, misreading, or, at a minimum, overstatement of relevant authority and possible confusion between actions and substantive rights in relation to physical property or “chattels personal.” Lord Justice Fry had referred to statements by Lords Coke and Hardwicke and to a passage in Blackstone’s Commentaries on the Laws of England (1765-1769), with Lord Justice Cotton having also referred to Blackstone. Blackstone discussed the nature of property, although in terms of actions and recovery. Blackstone had drawn a distinction between “chattels real” and “chattels personal,” which were “things moveable”. He explained property in action in terms of recovery and examined this with reference to debt or contractual performance. “Damages” were available in the event of breach and with money having already being included within property in possession. Blackstone only attempted to identify the principal forms of personal assets available at that time, which he considered in terms of court actions for recovery of physical chattels personal. He explained the law as it applied and did not state that there could be no other types of property. He recognised intangible assets in the form of proceedings and contractual claims, which corresponds with modern causes of action, debts, and rights under contract. He accepted that the possession or occupation of a chattel was recoverable, with title being in potentia but still absolute. Intellectual property rights were considered under public law at the time, with patents examined in terms of exemptions under statute against the common law prohibition on monopolies.

Lord Justice Fry did not have to consider whether there were any other areas of property under English law, having concluded that shares fell within choses in action. Any other remarks were obiter. Lord Justice Fry was satisfied that the flexible and expansive nature of choses in action was sufficient to include shares in the 1880s and to extend beyond simple debts. All the authorities in this area accepted the expansionary and evolutionary nature of the common law in this area. Blackstone, writing in the 1760s, arguably did not prevent the adoption of any new form of intangible moveable property either within choses in action or as a parallel field. Holdsworth later described the nature of the law in this area as unsatisfactory in The History of English Law and referred to the decision in Colonial Bank v. Whitney. Holdsworth explained the historical position in terms of extension, assignability, and statutory exceptions, which included expanding rights of action into rights of property. Therefore, it is necessary to clarify the law in this area going forward. Any meaningful reconciliation has to accept that the evolutionary nature of the common law has allowed the scope of choses in action to expand over time and include all residuary areas of intangible personal moveable property with possible new sub-divisions emerging within.

Six principal modern forms of choses in action are distinguished: rights or causes of action; debts; rights under contract; securities; intellectual property rights; and leases with documentary intangibles and negotiable instruments either constituting choses in possession or choses in action. Generally, choses are current or future private, intangible, moveable personal property interests that are either legal or equitable in origin under English law and subject to concurrent, successive, or fragmented ownership.

Three different sets of rights of action are identifiable with civil private law rights, public judicial review, or criminal sanctions. Only private rights of action are considered choses in action. A debt is a right to demand the payment of money at a stipulated time. Rights under contract constitute multiple and separate legal choses in action distinct from the underlying contract of creation. Debts and rights under contract are both indivisible.

Shares issued in the form of a physical security certificate are choses in action. Choses or other company members’ interests constitute personal property and are not in the nature of real estate. Bearer shares and bearer debt instruments or bonds are documentary intangibles. Immobilized physical securities are choses in action, and immobilized bearer shares and bonds are documentary intangibles. Dematerialized securities are also choses in action, being equivalent to physical shares. Transferable interests in securities represented by book entries, such as with Euroclear and Clearstream, can be considered to create separate equitable interests.

Intellectual property rights include patents, copyright, industrial design rights, trademarks, and confidential information. Like securities, several special rules apply to the statutory regulation of intellectual property rights creation (and challenges to rights creation) and transfer, including licensing. Separate rights arise in intellectual property and regarding damages following breach. Patents and design rights are referred to as hard intellectual property rights, and copyright and other rights as soft intellectual property rights.

Patents and applications for patents are personal property, although not choses in action under statute. Registered trademarks are defined as personal property under the Trade Marks Act 1994 and would constitute choses in action. Trademarks are also protected through passing off and malicious falsehood (including injurious falsehood, trade libel, and slander of goods), which are, by definition, choses in action. Registered designs under the Registered Designs Act 1949 are considered choses in action, as are unregistered design rights and designs in the form of artistic copyright. European design rights and trademarks are created under European law and would constitute intangible movable property and, by analogy, choses in action under English law. Copyright is a statutory right, although classified as a chose in action. Moral rights are considered to be choses in action, although the point has not been judicially confirmed. Confidential information does not constitute property nor a chose in action directly, although the receipt and abuse of confidential information would make up elements for a separate right of action.

Leases over land or dwellings can be classified as “chattels real,” which indicates that they are more of a real or proprietary nature, rather than personal nature. Leases are commonly granted over many other types of property other than land and are based on contract. Leases may then generally be classified as choses in action, except for tenancies at sufferance. The registered proprietor acquires a legal and beneficial title where the lease has been properly registered under the Land Registration Act 2002. Whether a person acquires a legal or equitable interest depends upon whether they complied with all of the supporting requirements to create a proper proprietary interest, such as registration.

Documentary intangibles embody payment obligations and have historically been treated as choses in action under English law. This refers to the right, rather than the physical item holding the right. The physical container holding the right are choses in possession, and the preferred view may be that documentary intangibles are choses in possession. The effect of this is to reify payment obligations under documentary intangibles.

3. Digital Currencies and English Property Law

The legal nature of digital currencies has still not been authoritatively confirmed in law. It remains unclear whether digital money and other digitally tokenized assets can be classified as property or how they may otherwise be categorized, although a recent decision suggests that this question will ultimately be answered in the affirmative. Particular problems arise in understanding the nature and importance of personal moveable property, rather than land, following the shift from earlier feudal estates to modern merchant and mercantile based economies. Fundamental problems remain in understanding the nature of such commonly used assets as money, shares, and securities, as well as dematerialized securities. English property law can be re-examined in an attempt to re-classify and re-categorize new forms of technology created by digital currency and other assets.

A number of commentators have expressed opinions on the nature of new digital assets. Disputes and disagreement nevertheless remain. Specific issues arise as new digital assets are not created by common law or statute but by computer code. These assets do not represent raw information but structured data under the definitions adopted in this paper. Data is structured, manufactured, or controlled information. Digital currencies and other digital assets are not based on digital information units but digital data; code is necessarily controlled and structured, which creates data points or entries, rather than raw information, as noted.

There is no universally recognized definition of Bitcoin or other digital currency due to these uncertainties. For the purposes of this paper, Bitcoin or other cryptographic currencies are defined as digital data points or entries held on a blockchain or other form of distributed ledger. Digital assets can only be created, held, used, transferred, or destroyed on digital ledgers, with the underlying value unit only existing at any point in time as the latest transaction or account record or entry. Digital assets have been classified in various ways for different purposes under separate country laws.

Property has been defined extensively under English statutory provisions and common law. Property for criminal law purposes includes money and all other property. Property consists of “money, goods, things in action, land . . . and also obligations” for insolvency law purposes. Goods are more specifically defined to include “all personal chattels other than things in action and money.”

The meaning of property has been examined in relevant case law. Property can be considered in terms of the four conditions or indicia developed by Lord Wilberforce in National Provincial Bank Ltd. v. Ainsworth in 1965. As stated therein, “before a right or interest can be admitted into the category of property, or of a right affecting property, it must be definable, identifiable by third parties, capable in its nature of assumption by third parties, and have some degree of permanence or stability.” His Lordship’s formulation can be summarized in terms of definition, identification, transferability, and permanence.

This was reconsidered by Lady Hale in a dissenting judgement in OBG Ltd. v. Allan in 2008. Lady Hale attached an additional independence condition with the rights attached clarified, stating:

The essential feature of property is that it has an existence independent of a particular person: it can be bought and sold, given and received, bequeathed and inherited, pledged or seized to secure debts, acquired (in the olden days) by a husband on marrying its owner.

The reference to independence is reconsidered by Penner in terms of a “separability thesis” or test to which Penner adds an “exclusion thesis.” Penner considers that things must be “contingently associated” with a particular owner who is able to exclude others. Exclusion reflects ownership and control, although it might be noted that this principally only applies with regard to private, rather than public, property.

Lord Justice Mummery has separately summarized, in an obiter statement, the criteria characterizing property rights as distinct from personal rights in terms of “certainty, exclusivity, control[,] and assignability,” which concerned company emails. The preliminary issue before the lower court was whether Fairstar had a proprietary interest to the emails; however, the Court of Appeal said that the real issue was whether a principal had a right to inspect and receive copies of an agent’s emails that concern the principal’s business affairs. Lord Justice Mummery would not conclude that information could not constitute property in all circumstances.

Other collections of rights can constitute intangible property under English law, such as European Union Allowances (EUA) created under the European Union Emissions Trading Scheme (ETS) Directive in 2003. An EUA is the “sum total of rights and entitlements conferred on the holder pursuant to the ETS.” It is not necessary that the rights are separately enforceable by action. The existence of a statutory framework also appears unnecessary, as private protocols or code are sufficient.

A waste management license can be considered to constitute property for insolvency purposes, where this has been created under statute. Milk production quotas may also constitute property. It remains unclear whether some form of statutory framework is necessary. Corporate securities constitute an intangible bundle of associated rights that include the rights to information, vote, and declare dividends. Custodial interests in securities can also be considered to constitute intangible rights with real, rather than personal, remedies being available to protect them.

It remains unclear whether a digital currency would satisfy these various tests. A Bitcoin is defined as a “chain of digital signatures” to which a series of associated rights can be attached. A digital coin is arguably capable of definition, identification, transferability, and permanence, is independent and capable of being bought and sold, and is arguably separate, certain, and capable of exclusion, control, and transferability, if not assignability. It is less clear whether it can be encumbered and bequest at this time, although it is arguable that this should be permitted over time if it can otherwise be classified as property. A bundle of defined rights can then be exercised with regards to an identifiable code-created entry or item, without any formal statutory framework. The position is, nevertheless, still unclear at this time.

4. Legal Statement and Reclassification

The LawTech Delivery Panel’s (LTDP) United Kingdom (UK) Jurisdiction Taskforce considered the nature of digital assets and smart contracts in a Legal Statement in November 2019. The statement rejects the argument that law is irrelevant and that cryptoassets are outside the law. The objective of the statement is to provide a foundation for the responsible future use of digital assets and smart contracts and promote market confidence, legal certainty, and predictability. The Taskforce concluded that digital or cryptoassets should, in principle, be treated as property, insofar as they have satisfied the indicia of property and are not otherwise disqualified due to their distinctive nature, information base, and failure to be classified as either choses in possession or choses in action. The indicia of property were summarized in terms of definition, identification, third-party assumption, and permanence (following Lord Wilberforce in National Provincial Bank) and in terms of certainty, exclusivity, control, and assignability (following Lord Justice Mummery in Fairstar). Reference is made to other judicial authority.

Cryptoassets were considered sufficiently definable and certain, capable of assumption and permanence, as well as controllable and exclusive. The indicia were, nevertheless, sometimes inconclusive and did not create a precise definition, although cryptoassets could be treated as property, subject to certain disqualification conditions referred to, which were considered not to be breached. The unique features of cryptoassets consisted of intangibility, cryptographic authentication, distributed transaction ledger, decentralization, and consensus rule, although these did not disqualify them from constituting property. Cryptoassets were not prevented from being property on the basis that they constituted information. The inability to claim a right of action or remedy against any specific party further did not disqualify cryptoassets from constituting property.

With regard to classification, the UK Jurisdiction Taskforce generally treats cryptoassets as constituting a third type of property outside choses in possession or choses in action. The owner of a cryptoasset is generally the person with knowledge of the private key, depending upon the rules of the specific system and particular circumstances. Title can be transferred by assignment or agreement, although the effect of a digital ledger transfer may be considered to constitute a form of substitution or novation with a new cryptoasset being formed in favor of the transferee.

No specific definition of cryptoasset was adopted. The term “cryptoasset” is used to refer to the digital representation of an asset on a decentralized system. The terms virtual and digital are distinguished. The Taskforce explains cryptoasset systems in terms of the use of a “pair of data parameters,” with a public key containing references to encoded information concerning the asset’s ownership, value, and transaction history and the private key, which allows transfers using a digital signature. Knowledge of the private key effectively confirms practical control over the asset. The Taskforce did not consider taxation, criminal law, partnership law, data protection, intellectual property, consumer protection, settlement finality, regulatory capital, anti-money laundering, or counter-terrorist financing.

The conclusions of the UK Jurisdiction Taskforce were approved by Justice Bryan in AA v. Persons Unknown in November 2019. Justice Bryan accepted that the statement was not a statement in law, although it was described as compelling and the reasons identified were adopted by the court. Cryptocurrencies were also treated as property by Justice Birss in Elena Vorotyntseva v. Money-4 Ltd., with a worldwide freezing order being awarded, and by Justice Moulder in Liam David Robertson, in which an Asset Preservation Order (APO) was granted over 100 Bitcoins (worth £1 million). Each of these decisions proceeded on the basis that cryptoassets were property, although without the need to consider the specific type or nature of property more generally.

The nature of digital assets and smart contacts was subsequently considered by the English Law Commission, which has also examined electronic trade documents with documentation execution having been reviewed previously. The Law Commission supported the approach adopted by the Taskforce, although it wished to consider wider possible law reform, including through an extension of possession and intangible property. The Law Commission had already proposed an extension of possession to include electronic trade documents, with a three-point test developed based on independence, exclusivity, and divestment. This would be reconsidered with regard to digital assets.

5. Digital Property Restatement

It can be unsatisfactory that the legal status and nature of digital coins and other digital assets remains unclear under English and other laws, especially as large amounts of monetary value may be created in the form of digital intangible assets or generated on or transferred to blockchain and distributed ledgers in the near future. Despite the uncertainties that arise, it is possible to begin to construct a new form of digital re-examination or restatement of more traditional property law conditions as noted. It is possible that much of this may be clarified over time through new judicial decisions and legislative adjustment. This may result in the recognition of other forms of statutory examples, in addition to the new formulations referred to, including emission allowances, waste management licenses, and milk production quotas. The UK Jurisdiction Taskforce statement has also been of significant value, although it is non-enforceable in and of itself and only amounts to a collection of points of interpretation. It would, accordingly, be beneficial for this to be clarified in a more comprehensive manner by statute over time.

The features or conditions of property law referred to above may be consolidated and restated for the purposes of this paper. These may be identified as consisting of specificity, separability, stability, singularity, and supremacy or sovereignty. These may be summarised in terms of identification, existence, presence, exclusion, and control. Specificity includes definition and identification, following Lord Wilberforce. Separability corresponds with independence, following Lady Hale. Stability connotes permanence. Singularity corresponds with exclusivity and the availability of proprietary and non-proprietary remedies. Supremacy or sovereignty incorporates control, particularly in terms of holding, encumbering, bequeathing (by will or trust), transferring (by gift or sale), and cancelling (or destroying). These control factors are referred to as title rights for the purposes of this paper. These can be re-summarized in terms of detain, demand, devise, donate or deal, and destroy or class, charge, seek, convey, or cancel. Other types of rights can be referred to, although these may overlap or conflict and arguably do not constitute legal formulations. All aspects of new digital coin and tokenized assets can then be considered in terms of these five property conditions, or new indicia, and five associated title rights.

This restatement can be understood in terms of creating a new form of “attachment” theory of property in law. While all five of the core constituting characteristics referred to are important, the two most significant determining factors may be separability (or independent existence) and supremacy (or control). Property arguably consists of any separate non-human item or particular, over which a series of associated rights can be exercised. This has to have some form of independent existence and recognition without constituting a natural person, fiction, or sham and in relation to which certain rights or entitlements can be exercised. These rights are not bare rights, as they can be considered to be attached to the particular and will pass with it, although they are strictly, in law, only held by the owner and enforced against other persons.

Care must still be exercised with regard to the use of such terms as “thing” and “property.” A thing will cover land and moveable corporeal and incorporeal items, including all other rights and claims of any form, and only excluding natural persons and actions or remedies that can be considered to correspond with patrimonium. Property can either be considered to be correlative, and correspond to a thing, or be restricted to land or corporeal and incorporeal items, thus excluding claims and other rights. These rights can be further distinguished between the entitlement to receive payment and the discharge of other contractual or performance obligations. This distinction creates a “sub-trinity” of possession, payment, and provision (or performance) within the larger private law trinity of “persons, things and actions” referred to above. Private law is, thus, restated in terms of a “quinity” of persons, property (possession, payment, and provision or performance), and protection (or remedy). A parallel “quinity” of public law rights can then be developed. It is further possible to consider financial law as orthogonal in light of its significance across other fields such as property, contract (obligations), and tort (restitution). Thus, financial law is a separate field of law within the previously detailed structure.

Each of these five new conditions or indicia can be considered in further detail.

a. Specificity

Specificity refers to the idea of being able to identify a particular item or asset capable of ownership and a proprietary classification. This corresponds with Lord Wilberforce’s two tests, which can be combined, that property must be both definable and identifiable by third parties. Digital coins and assets are capable of definition and identification. A digital coin, such as Bitcoin, is specific to the extent that it represents a chain of transactional transfers of value that can be traced back to the creation of the specific digital units concerned in the origin block. Bitcoins and altcoins generally operate on a transactional rather than an account balance basis. Value is, nevertheless, moved from one address to another using private keys. This creates a string of digital transaction values. The amounts moved do not represent the total coins but a multiple of the minimum denomination units concerned. These are referred to as “Satoshis” in Bitcoin, which represent 100 millionth of a Bitcoin.

b. Separability

Separability is concerned with dislocation and independence. An item of property must be capable of separation from other similar or equivalent things, which corresponds with Lady Hale’s need for independence. This is reflected in the Law Commission’s three conditions for electronic trade documents. The Law Commission specifically required that an item have an existence beyond a mere right. Items must be distinct in some manner to allow separate title to attach.

Separability raises additional issues in terms of divisibility and fungibility. Official currency and private digital coins are generally divisible into minimum monetary units such as Bitcoin Satoshis. Bitcoin transfers are technically not of Bitcoin but of multiples of the minimum monetary unit. Addresses will generally hold large numbers of unspent outputs (UTXOs) from multiple transactions, which makes their value dependent upon the aggregate sum of all minimum units passed across all previous transfers. While these minimum units are held and transferred through transaction chains economically in terms of technology and law, one digital entry or record on a ledger is simply replaced by another. This operates as a form of substitution or novation and is similar to the transfer of value between bank accounts with no tangible or intangible funds actually moving. In this way, coins may never truly transfer, yet their entries may be adjusted and updated.

Fungibility is the obverse of separability, with any asset being interchangeable for another asset within the same class. Fungibility involves substitutability and is distinct from negotiability, which is concerned with title transfer. Fungibility may be determined by law or party agreement. Money is fungible to the extent that different coins or banknotes can be used in substitution of others. This may include digital monetary units, although a complete record of all transactions and transfers is maintained on the ledger. Legal tender is connected but distinct in that fungibility defines the specific types of money that may discharge a debt in law without party agreement. Digital currencies are generally not considered to constitute money and cannot be legal tender in the absence of statutory revision of domestic legal tender statutes.

c. Stability

Stability can be considered in terms of permanence, scarcity, and integrity or non-rivalry. Stability connotes the idea of permanence or standing. This does not have to be absolute, as perishable goods may still be owned and constitute property even if they only have a short useable or physical lifespan. This is one of the arguments against information and confidential information constituting property, as its value is diminished or destroyed on transfer or communication. Assets created and held on digital ledgers are capable of being stable and permanent in relative terms. Scarcity supports value, which can be managed through volume limits imposed on the issuance of official and private currencies. Bitcoin, for example, is limited to twenty-one million coins, which are slowly released on a controlled rolling basis until approximately 2040.

Private property is generally rivalrous with consumption by one party reducing its consumability by another. Non-rivalrous assets can be subject to common consumption without any reduction in value. Money is rivalrous with only one person being able to use it in exchange at any particular point in time. Information, on the other hand, is generally non-rivalrous, although certain socially important information may be considered to be rivalrous. The difficulty that arises with regard to digital currencies is ensuring that digital coins cannot be re-spent or double spent. This is achieved in Bitcoin through the use of single transaction forks with cryptographic access control and transaction and block hashing, which creates a consequential immutable record of entitlement. Transfer values can then only be accessed and reused through the transfer of the private cryptographic access key to the new value address. While the public key is non-rivalrous and reusable, the private key and underlying coin are digitally rivalrous.

The blockchain or other distributed ledger create new digital assets and digital value points or entries. Private coins generally have no intrinsic value, although this may be tied to other assets such as stablecoins, which are linked to official currencies, cryptocurrencies, commodities, or other baskets of assets. Value is denominated in terms of the minimum monetary unit used. This would only otherwise have market value in terms of community and social and market recognition or demand. The effect is to create a form of digital value, code value, or data value on the particular blockchain or distributed ledger. The code then originates a new asset with the value attached to that asset.

d. Singularity

Singularity is concerned with exclusivity and the ability to sole use or possession. This connotes exclusive occupation or use. This may be considered to overlap with the idea of control, although exclusivity is concerned with the denial of others’ rights of use, rather than the specific rights of use of the owner directly. The owner of property can exclude others from exercising any non-transferred rights in relation to the property or asset. The holder of any digital asset can deny others the right of use through the holding of the private cryptographic key.

Property is generally referred to in terms of exclusivity, with the owner or possessor being able to deny third-party use or operation. An asset is excludable where third-party consumption is prevented or managed. This specifically protects the rivalrous nature of the property. Exclusivity is generally secured with digital coins through the application of cryptographic access controls and control over the private key. Excludability is protected in practice through the exercise of private and public legal protections and remedies. This prevents interference with assets, including money, and the recovery of goods, their monetary value, or other compensation for loss or unjust reward.

e. Supremacy or Control

Supremacy or sovereignty corresponds with the idea of control and the ability to exercise the core title rights attached to property. An item does not constitute property unless some or all of the title rights referred to can be exercised in relation to the thing. Whether all rights can be exercised may not be necessary, perhaps reflecting the development or evolution of the supporting law or legal system over time, such as with the recognition of the right to create a charge over a digital coin or bequest a digital asset. Conversely, where the title rights can be exercised in relation to a new digital asset, it is arguable that this will constitute property, assuming that it is otherwise generally capable of satisfying the other principal property conditions or indicia referred to and no disqualification arises. Any digital data point or entry on a distributed ledger can arguably constitute property in law if it satisfies the constitutive existence and title rights conditions referred to.

i. Holding, Exercise, and Possession

Property related rights clearly include the right to hold, use, or exercise an item or asset. Many of the additional rights referred to would fall within the right to exercise, use, and enjoy. This may also include the right to have physical possession, depending upon the specific entitlement conferred. Digital assets may also be considered in terms of constructive digital possession and constructive digital location.

ii. Encumbrance

Owning property will generally include the right to encumber the asset, particularly through the conferment of a security interest. The type of interest created will then be dependent upon the nature of the asset concerned and the relevant local law. For example, a security interest may be created by way of charge without the need for physical possession, although the transfer of possession or title may be required in other cases.

Security interests may be created by agreement or operation of law. Consensual security interests can be created through mortgages, pledges, equitable charges, or contractual liens. Because pledges and liens require possession, security over cryptoassets may generally be provided through mortgages or equitable charges. Parties may also confer rights that create a form of quasi, or functional, security without the full proprietary interest being conferred. Digital assets will generally not be subject to bailments because they require possession.

iii. Bequest

Property may be bequest through a testamentary disposition, will, or, if both of these fail, intestate succession. Property is generally assigned a wide definition for these purposes and will include all assets belonging to the deceased person. In fact, digital assets have specifically been included within the Uniform Law Commission rules of the United States and Canada.

Property may also be placed in trust. But the issue of whether digital coins and other assets can be held in trust depends on their initial classification as property. The Singapore International Commercial Court held that cryptocurrencies could constitute property for the purposes of a trust. The New Zealand High Court also confirmed that cryptocurrencies are forms of property capable of being held in trust.

iv. Transfer

Cryptoassets may generally be transferred by gift or sale without restriction. This corresponds with divestiture. Digital currencies will be transferable rather than negotiable insofar as they do not constitute money or are otherwise recognised as constituting a negotiable instrument. Transferors cannot transfer better title under the Latin maxim nemo dat quod non habet. Title is defeasible rather than indefeasible. Even though a digital coin ledger records an inalienable transfer of title through code, the ledger can still be defective in law and subject to challenge. This may create both an evidential presumption of entitlement subject to argument and a defence in the event of a dispute. Transactions using a private cryptographic key fraudulently would arguably be void or voidable on the basis of fraud.

v. Cancellation and Destruction

Control of an asset also includes the right to cancel the asset or destroy the asset altogether. Destruction constitutes the ultimate form of control and authority.

E. Digital Asset Classification and Constructive Digital Possession

Considerable difficulties remain in understanding the nature and development of new property under the law. Consequently, classifying digital currencies and assets under the law has been a complicated matter. It is arguable that a separate category of personal movable intangible property should be recognised under all legal systems. The existence of a third category of moveable intangible property under English Law is given statutory support by the definition of patents under the Patent Act 1977 and other definitions of property in the Theft Act 1968, Fraud Act 2006, Insolvency Act 1986, and elsewhere. The anomalous treatment of rights of action and under contract, securities, intellectual property, leases, documentary intangibles, and negotiable instruments together sit uncomfortably within the residuary category of choses in action under English law. This could be made subject to statutory correction in the absence of further judicial delay and adjustment, which is, in turn, dependent on the vagaries of instruction and opportunities for argument.

Reform could be achieved either by creating a third category of personal intangible moveable property under English law or extending the existing field of chose in action to include intangible assets and pure claims. It may be preferable to extend the existing category of chose in action to include all intangible property with clear sub-divisions, which would incorporate all existing anomalous types of property and new digital assets.

Digital rights, including digital currencies, will continue to constitute choses in action under English law as long as they are movable property that cannot be physically held. The historical evolution of choses in action allows this category to act as a form of residuary category and subsume any new forms of intangible property. This can also allow real rights to be conferred. Digital rights would constitute intangible movable property under U.S. law and other civil laws. More difficult classification issues may arise under other national laws pending further law reform.

To avoid future uncertainty and confusion, it is arguable that the category of choses in action under English law should be reformulated to separate assets and rights. A clear category of intangible property could be identified to include documentary intangibles, financial instruments, intellectual property rights, possible lease interests, as well as new digital and dematerialised items, with a residual category of choses in action for pure claims and other rights of action.

This could be given effect as well by recognising a separate category of intangible property under English law with further sub-divisions within this category. This could be referred to, for the purposes of this text, as involving choses in possession (for tangible property), choses in action (for pure claims), and additional “choses in entitlement” (for intangible property). Intangible property could, for example, be referred to as choses intactilis, choses inviolabile or choses insensibilis. This may include separate areas of choses digitalis (for new digital assets), choses intellectualis proprietas (for intellectual property), choses conduco (for leases), choses securitates or agmen (for securities), and possibly choses contractum (under contract), with other choses in action consisting of choses in pecunia or impendium (for payment obligations), choses in effectus (for performance), and choses in partum (for delivery of property). The use of Latin formulations is not necessary and used only for clarification and discussion purposes, which would be replaced with clear functional descriptors in any new law reform programme adopted. All of this can be considered further.

In the event that this is not possible, the alternative would be to treat digital assets as choses in possession through the use of a new doctrine of constructive digital possession based on any form of control rather than physical holding. The Financial Markets Law Committee (FMLC) in the United Kingdom has recommended that digital currencies be treated as choses in possession rather than choses in action and be assigned negotiability in addition to simple transferability. The Law Commission has been reconsidering this and recommended that possession in relation to electronic trade documents should be extended and based on the three tests of independence, exclusivity, and divestment. The term “chose in possession” has traditionally only been used where physical holding is available. One possible means of reconciling the anomalous treatment of patents and other forms of intangible rights, and specifically digital intangible assets, would be to develop a new doctrine of constructive digital possession. Constructive possession is already used in other areas such as drugs trafficking, which establishes that offences have been committed where parties exercise a sufficient degree of control over narcotics or other goods, even when they are not in actual physical possession.

The new doctrine of constructive digital possession could be applied where parties are considered to control digital assets held on a distributed ledger or blockchain and determine the access to or transfer of the assets on the ledger. This would specifically apply where, for example, they hold the private cryptographic key to digital currencies held on a blockchain, which gives them exclusive control over the digital entitlement held on the ledger and the sole right to transfer the asset. “Possession” could then be re-defined in terms of control rather than physical holding. A “chose in possession” would refer to any item within the physical or legal control of a party without the need for any physical relationship or attachment.

This could be supported through the development of a parallel doctrine of constructive digital location. This would look to determine the legal location and governing law to apply with regard to any specific crypto asset. Difficulties arise in that digital assets can be considered non-existent and, at any particular point in time, both nowhere and everywhere at the same time. A series of options can be developed under a waterfall model, with the default solution being the location of the person holding the private cryptographic key.

III. Digital Financial Assets

Several further issues can be considered to arise with regard to the nature of digital currencies and money, tender, digital ledgers, title transfer, digital autonomy, and smart contracts.

A. Digital Currencies and Money

Uncertainty remains as to whether digital currencies constitute money under domestic legal systems. The assumption is often made that, as currencies, digital currencies must comprise money, although this is not necessarily correct under an economic or legal analysis. Conflicting writings and opinions have been expressed both in terms of economics and in terms of law.

In economic terms, the meaning of money depends upon its function. Money is specified to consist of any item that can be used as a medium of exchange, store of value, and unit of account. This classification dates from Aristotle, although Aristotle also stressed the importance of valuation in his Nicomachean Ethics. Some economic texts accept the importance of valuation, although the majority stress exchange.

In legal terms, the meaning of money depends upon the intention of the parties in any specific situation. This may include private parties, public bodies, or Parliament in construing statutory provisions. There is no single definition of money in UK statutes, with a number of conflicting opinions having been issued by the courts over time. The widest and most generous interpretations tend to be adopted in charterparty (shipping) and testamentary dispositions where the parties are understood to have adopted the widest possible definition and intent.

Where intention is not separately relevant or clear, the default position in law should arguably be to equate money with legal tender where the legislature has adopted a legal tender statute. The effect of a legal tender designation is to determine that only the defined assets specified can discharge a payment obligation and debt in law. To interpret money as anything other than legal tender in any particular case would then be to compel a party to accept payment in a form that does not discharge the debt obligation concerned. Money, tender, and payment can, therefore, be considered together in default situations.

A number of separate theories of money have been constructed over time, principally in economic writing. These can be summarised in terms of the specie or commodity theory, the state or chartal theory, the more recent institutional theory, as well as an earlier society theory. These can be most easily reconciled through the adoption of a denomination and state permission theory. Money would then constitute anything denominated in the form of an official reference asset (ORA) and issued by or under the authority of the state. This would include coins and banknotes, as well as commercial bank accounts and central bank reserves accounts. This would also include new forms of electronic or digital money denominated in an official currency and either issued by or under the authority of the state. This would, for example, specifically cover pre-loaded electronic devices at present, as well as sovereign or central bank digital coin in the future.

It must be recognised that many private digital currencies can carry out each of the core economic functions of money, including acting as a means of exchange, store of value, and unit of account, although issues remain regarding their reliability and stability. This does not of itself mean that such currencies are money, with any other commodity possibly being used for these purposes. Most private token based digital currencies would not constitute money under the reconciliation definition referred to. They are not denominated in the form of an official currency or reference asset and would not be used by, under the authority of, or with the permission of the state. Even where private currencies are exchangeable into official currencies, this would still not mean that they would automatically be reclassified as official money. Such currencies can be classified as investments rather than monetary assets.

B. Digital Tender

Private digital currencies will generally not constitute money as noted. They will generally also not constitute legal tender in the absence of a statutory amendment to extend the list of official assets to include such currencies. The effect of this is that payees can always refuse to accept digital currencies in tender for payment purposes in the absence of contrary agreement. Debts can only be discharged through the provision and acceptance of legal tender.

Separate issues arise where a central bank may issue digital coin in place of domestic coinage or banknotes. Where the new digital coin is produced as a substitute for existing legal tender, it could be argued that the coin would constitute tender. A strict interpretation of legal tender laws may, nevertheless, exclude this and require a paper instrument in the absence of appropriate statutory correction. Legal tender status was originally introduced in the United Kingdom to promote confidence in Bank of England notes during a period of market volatility. Extending tender status to official new digital coins may be considered appropriate to promote confidence and use, with relevant laws having to be extended as necessary.

C. Digital Ledgers

An important key development in this area has been the growth in the use of electronic systems to record and exercise underlying legal rights. This applies both with regard to the expression, or re-expression, of existing separately or previously generated rights as digital rights and the original creation of new rights in the form of digital entitlements. It must be expected that, with the continued growth and expansion of the Internet, electronic commerce, and government systems, many legal rights may be transferred to or generated and stored in the form of digital information and digital data systems. This creates substantial new challenges in terms of legal definition and recognition, as well as the protection of all relevant rights and entitlements.

Different types of more general asset registers or ledgers can be distinguished. This may include land registers, corporate securities registers, and dematerialised government bond or corporate securities or bond registers. Many registers only act as a record of underlying entitlements and transactions, with assets being passed from party to party, for example, through separate contracts of sale, such as missives or dispositions. Other registers may constitute or be determinative as to the original title to the underlying assets, with the register entry being proof of ownership subject to separate contrary evidence.

These two types of registers could then be distinguished in terms of being either title or substantive and record or evidential ledgers. While this division does not have any established or common use or meaning in legal terms at this time, this becomes of considerable significance in the digital asset area, with title to new digital assets often only being determined by electronic ledger entries alone.

Registers can also be distinguished in terms of either being centralised, multiple or separate, shared, and decentralized or distributed. Other possible divisions can also be identified depending upon, for example, whether they are permissionless and open or permissioned and closed. Central registers are usually closed or permissioned and managed by a central official entity, such as with a land register. Multiple separate registers would include bank accounts with different accounts in common format being held by different banks and other financial institutions. A shared ledger is a collective term for any register with multiple accesses. A decentralised ledger operates on the basis of multiple copies being made available through separate nodes, with a distributed ledger having no central hierarchy and with all nodes being connected directly.

Digital assets held on distributed ledgers arguably do not constitute documents or instruments. They do not represent other assets apart from in relation to coloured or tokenised coins. They do not embody a payment obligation. They have also not been recognised as documentary intangibles or negotiable instruments by mercantile usage to date.

Entries held on digital ledgers cannot generally be considered to constitute financial instruments, documentary intangibles, or documents of title. An instrument can be considered to constitute a record of title to ownership or payment with a financial instrument embodying a payment obligation. Negotiable instruments are financial instruments that confer perfect titles, subject to the transferee not receiving them with any notice of any prior defect in title. Negotiability can only be conferred by statute or established mercantile use. Transaction volume is arguably more important than time. While the law is flexible, the negotiability of cryptoassets has not generally been recognised to date.

It is arguable that the digital ledger cannot be considered to constitute a definitive record of legal entitlements without express statutory recognition. The effect of this is that a court may not be bound by the terms of a ledger in considering legal entitlement. Parties may agree that the entries in a ledger specify their entitlements inter se, although this may not bind third parties. Separate proprietary interests may arise off the ledger, such as those created through trust, security, or succession, or through off-chain dealings. Parties acquiring assets off-chain will need to evidence their entitlement through other means and may acquire preferential rights, particularly where they receive the asset before an on-chain transaction. All of this will have to be clarified in law over time.

D. Digital Rights, Title Transfer, and Title Finality

Where digital assets are held on a ledger, a number of distinct types of title rights can be distinguished, as discussed above. These would specifically include the right to hold, encumber (by way of security), bequest, transfer (by gift or sale), and cancel or extinguish. These are referred to as core title rights for the purposes of this paper.

The transfer of digital assets held on such ledgers would also be by way of simple register or ledger amendment. Assets would be transferred simply by revising that record of holding on the ledger. In practice, this would require use of the encrypted public key, which would be verified through the private cryptographic key. Bitcoin has specifically been referred to as a list of digital signatures.

The related issue that arises is ensuring finality of transactions without the possibility of subsequent interference. The issue has become of particular importance at the national, European, and international levels in connection with ensuring finality in clearing and settlement systems and especially with the adoption of the European Settlement Finality Directive (SFD) in 1998. The SFD is implemented under statutory instrument in the United Kingdom. The objective is to disapply the normal operation of insolvency laws to protect the finality and irrevocability of transfer orders entered into through the system. The provisions apply to systems complying with the criteria set out in the regulations and appropriately designated by the national authority.

Difficulties may arise with regard to DLT and blockchain in that their transfers are intended to be indefeasible and irreversible, particularly through a combination of cryptographic access control, transaction hashing, and the closing and locking of blocks. Where unauthorized or inappropriate transfers have been carried out, the transfers may have to be managed through subsequent “correction” or “compensation” value transfers to avoid the need to amend the original transaction and all of the intermediate transactions carried out. This would protect the integrity of the system while allowing necessary corrections to be made, where appropriate.

E. Digital Autonomy and Smart Contracts

A related issue that arises is whether digital assets can be transferred on an automated basis using code or algorithms alone. This is, in turn, concerned with the wider legal effectiveness and enforceability of code-based “smart contracts.” The term “smart contract” has not been authoritatively defined, and it is questionable whether such arrangements are smart and constitute contracts. A smart contract is defined for the purposes of this text as referring to any form of contractual performance determined or controlled by computer code alone. Contract law is generally concerned with the legal enforcement of promises. Contracts can be created in any form, may be unilateral, bilateral, or multilateral, and are only dependent on the establishment of an agreement between parties, the intention to be legally bound, and the transfer of benefit or consideration. Contracts may be created and recorded using either natural language or computer code. Code may be used in different ways, such as to record party agreement or to determine results on the basis of conditions set by party agreement. A piece of pre-written code may also be offered by one party to another, which is accepted by the other. A court would look to determine the proper intention of the parties, giving regard to the clear and apparent meaning of the documentation or language used. The purported meaning will be applied unless the language is unclear or unambiguous. Courts will generally seek to determine the obligations that the parties intended to assume, giving regard to the contract as a whole and any admissible evidence.

Parties do not need to know the identity of the other contracting party, which applies in relation to unilateral contracts, agency relationships, and auction purchases. A court may consider external factors extraneous to the code in circumstances where this does not reflect party intention or where there has been misrepresentation, fraud, or duress applied. The anonymous or pseudonymous nature of DLT dealings would not prevent transfer of legal title or conclusion of a valid agreement to contract. The use of a private key may constitute an electronic signature, which satisfies any statutory signature condition. A statutory or contractual “in writing” condition should also include code where any form of representation of meaning is capable of visual output, including on a screen or printout. The determinative condition would appear to be that there was an intention to convey meaning. This would apply even where a computer programmer was required to read or explain the code.

IV. Digital Currencies Under U.S., EU, & Other Laws

Many inconsistencies have arisen in practice, as judicial and regulatory tribunals have applied different sets of laws depending on the approach adopted for the nature of the digital asset concerned. Agencies have had to consider an increasingly wide area of law and regulation and apply existing definitions that were not designed for use in the digital area. A series of decisions have increasingly recognized that cryptocurrencies are property, including for the purposes of injunction, attachment, and trust. But significant uncertainty remains with regard to the nature of the property interests, whether other digital assets would also constitute property, as well as the regulatory and tax treatment of such items. Many contradictory positions have arisen because of specific difficulties in determining whether cryptoassets fall within various financial regulatory statutes and their parameters. All of this will have to be reviewed to ensure that relevant laws and regulations apply in a complete, consistent, and effective manner, especially in response to continuing innovation in financial markets, trade, and commercial practice.

A. Currency

Many conflicting decisions have been issued in various countries, including the United States, as to whether Bitcoin and other digital currencies constitute money. U.S. Magistrate Judge Amos Mazzant of the Eastern District of Texas held in 2013 that the SEC could proceed against Trendon Shavers on the basis that “[b]itcoin is a currency or form of money.” Shavers was accused of operating an illegal Ponzi scheme through the Bitcoin Savings & Trust (BTCST), having collected $4.5 million with 700,000 Bitcoins and promising investors a seven percent weekly return.

In the United Kingdom, Her Majesty’s Revenue and Customs (HMRC) treats Bitcoin and other cryptocurrencies as private payment devices. HMRC notes that “[c]ryptocurrencies have a unique identity and cannot therefore be directly compared to any other form of investment activity or payment mechanism.” No value-added tax (VAT) is charged for the exchange of other currencies or for mining, although VAT may apply where other goods or services are supplied. Profits and losses are subject to corporation tax or capital gains tax and income tax for non-incorporated businesses.

B. Investment

Many initial coin offering (ICO) related schemes have been treated as constituting investment contracts and are, therefore, considered securities under U.S. law through the application of the Howey test. Attempts have also been made to clarify the law concerning digital currency and other assets in relation to derivatives markets in the United Kingdom and the United States.

The term “security” is defined extensively in the United States under the Securities Act of 1933 and Securities Exchange Act of 1934. The definition specifically includes “investment contracts,” in addition to general corporate stock, bonds, and debentures, as well as financial derivatives. This will include subscription rights and any other interests or instruments commonly known as securities. The meaning of investment contract was examined by the U.S. Supreme Court in SEC v. W.J. Howey Co. in 1946. In Howey, the meaning of investment contract was summarized in terms of any common investment and expectation of profit, which may include digital currencies or cyptoasset-related schemes. Consequently, U.S. authorities have adopted an aggressive approach to ICOs and digital token offerings in addition to issuing warning notices. The SEC issued two warnings: one with regard to Ponzi schemes and virtual currencies in July 2013 and another with regard to Bitcoin and other virtual currency related investments in May 2014. The SEC has taken many specific actions related to digital assets and ICOs since its enforcement proceedings against Shavers and BTCST for operating a Bitcoin-denominated Ponzi scheme in 2013.

Following its investigation into the Decentralized Autonomous Organization (DAO), the SEC released a statement in July 2017 confirming that U.S. securities laws may apply to the offer, sale, and trading of interests in virtual organizations. Although the SEC has warned that they may be used to entice investors with the promise of higher returns in a new investment space, ICOs may provide fair and lawful investment opportunities as well. Other warnings were issued in 2017. Former SEC Chairman Jay Clayton produced a statement on Cryptocurrencies and ICOs in December 2017 and testified before the U.S. Senate Committee on Banking, Housing, and Urban Affairs in February 2018.

C. Commodity

The U.S. Internal Revenue Service (IRS) confirmed in March 2014 that it would treat virtual currencies as property rather than currency for tax purposes. Such currency was not granted legal tender status in any jurisdiction. This confirmation followed a Government Accountability Office (GAO) report on virtual economies and currencies that had sought additional IRS guidance.

A Dutch court held in June 2014 that Bitcoin was a commodity, like gold, and not “common money,” “legal tender,” or “electronic money.” The buyer of 2,750 Bitcoins had sued the seller for return of the prepaid contract price after only 990 Bitcoins had been delivered. The buyer received the value of the undelivered coins (around €14,000) but was not awarded the additional €130,000 in damages following an increase in the value of the coins.

Similarly, the Australian Tax Office (ATO) confirmed in August 2014 that it would tax Bitcoin related activities as non-cash barter transactions and not as money.

D. Regulation

Regulatory authorities have also been considering whether money laundering controls should apply to crypto assets. Judge Katherine Forrest of the U.S. District Court for the Southern District of New York ruled in August 2014 that Bitcoin fell under federal money laundering statutes. The case involved an action against Ross Ulbright (Dread Pirate Roberts), creator of the infamous Silk Road website, for operating an unlicensed money transmitting business. Judge Forrest ruled that it would be “nonsensical” for Bitcoin not to have been covered by the relevant legislation. Ulbricht was sentenced to life imprisonment.

E. Lack of Regulation

While courts have increasingly recognized the proprietary and regulatory nature of digital coins, some inconsistencies have arisen. Tokyo District Court Judge Masumi Karachi ruled in August 2015 that Bitcoin was not subject to ownership following the collapse of the Mt. Gox Bitcoin exchange that filed for bankruptcy in February 2014 after 850,000 Bitcoins disappeared from customer wallets. A former customer claimed the return of 458 Bitcoins worth around ¥31 million ($128,144), with the judge considering that the Bitcoins could not be recovered under existing law due to their intangible nature and reliance on third parties.

V. Digital Property Comment

Several issues remain regarding the nature of digital legal rights, assets, claims, classification, regulation, and taxation. Specific difficulties can be identified regarding digital property definition, exercise rights, creation, remedy, and location. Further, problems arise with title ledgers, title transfer, and transaction finality. As with many other areas of law, property law specifically creates underlying rights and duties that cannot be disapplied by party agreement or code alone. The residuary effects of law in the digital space consequently create massive uncertainty.

A new digital rights theory can be constructed under this paper to refer to legal rights held or created in a digital form, with rights being defined in terms of any interest or entitlement recognized and subject to protection at law. Legal rights can be held, created, or transferred in the form of computer code held on digital record systems. An accompanying digital property theory has been proposed that defines any new digital asset in terms of the five constitutive conditions of specificity (definition and identification), separability (independence), stability (permanence), singularity (excludability), and supremacy (control). A series of associated control or title rights, including holding, use or exercise, encumbrance, bequest (by will or trust), transfer (by gift or sale), and cancellation or destruction, are then attached.

Arguably, any new digital asset could be created in the future, including by computer code, provided that it satisfies these conditions and is not otherwise disqualified. This could arguably cover digital currencies or tokens, digital securities, smart contracts, and other types of new digital assets, including digital securities like decentralized autonomous organizations (DAOs). The value of these digital items would clearly be dependent on market use and interest, although these could satisfy the minimum necessary conditions for legal recognition.

This new approach to property has been summarised as constituting an attachment theory. This digital property theory can also be considered to incorporate a series of sub-theories, including a digital title theory or digital ledger theory, with ledgers being title rather than record or evidential registers, and an associated digital creation idea, with rights being either transfer and conversion or creation and origin rights. A further digital asset theory, digital claim theory, and digital value theory can also be developed.

The following specific comments and conclusions may be drawn on this crucial, although still evolving, area of law.

A. Technology and Digital Rights

Astonishing technological advances have occurred in recent years that have developed innovative forms of products, services, and delivery channels. Certain core legal constructs, nevertheless, remain in place. Legal systems are based on legal rights which are defined, for the purposes of this paper, as any interest or entitlement recognized and subject to protection by law. Legal rights may be created by legislative enactment or judicial pronouncement, and possibly by custom over time, subject to separate legal acceptance and recognition. Digital rights are legal rights held or created in digital form.

Separate difficulties arise regarding the legal definition and nature of information and data and digital information and digital data. Many new forms of digital assets may only exist in the form of code entries or data strings. It is maintained that information and data do not constitute property in law directly. Where a piece of data code, nevertheless, creates a new identifiable digital item or satisfies certain conditions and an appropriate set of title rights are attached, this data point can be transformed into a new type of property in law. While a point of information cannot be considered to constitute property in and of itself, if it is referable to and identifies a new asset to which corresponding rights of use and control are attached, a new item of digital moveable intangible personal property can be created.

B. Choses in Possession, Action, and Agreement

A new area of moveable intangible personal property must be created under English law. While this could be left to judicial clarification in response to continuing technological advances, this may be more effectively achieved through statutory revision in the form of a Law of Property (Miscellaneous Provisions) Act, Digital Property Act, or revised Digital Economy Act. The objective of a new area of moveable intangible personal property law would be to clarify the nature of new digital monetary and other non-monetary assets. This would include those created on a blockchain, created on other DLT, or converted or transferred to the ledger. These are referred to as conversion or transfer rights and creation or origin rights for the purposes of this paper. Additionally, this could be an opportunity to clarify regulatory coverage and perimeters by confirming the extent to which each new asset is or would be covered by financial laws. Specifically, this would be achieved in the United Kingdom through amendment to the Regulated Activities Order (RAO) 2001. An appropriate remedy system must also be provided.

The traditional distinction between choses in possession and choses in action has generally only confused this debate. Judicial decisions and legal textbooks refer to such established authority as Lord Justice Fry’s statement in Colonial Bank v. Whinney from 1885, although this has arguably only resulted in misunderstanding and delayed necessary reform and development. Lord Justice Fry’s analysis was arguably obiter and fact and time specific. It may also have been based on a misreading or overstatement of relevant sources, including Blackstone’s Commentaries on the Laws of England (1765-69) and other available authorities. Blackstone did not have to consider the nature of intangible property more generally and did not restrict property only to land and physical chattels. The chose in possession and chose in action dichotomy may arguably be further concerned with the classification of actions and remedies rather than with the substantive division of property and things as originally provided for by Gaius and Justinian.

Historical development of causes of action over time has affected increasingly important areas of English law, including the residuary area of choses in action, particularly in the absence of any other appropriate law reform. This would now include digital currency and other assets as the residual identifier. Arguably, this creates unnecessary juridical and pedagogical confusion, which could be corrected as part of a larger reform to create new digital communities, societies, or economies. This is not meant to create a new third area of property but to extend and clarify the existing category of chose in action, which would apply to all intangible moveable personal property. Further, it should include separate necessary sub-divisions, including pure claims and other forms of assets. All assets must, nevertheless, enjoy the same protections under the law, with any other anomalies removed, especially in terms of available remedies.

C. New Digital Property Classification or Restatement

The associated definitional conditions applied to determine whether a thing constitutes property under the law can also be clarified. The original judicial tests of definition, identification, assumption, and permanence can be revised to merge definition and identification, replace assumption with independence, and add control, with control being understood in terms of the five key title rights of holding, encumbering, bequeathing (by will or trust), transferring (by gift or sale), and cancelling (or destroying). The five core conditions for property determination can then be restated in terms of specificity, separability, stability, singularity, and supremacy. Supremacy or control can, in turn, be understood in terms of detaining, devising, donating, dealing, and destroying or classifying, charging, ceding, conveying, or cancelling.

Many new forms of public and private digital coins and other tokenised assets would fall within this new definitional framework. Computer code would then create digital rights in the form of entitlement to new “digital assets,” which are digital data points or entries. Many of these may then embed private digital value or data value denominated in the form of new digital currencies or other social units of account. This can form a key part of the new ValueNet currently under construction. In terms of property analysis, new digital assets would be specific, separable, stable, isolated, and managed or sovereign and identifiable, divisible, permanent, exclusive, and controllable. This would allow identification by owners and discoverability by third parties. They would be divisible and both specific and fungible depending upon use.

The value of the assets is based on their usability and supported by their controlled scarcity with cryptographic security, including access control and transaction and block hashing, making them rivalrous and only finitely consumable without double spending. Third-party use would be limited through their excludability and ownership and protected through the availability of a full remedy system that permits continuous recoverability. They are generally also controllable through a still-emerging set of title rights including holding, encumbering, bequeathing, transferring, and cancelling (or destroying).

While all these conditions and rights may not be specifically recognized in relation to new digital coins and assets at this time, this may be commercially and socially necessary over time and can be extended accordingly. Appropriate law reform could ensure that new digital assets are properly recognized as property, subject to these conditions, and that all necessary consequential rights of use, remedies, and protections are available. Appropriate changes can also be made to ensure that a full set of title rights can be exercised in relation to all new forms of digital assets over time.

The following more specific points may be made on the core property conditions and revised indicia.

D. Specificity, Identifiabilty, and Discoverability

It is necessary to be able to define and identify things to constitute property items in law. This can be understood as an aspect of specificity, which also allows party identification and third-party discoverability. New digital coins and other assets must be capable of definition and identification, which should be relatively easy to secure in most cases. Issues may arise regarding anonymity, although this should not prevent a property attribution. Property can be held by any natural or legal person, including agents or nominees, although arguably not by a machine, but this may require legislative clarification and any concessions confirmed.

E. Separability, Divisibility, and Fungibility

Separability may be understood in terms of divisibility and fungibility, as well as negotiability. It must be possible to separate digital coins and assets from other items. This will generally be achieved at the level of the minimum monetary unit concerned with larger items being divisible into root units. These may still be fungible in practice, with one monetary unit being exchangeable for another if they have the same nominal value. Conflicting technological techniques (such as splitting, peeling, and mixing) may hide the source and defects in the title of specific assets to make them fungible, while other tools (such as poison, haircut, and first in first out devices) identify transaction chains. While banknotes and cheques are negotiable, digital currencies will not be treated as such pending substantial changes in market and commercial practice. Negotiability may only otherwise be conferred by statute. Legal tender status and the ability of digital currencies to discharge debts may also only be secured through legislative revision and extension.

F. Stability, Scarcity, and Integrity

Stability can be understood in terms of permanence, scarcity, and integrity. Property must have a degree of relative permanence to make it a holdable asset. It must be separable but also lasting in some manner and not constitute a fiction, sham, or abuse of any form. It should have a corresponding degree of certainty. This does not have to be permanent, provided that the asset has a useable lifespan of some form. Scarcity arises in the form of production limits, which support both separability and stability. The usability or integrity of the asset is also confirmed if it is rivalrous but capable of controlled reuse without limiting its value. The effect of all of this is to create a new data asset and data value.

G. Singularity, Exclusivity, and Protectability

Exclusivity can be considered in terms of singularity and protectability. The party entitled to the asset must be able to exclude third-party consumption and exhaustion and to protect the asset. Exclusivity preserves the rights of the owner or possessor. This ensures the rivalrous nature of the asset. The owner must also be able to prevent interference or removal or be compensated for loss or other unjust enrichment through appropriate legal remedies. This would include recoverability of the asset in the event of loss, as necessary.

H. Supremacy, Sovereignty, and Control

Control can be referred to in terms of supremacy or sovereignty. The owner or holder must be able to exercise all the assigned title rights attached to property, other than those separately granted to another party. These specifically include the right to hold, encumber, bequest (by will or trust), transfer (by gift or sale), and cancel or destroy. Ownership can be understood in terms of the aggregation or amalgamation of these rights. Possession can be restricted to refer to the direct physical holding of the asset or possibly extended to include direct or indirect constructive control, although this may again require a degree of physical attachment under English law pending further law reform.

I. Digital Ledgers

Digital ledgers are distinct from more traditional forms of register or record in that legal title can only be held and transferred on the ledger itself. This is distinct from other forms of title transfer, including sale contracts and missives or dispositions of title to land where title is generally transferred under contract and subsequently recorded on the register for evidential purposes. The registered title may then replace the contractual title where this is separately provided for, such as in relation to land registers. Digital title will generally only be capable of being held and transferred on the new blockchain or DLT concerned.

Difficulties may remain where it is unclear whether digital ledger title rights replace underlying contractual entitlements for all purposes and when finality and indefeasibility takes place. This may, for example, be relevant where issues arise regarding transaction mistakes, misrepresentations, or fraud. Also, this may raise arguments of substitution and replacement regarding the use of the original asset. It would be desirable to expressly deal with this under the terms of any new title ledger established, although this may not occur in practice, especially where the ledger is intended to replace other register systems through the use of code alone. Forms of correction transfer or other restitution-based remedies may become relevant in practice. Difficult issues may remain to be resolved in this area.

J. Digital Money and Legal Tender

A number of conflicting positions have arisen regarding the nature of digital currencies in law. The varied treatment of digital currency in terms of money reflects the diffuse uses of the terms digital and money, both of which can be considered to constitute contestable ideas and, more specifically, essentially contestable concepts. In legal terms, money can principally be considered in terms of party intent in the particular circumstances, which includes individual private party and Parliamentary or legislative intention.

Digital currency is generally not considered to constitute money at this time. Commentators generally refer to the limitations that arise in using digital currencies for the purposes of exchange, store of value, and unit of account. This reflects a re-application of an economic or functional theory of money. In legal terms, the meaning of money can be considered to be dependent on party or legislative intent, with the default position being to equate money with legal tender. Money can be defined as an asset denominated in the form of an official monetary value issued by or under the authority of the state. This would include coins issued by a royal mint or finance ministry, banknotes produced by a central bank (as an agent for the state), as well as regulated commercial bank account balances and other forms of recognised electronic value.

For the purposes of this paper, a denomination theory has been adopted with private digital currencies not constituting money or national currency to the extent that they are not designated in the form of an official reference asset or issued by or under the authority of the state. Sovereign digital coins issued by a government or central bank (Central Bank Digital Currency (CBDC)) on behalf of a national government or state would arguably constitute money with or without a corresponding extension of legal tender status. This would also apply to commercial bank or other private operator digital coins, provided that these were issued with the direction and consent of the state. Stablecoins would not constitute money unless again issued by or under the authority of the state.

K. Digital Remedies

Specific difficulties arise with digital assets in relation to remedies and recovery. This is a complex area of English law that has evolved over time, with many distinct issues arising in contract, tort, and property law, depending on the particular facts and circumstances. Initially, a core distinction has to be drawn between the classification of the remedies available to protect rights and the underlying rights themselves or causes of action and liability. A further division can then be drawn between property or proprietary remedies and personal or non-proprietary rights of action, with some of these being performance, rather than payment, related. Remedies may be referred to as being common law or equity based, possessory or non-possessory, and coercive or non-coercive, as well as monetary or non-monetary in nature. Separate remedial actions may be exercised on an extra-judicial (or self-help) basis without court sanction, while others require judicial authority or direction. A further range of final enforcement or executionary remedies are also available.

English law does not have a general remedy equivalent to Roman vindicatio that protects ownership rather than possession. No pure proprietary action is available. Separate real and personal common law and equitable proprietary remedies can still be pursued. In rem actions are available through following and tracing. Common law personal proprietary remedies may be exercisable, although these provide limited protection in relation to intangible property, which would include digital coins and cryptoassets. Personal common law claims include trespass and conversion with negligence, possible reversionary injury, and formerly detinue (wrongful detention), which was abolished under the Torts (Interference with Goods) Act 1977. Equitable proprietary actions principally consist of constructive trusts or equitable torts in the form of knowing receipt and dishonest assistance.

Possessory torts may be used to protect corporeal property that is capable of physical possession with an action based on interference with physical possession. Trespass involves interference with the physical possession of goods without consent. Conversion involves interference with the physical goods themselves, which prevents their possession or use by another. Possessory remedies, such as trespass or conversion, are not available in relation to intangible digital currencies or assets, with reversionary injury being similarly restricted in scope. Money may not be recovered through conversion. Conversion may be available where something physical was involved, such as a computer or server, which may include the physical record of an encryption key. An action may be available for knowing receipt or dishonest assistance. A constructive or resulting trust may be created with a possible lien in equity. Constructive trusts provide an equitable remedy where it would be unconscionable for the party to retain the property and a resulting trust where the intention of the parties has not been carried out. Stolen property may be held subject to a constructive trust, while a resulting trust may arise from fraud.

An action may lie in restitution for money had and received, which includes incorporeal money. This may also include money paid for the plaintiff’s use, quantum meruit, and quantum valebat. Common law claims for restitution against banks may fail where the funds are mixed or the bank is a bona fide purchaser for value. A claimant may apply to the court for a declaration of superior title, which would create a proprietary remedy. An equitable proprietary claim or personal action may be available for knowing receipt or inconsistent dealing.

Tracing remedies may be available where the holder of a digital currency suffered a loss in which the interest was considered to be proprietary and property was involved. It is, nevertheless, unclear whether digital currencies would be followed rather than traced. Specific difficulties arise in relation to digital currencies where coins are intentionally mixed for criminal, commercial, or technological purposes. Coins may be processed through multiple keys to hide their source. Mixer services (or coin laundries) may be used, which collect payments using a specific public key but distribute outgoing payments from a separate key, breaking any transactional connection chain. Data transaction chains can be broken through splitting, peeling, and mixing, or transfers can be conducted off-chain, which makes it impossible to identify the origin of the funds. Programmers can use other tools to attempt to respond to these identification problems, including through a punitive “poison” or proportionate (haircut) and allocative “first in first out” approaches.

The law of remedies with regard to intangible property is arguably already confused and inadequate. Even more difficulties will then arise in the digital area. Some form of codification and restatement of relevant remedies may be necessary, which could be considered as part of a larger digital law reform programme, including relevant private international law measures, which are considered next.

L. Digital Location and International Private Law

Digital assets come with their own residual issue for private international law purposes. The purpose of international private law is to determine the most appropriate law applicable to the dispute, paying regard to all relevant circumstances but without adopting any formalistic approach. Specific issues arise in determining the most appropriate jurisdiction, the choice of law to govern the dispute, and the enforcement and execution of judgements following court action or arbitral award. Jurisdiction is concerned with determining the most appropriate court to consider the dispute. Choice of law identifies the most appropriate law or laws to apply to resolve the dispute. Enforcement involves domestic or cross-border execution of court or arbitral rulings.

Jurisdiction was originally dealt with under common law rules, which were subsequently supplanted by the Brussels Convention, as implemented in the United Kingdom under the Civil Jurisdiction and Judgements Act 1982 and then by the 2012 Recast Brussels II Regulation, which had direct effect in the United Kingdom and did not require separate national implementing measures. Since it came into effect on March 1, 2002, Brussels II has applied with regard to civil and commercial matters, including status and legal capacity, matrimonial relations, wills and succession, bankruptcy, social security, and arbitration and excluding revenue, customs, or advantage of matters. This covered transfers of rights of causes of action, debts and rights under contract, securities, intellectual property rights, and leases.

Choice of law, or lex causae, is considered in terms of the relevant issues, most appropriate connecting factor, and legal application. Lex causae deals with such matters as the nature of the asset, legal capacity of the parties, transferability, conditions for transfer, and priority. English international private law contains separate sets of provisions governing contractual and non-contractual obligations (tort, restitution, and equitable remedies), family law, property, and succession.

Difficulties arise in determining the governing law in relation to intangible property. The location of intangible property, for conflict purposes, is generally considered in terms of where the asset is recoverable or may be enforced, such as in the country or residence of a debtor. Determining the governing law for assignments of choses in action within the EU is dealt with under Articles 14(1) and (2) of the 2008 Rome I Regulation, in respect of transfers carried out after December 17, 2009. Article 14(1) is concerned with the relations between the transferor and transferee and applies the law of contract of assignment, while Article 14(2) is concerned with the nature of the asset at issue and applies the law of the asset. Under the terms of the Rome I Regulations, a number of choses are, nevertheless, excluded, and separate rules apply.

The choice of law selection for registered shares will generally be determined by the lex situs and location of the register and law of incorporation, while bonds and debt securities are subject to contract rules. Dematerialised securities can be dealt with on a Place of the Relevant Intermediary Approach (PRIMA) basis, which applies the law of the intermediary or the place intended or agreed by the parties, which can be referred to as PRIMA plus (or “PRIMA+”). English courts have generally refused to consider issues with regard to foreign land, leases, and intellectual property rights, although actions concerning infringement rather than the validity of intellectual property rights may be considered. Negotiable instruments are dealt with under Section 72 of the Bills of Exchange Act 1882. Trusts are considered under a separate convention and implementing legislation.

Separate difficulties arise with regard to applying more traditional international private law rules to new forms of digital assets due to the absence of any physical location, identification, or material connection. It may be impossible to determine the location of a digital asset at any particular point in time or the place of the source or receipt of a transfer. These difficulties might be dealt with by reapplying the PRIMA plus and PRIMA principles by using a wider range of options or the “waterfall” approach. This might, for example, include reapplying existing party consent (PRIMA+) or the location of the intermediary (PRIMA), where this is clear. In other cases, regulatory authorities may be given power to allocate or determine the governing law for particular types of products or asset classes (which could be referred to as “PRIMA minus” (or “PRIMA-”)). Other sequential options could include the place of the “operating authority” of the ledger, where this is known (which could be referred to as “PROMA”), or the “administrator” (which would be referred to as “PRAMA”). The default position may then be to equate the location of the asset with the owner or possessor, which would, in practice, be the holder of the private encryption key necessary to locate or transfer the item (creating “PREMA” for encryption). Additional measures could be adopted for use with multi-signature systems, and traditional rules could be applied with regard to agent-principal and employee-employer relations with any necessary adjustment.

Attributing location of digital assets to the domicile of the controlling party reflects the idea of constructive digital possession and creates a parallel doctrine of constructive digital location. This would apply an encryption key, or PREMA test, as the default option model, based on private cryptographic key location. A corresponding set of waterfall options can be designed in respect of jurisdiction selection. The application of such a series of measures in respect of governing law and jurisdiction could assist in cases where no selection has been made by the coders, programmers, or other parties involved either deliberately or accidentally. There should also always be some possibility of judicial oversight and final judicial determination.

All of this, including the waterfall, default PREMA position, and the parallel doctrines of constructive digital location and possession, could be set out in a digitally targeted legislative reform programme. This could also include a clarified set of definitions, particularly of digital information and digital data, as well as a reformulated set of digital property conditions and associated rights, as outlined in this paper.

VI. Digital Property Close

Fundamental difficulties remain in determining the nature of new digital currencies and assets based on cryptography and blockchain or distributed ledger technology. Property law is a form of default law, which defines and determines relevant rights and remedies. The nature of modern property and commercial assets has changed substantially, while legal categories and classifications have remained, to a large extent, based on their feudal and mercantile origins. Gaius and Justinian classified private law in terms of persons, things, and actions, with things consisting of all forms of corporeal and incorporeal property. This classification has to be updated to include all new forms of code creating digital assets.

Specific difficulties remain with regard to English law and its binary classification of personal property into choses in possession and choses in action. This is arguably juridically and pedagogically inadequate, to the extent that it is essentially dependent upon an outdated classification of property, actions, and remedies. A new, wider category of personal moveable intangible property should be recognised under English law and other laws that can include such valuable new commercial assets as digital coins and dematerialised securities, as well as intellectual property rights and leases separate from pure claims in action. The effect of this is not to create a third category of property law, but rather to recognise the extensions that have occurred over time, with a clearer set of sub-divisions being applied as necessary.

The impact of modern technology has been to stretch the limits of legal recognition of property in terms of its underlying digital information and digital data base. While information and data do not constitute property as such, they can be used to create new forms of code generating ideational constructs to which a full set of title rights can be attached. Code cannot replace law outright, despite technological pretensions to the contrary, although code can create fully recognisable and enforceable legal rights and property in law. The new world will not be created by code rather than law. The future is both law and code.