The legal status of crypto assets and smart contracts under English and Welsh law has been clarified by a recent statement by the Chancellor of the England and Wales High Court, which has recognised crypto assets as ‘tradeable property’.
The statement given is expected to provide a solid foundation for the mainstream acceptance of crypto assets and smart contracts within the U.K., which could potentially give a boost to companies working in the crypto industry. It will also have implications across a variety of legal areas such as succession, the vesting of property on bankruptcy, the rights of liquidators in corporate insolvency as well as fraud, theft and breach of trust cases.
The fact that crypto assets are thought of as legal property has been widely anticipated in the financial services sector, despite previous case law deeming that information cannot be property. Crypto assets are effectively digital files, which had raised questions among academic lawyers about their true status, and the perceived legal uncertainty of them has led to some lack of confidence in the asset.
The statement does though set limits on crypto assets and recognised that they are virtual assets and so cannot be physically owned in the conventional sense. With this in mind, it will be important to establish ownership and so whoever has lawfully acquired knowledge and control of the corresponding private key to the crypto assets would be treated as the owner of them. The statement went on to say that private cryptographic keys can act as signatures to transactions in which crypto assets are transferred, and such a key can also be used as a valid signature to electronic documents generally. This could prove to be important going forward and have implications for the reliance on “wet ink” signatures in the future.
It is not the end of the matter though as the Law Commission will need to consider whether any legislation is needed to reflect the statement but users of crypto assets can perhaps be entitled to assume that they will be treated in line with the principles set out in the statement, at least under English and Welsh law.
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