The concept of property rights is that they grant a person the rights they need to exercise control over objects that are usually, but not always, in their possession. However, as Lord Ainsworth puts it, it is only at the point that such object is “definable, identifiable, capable in its nature of assumption by third parties and…(has) some degree of permanence or stability” that such object may attract the accompanying property rights.
Not only does English common law state what qualities objects must possess to enable them to attract property rights, but there are two categories of private property: real (interests in land) and personal.
Clearly, crypto-tokens are not, by their very nature, “real” property. However, given their emergence during a time of ever-increasing digitisation, now may be an appropriate time to recognise them as pieces of personal property.
Without embarking on a detailed technical analysis, it is important to understand that there have traditionally been two categories of personal property rights – choses in possession (things you can, as the name suggests, possess) and choses in action (things you can claim through legal action).
A recent Law Commission consultation paper, published in July 2022, suggests that digital assets such as crypto-tokens cannot be categorised as either of these things, as they are neither tangible things in the normal sense, nor are they only claimable or enforceable by legal action or proceedings. Yet it remains important to give such digital assets recognition in relation to property rights, as whilst they do not fit the traditional categories, they function much like objects, and so should have the associated rights.
They therefore propose that a third category of personal property is introduced, “data objects”, to encompass things that must:
- be composed on data represented in an electronic medium;
- exist independently of persons and of the legal system; and
- be rivalrous (i.e., if I have it, you can’t!).
Without the introduction of this category there is a risk that these assets, which are neither tangible nor can only be claimed through legal action, run the risk of falling through a gap in the law.
Recently, the English courts have recognised that fungible, non-identifiable, digital assets constitute property that is capable of being bought, sold and held on trust – but does this go far enough or do the deep-rooted principles of private personal property law need a re-invigoration to bring them in line with modern day attitudes?
The Law Commission consultation is currently open until 4 November 2022 and seeks views and feedback from legal experts, technologists and users. Following such feedback, one would envisage a (perhaps radical) shake up of the traditional common law foundations of property rights.
Traditionally assets are considered as either things in possession or things in action, but the Law Commission now proposes creating a third category of assets to capture digital assets.
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