English law makes crypto assets property and smart contracts binding
The UK has seen a landmark legal statement published which seeks to address uncertainty surrounding crypto assets and smart contracts, in a bid to position the country as a global fintech leader.
Under English and Welsh law, crypto assets will now be recognised as tradeable property, while smart contracts – contracts stored on the blockchain – will now become enforceable agreements, according to the statement published by the country’s Jurisdiction Taskforce (UKJT) of the Lawtech Delivery Panel.
The news follows other attempts by regulators to develop legislation around cryptocurrency. Swiss bank SEBA has now launched as “the first bank to focus on digital assets,” and the German bank association Bankenverband published its argument for a digital euro.
“This announcement is a prime example of why English law remains the preferred law of business around the world – used in over 40% of all global corporate arbitrations,” says financial industry lobby group TheCityUK’s MD Gary Campkin.
Barristers from Twenty Essex Lawrence Akka QC and Sam Goodman, as well as 3 Verulam Buildings’ David Quest QC and 4 Pump Court’s Matthew Lavy drafted the statement, which read cryptocurrencies “have all of the indicia of property” and “are therefore to be treated in principle as property”.
As for smart contracts, these are imbued with “contractual force” in the statement. Parties’ contractual obligations are now capable of being “defined by computer code” or in circumstances where “the code may merely implement an agreement whose meaning is to be found elsewhere”.
Tara Waters, partner at law firm Ashurst believes the statement “reiterates the need for a multi-faceted and fact-specific analysis”.
“By acknowledging that crypto assets should be treated in principle as property, it provides market participants with a legal baseline from which to conduct that analysis,” she continues, pointing out that further legal clarification on transferability and registration of ownership of crypto assets would be helpful too.
“This further analysis and guidance will certainly be helpful for legal practitioners, although other market participants are likely to still feel uncertainty as to how their proposed activities fit within the wider and complex legal and regulatory environment.”