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A research paper suggests it may not be legally possible to possess digital tokens in some jurisdictions, including England and Wales. by Deyana Laguna 3 min
England and Wales are among the jurisdictions “unlikely” to identify cryptocurrencies as legally enforceable property, according to a research paper published in the Journal of Law and Technology (JOLT) at the University of Richmond in the US.
As a result, although digital tokens are technically secured through blockchain technology, the level of legal protection is unclear.
Johan David Michels, one of the authors of the paper, explained in an article that in legal terms, there are two main types of properties — land or “real properties” and “personal property.
” The latter includes rights over “things in possession”— tangible items you can physically possess and transfer to another, and “things in action,” which include debts, rights under contract, and intellectual property.
“So what about digital tokens such as crypto-currencies? Tokens don’t physically exist.
They are entries on a virtual ledger. And case law in England and Wales has established that a thing which exists only in electronic form cannot be the subject of possession. So digital tokens aren’t things in possession,” Michels wrote.
He further noted that cryptocurrencies differ from “things in action” as “ a Bitcoin doesn’t give you a right to anything or against anyone.” Thus, although digital tokens are technically secured through blockchain technology, the level of legal protection is unclear.
Despite the current legal uncertainty with regard to cryptocurrency possession, the researchers do not dismiss cryptos as property.
They suggest that in the future, the law could extend property rights to digital tokens, for instance by recognizing a new category of virtual things in possession.
“Depending on their function, the tokens sold in some ICOs [initial coin offerings] may be deemed to be securities, in which case their promoters will need to comply with securities laws, including obligations to provide investors with appropriate information.
Whether the tokens issued under ICOs qualify as the legal property of their users is currently uncertain and will likely depend, to some extent, on the rights the token purchaser holds against the issuer. In England and Wales, a transferable token that gives the user a definable right against a specific issuer may qualify as a chose in action. Conversely, the property status of cryptocurrency tokens on open, distributed applications like Bitcoin is unclear,” the research paper concluded.
In October, China’s arbitrary court ruled that digital assets, specifically Bitcoin and several of its hard forks, are considered legal property by current local laws.
Russian and Israeli legal authorities have also defined cryptos as properties in recent months. However, the nascent nature of the virtual currencies market, as well as the lack of consensus on the associated legal issues, have prevented most jurisdictions from initiating similar moves. Reading now .
