In April 2021, the Law Commission published a call for evidence seeking views on existing practical issues arising from applying the law of England and Wales to digital assets, and how market practice attempts to resolve those issues.

The call for evidence asked respondents to consider potential implications of a reform to expand the concept of possession to (some) digital assets. The call for evidence noted that this would require a change to the law and could have significant practical consequences. The call for evidence also invited respondents to suggest comparator jurisdictions and to identify other areas of law that could be affected by law reform.

The purpose of the call for evidence was to gather evidence to inform the Commission’s proposals for law reform which it originally said it would put forward in a consultation paper on digital assets at the end of 2021. The Commission says that it expects to make proposals for law reform to make (some) digital assets possessable.

The interim update paper provides an update to the Commission’s work based on the responses received to the call for evidence and additional work it has completed.

On the definition of “digital asset”, the Commission says that it recognises that it is an extremely broad term that requires sub-division, and that digital assets are idiosyncratic, meaning that analogies with existing concepts of personal property may not apply. The consultation paper will address this.

Another area that needs further consideration is the ambiguity inherent in the legal categorisation of certain digital assets, i.e., things in action, things in possession, or whether there should be a third category of personal property that is neither a thing in action nor a thing in possession.

The Commission will also further consider the recognition and protection regime for digital assets, which will need to be different to the regimes applicable to things in possession or to things in action.

The Commission says that its timeline to publication of its digital assets consultation paper will be extended so that it can cover the issues outlined above in more detail. It now anticipates publishing the consultation in mid-2022.