Property (Digital Assets etc) Bill [HL]

Lord Holmes of Richmond Excerpts

Report stage
Wednesday 30th April 2025 Lords Chamber

Moved by

[Lord Holmes of Richmond]

1: Clause 1, page 1, line 5, leave out “a thing in” and insert “capable of”
Member's explanatory statement
This amendment, connected to another in the name of Lord Holmes of Richmond, seeks to provide a statutory basis for recognising digital assets as property, while removing any presumption that these assets cannot be accommodated by the existing two categories of personal property rights.

[Lord Holmes of Richmond (Con)]

My Lords, in moving Amendment 1, in my name, I will speak to Amendments 2 and 3 in this group.

It is a pleasure to open Report of the Property (Digital Assets etc) Bill. In doing so, I declare my technology interests as set out in the register, not least as adviser to Ecospend and Members Capital Management. I take a brief moment to thank all of those who have got the Bill to this stage, including Professor Green and her team at the Law Commission, everyone who was involved with our Special Public Bill Committee—particularly the clerk, Matthew Burton, and all his staff—and all colleagues who have shown an interest in and engaged with the Bill.

There is an extraordinary opportunity when it comes to digital assets and delivering clarity, consistency and certainty around their property classification. By 2030, it is estimated that somewhere between 10% and 14% of GDP will come from digital assets. To put it another way, transactions in 2030 involving digital assets will range between £10 trillion and £24 trillion. That is a huge opportunity for the planet and for the UK, not least because of our excellence in financial services and in fintech—financial technology—but, crucially, because of the great good fortune of English common law.

What we see with the Bill is the leading-edge deployment of that great tradition in the most modern of contexts. To take just one example, if we get effective dematerialisation of the capital markets, that will save £20 billion year-on-year in reduced costs and speeded up transactions. Clarification of digital assets will not only help capital markets but will assist with financial inclusion and financial market infrastructure transformation, impacting positively on our economy and, through that, our society. We should note that the world is watching as we pass this Bill—following, as it does, a suite of Bills from the Law Commission, not least the recent Electronic Trade Documents Bill, now Act.

This is a very good Bill, which does a very simple task of enabling a third category of property: taking a “thing in possession” and a “thing in action” and enabling a potential third category to accommodate digital assets which do not neatly fit within either of those current property classes. It is a good Bill, and it has been through an excellent Committee and Special Public Bill Committee procedure, but I believe it is worthy of stress-test through these amendments this evening.

Amendments 1 and 2 go to the very heart of the Bill and propose that the presumption that digital assets cannot be fitted within the existing two categories of property be reversed. Consider something such as an NFT, a non-fungible token. To put it in simpler terms, it is largely a piece of electronic software on the hardware of a digital ledger. It has an existence beyond its legal form, but it is difficult to possess in the way you would possess, for example, a bag of gold. In that sense, the Bill is structured to enable this third category. The amendment seeks to stress-test that and reverse that presumption, as we have seen in some of the recent judgments in Australia and Singapore.

I am not suggesting that this amendment is the right amendment; it is merely put to stress-test how the Bill is set out. It seeks to stress-test the claim made by Professor Green, when she gave evidence to our Special Public Bill Committee, that this amendment would take the bite out of the Bill. If indeed it would take the bite out of the Bill, then it would not satisfy my three Cs test of what the Bill needs to achieve if we are to realise the opportunities and the economic benefits from digital assets. Those three tests are: clarity, certainty and consistency.

Amendment 3 seeks to assist with this by suggesting codes of practice that could be brought to bear to assist the courts when they come to consider issues around digital assets. With that, I beg to move Amendment 1.

[Lord Clement-Jones (LD)]

My Lords, I am a great admirer of the noble Lord, Lord Holmes, and his passion for all things digital. But this is a good yet very modest Bill, and I not sure that we need stress-testing at this point in the proceedings. Through the Special Public Bill process that we have all been through over the last few months, we have kicked the tyres pretty hard already on this. We have taken evidence and had amendments in Committee, so I will be extremely brief and perhaps disappoint the noble Lord by not being in favour of any of his amendments.

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[Lord Holmes of Richmond (Con)]

My Lords, I thank all noble Lords who participated in this short debate. I say particularly to my friend, the noble Lord, Lord Clement-Jones: disappointing? Never. The whole purpose of tabling these amendments has been set out eloquently through the debate and what I was seeking to achieve was to have those arguments on the Floor of your Lordships’ House. I am delighted that that is exactly what has occurred, so I am more than happy—not disappointed at all—to withdraw the amendment.

Amendment 1 withdrawn.

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Moved by

[Lord Holmes of Richmond]

4: After Clause 1, insert the following new Clause—
“Review: impact of digital assets being treated as property by virtue of this Act(1) On the day on which this Act is passed, the Secretary of State must publish an economic impact assessment of digital assets being treated as property by virtue of this Act.(2) The impact assessment under subsection (1) must include, but is not limited to—(a) the estimated change in demand for, and use of, digital assets and the impact of this on data centre power usage, and(b) the current level of data centre provision and its ability to meet any increase in demand for digital assets.”

[Lord Holmes of Richmond (Con)]

My Lords, in moving Amendment 4 I will speak also to Amendment 5 in my name. I will be very brief with these because I accept that they go some way beyond the central thrust of the Bill.

My main reason for bringing these amendments back on Report is to make the point, and have it on the record, about the impact of data centres and the fact that they are in many ways the foundries, the furnaces, that are fuelling this fourth industrial revolution, not least when it comes to digital assets but also, of course, when it comes to AI and other new technologies. So it is imperative to think on the implications of, I hope, a massively expanding digital assets ecosystem and economy in this country, and the underlying policy implications for many other government departments.

I also brought the amendment back because, having been told that data centres were not an issue to be brought in the Data (Use and Access) Bill, I thought, well, if not the Data (Use and Access) Bill, why not the Property (Digital Assets etc) Bill? They will continue to be an area of contention rather than consensus, of potential negativity rather than positivity, if all government departments relevant to the issue do not come together and decide what the UK’s data centre strategy is, not least in terms of the provision of that resource for digital assets. If the Government get that right, it should be a purely positive path, but looking at issues around PUE and the siting and fuelling of these data centres is critical.

In brief, Amendment 5 seeks to make it clear that no further regulations will be required in relation to digital assets, stablecoins and other tokenised forms as a consequence of the Bill passing. I beg to move.

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[Lord Ponsonby of Shulbrede (Lab)]

My Lords, at the outset, I acknowledge the long-standing advocacy for technological innovation of the noble Lord, Lord Holmes. I also pay tribute to his deep commitment to ensuring that our regulatory framework is fit for purpose in an increasingly digital world.

These amendments would mandate reviews of the impact of digital assets being treated as property by virtue of the Bill’s provisions. One amendment requires the Government to publish an economic impact assessment of the Bill on the day the Act is passed. As noble Lords will know, the Government published an impact assessment when introducing the Bill. I hope it will assist and reassure noble Lords if I highlight some of the most salient points.

As the impact assessment sets out, the Bill is expected to bring clarity to personal property law, reduce uncertainty for businesses and ensure England, Wales and Northern Ireland remain leading locations in which to innovate. Due to limited data, it is very hard, if not impossible, to quantify these benefits. However, we think the Bill will help ensure our laws remain competitive on an international stage.

The impact assessment considered the potential for the Bill to encourage the use of digital assets. However, this impact is highly debateable, given the Bill merely confirms the position that has been gradually emerging through case law in recent years. It is not expected or intended that the Bill will cause a significant increase in uptake of digital assets.

The same amendment calls for the impact assessment to cover the estimated change in demand for, and use of, digital assets. The assessment would also have to cover data centre power usage, the current level of data centre power provision and its ability to meet any increase in demand for digital assets. This follows on from the points the noble Lord, Lord Holmes, made in Committee. He mentioned that he would like to hear that the Government are committed to data centres being fuelled through renewable energy and a discussion around where data centres would be located, given the value they can bring to the country. Although these are important points, they sit outside the remit of the Bill.

I say to my noble friend Lord Stansgate that whether a data centre is in space or not is also outside the relevant part of the Bill.

Furthermore, it would likely be impossible to accurately estimate the long-term effect of the Bill on data centres. There are many greater influences on these areas, such as cloud computing, AI and general data storage. This will make it extremely difficult to assess the impact of the Bill. Therefore, such a review could result in speculative or misleading conclusions.

The other amendment calls for reviewing the

“need for further regulation of stablecoins and tokenised deposits”

within six months of the Act passing. Here, I reiterate that the Bill does not specify how the courts will treat these particular digital assets. If they were considered personal property under the Bill, this would not affect the need—or not—for regulation. The Bill deals only with a discrete matter of private law. Therefore, the proposed review is unlikely to yield any meaningful conclusions.

Moreover, issues around regulating stablecoins and tokenised deposits are already being addressed. The Government’s forthcoming financial services regulatory regime of crypto assets will include a new regulated activity for stablecoin issuance in the UK. Overseas-issued stablecoin will be regulated in the UK in line with other crypto assets. This will ensure that the Financial Conduct Authority can properly manage stablecoin-specific risks.

In addition, the Prudential Regulation Authority has published its views on the risks associated with tokenised deposits and how it expects banks to address those risks. Where tokenisation does not change the underlying economics and fundamental nature of a depositor’s claim, the PRA’s prudential regulatory framework will treat a tokenised deposit similarly to a traditional deposit. Where banks intend to take tokenised deposits from retail customers, the PRA expects this to be done in a way that meets the PRA’s rules for eligibility for depositor protection under the Financial Services Compensation Scheme.

The Bill takes a minimalist approach to achieve the specific aim of unblocking the common law on personal property. While I am very pleased that I have had the opportunity to debate these amendments, the Government fear that they could cause unnecessary bureaucracy and regulatory duplication, which could increase uncertainty rather than alleviate it.

As set out already, we think there are significant benefits of the Bill, such as bringing clarity to English, Welsh and Northern Irish law and keeping it world leading. We will, of course, monitor those benefits closely in the future. Given that, I ask the noble Lord to withdraw his amendment.

[Lord Holmes of Richmond (Con)]

My Lords, I thank all noble Lords who have contributed to this brief debate and say, again, “Job done: mission accomplished”, on the record, I beg leave to withdraw the amendment.

Amendment 4 withdrawn.

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Moved by

[Lord Holmes of Richmond]

6: Title, line 1, leave out “capable of” and insert “not prevented from”
Member's explanatory statement
This amendment seeks to restate the long title more clearly, so that it is consistent with the operative Clause of the Bill.

[Lord Holmes of Richmond (Con)]

My Lords, in moving my Amendment 6, I thank the noble Lord, Lord Anderson of Ipswich, and, indeed, the Minister, for adding their names to it. I also take the opportunity again to thank the noble Lord, Lord Anderson of Ipswich, for the excellent job he did in chairing, steering and keeping us focused through our Special Public Bill Committee procedure.

Amendment 6 is incredibly simple and straightforward: it takes the Long Title of the Bill and makes a change so that it fits perfectly with the operative clause within the Bill. As noble Lords will be aware, the Long Title has no operative impact. So, why go to the trouble of making the change? Firstly, for issues of clarity, consistency and certainty—to tidy up the Bill at this stage. But, far more importantly than that, because, as mentioned in earlier groups, the world is watching when we pass this legislation, and the signal that the Bill sends out is critically important. That signal—the signposting—means that, if anyone, anywhere on the planet, merely reads only the Long Title, they will get from that the purpose of the Bill, what it is all about and how it is going about it. It is a simple, straightforward amendment, which I am delighted the Minister has put his name to.

Lastly, as these are almost the last words I will say on the Bill, I will say just two things. We hear very often in these parts about a black hole measured in various billions. What about the opportunities enabled through the Bill for a goldmine? A digital, virtual, intangible goldmine, yes, but a potential digital assets goldmine measured in the trillions. The Property (Digital Assets etc) Bill is future facing, future-proofing, growth enabling ground-breaking and good for innovation, investment, citizen, consumer and the country. I beg to move.

Property (Digital Assets etc) Bill

Lord Holmes of Richmond Excerpts

Second reading committee
Wednesday 6th November 2024 Grand Committee

[Lord Holmes of Richmond (Con)]

My Lords, it is a pleasure to take part in this Second Reading Committee on the digital assets Bill, and to follow the Minister. I congratulate him on his erudite and excellent introduction. I declare my technology interests as set out in the register, not least as an adviser to Lombard Electronic Market Infrastructure and to MCM Ltd. I shall set out a bit of history around the technology that underpins the Bill and the opportunities for the UK, say some words on the Bill itself and then ask some questions of the Minister. Before all that, I put on record my thanks to the Law Commission, particularly Professor Green, for her work and the work of her team in bringing this Bill to your Lordships’ House for our consideration.

Turning to the technology, we can all be forgiven for believing that artificial intelligence, not least gen AI, is the only technology show in town. It certainly has enough column inches to keep feeding itself until the end of time. But there are other technologies that we should consider when we look at the social, economic and democratic opportunities for the UK. Chief among them is blockchain or distributed ledger technology, which I believe could be a far more profound driver and enabler of value than even some of the greatest claims about artificial intelligence. That is why I have been interested in blockchain for decades and wrote a report on the subject in 2017, Distributed Ledger Technologies for Public Good: Leadership, Collaboration and Innovation. I believe that leadership, collaboration and innovation remain three wise watchwords for our approach to this Bill.

I shall give an example of the transformative powers of this technology, which was in my 2017 report. Currently, 25,000 doctor days are used up in the NHS on proof of credentials. Of course they are important—you want to know that the person operating on you is who they say they are and has the experience and the credentials to do so—but with a relatively simple DLT solution, those 25,000 doctor days could be converted into 25,000 doctor days of care.

Crucially, when we consider these technologies, we need to put the human right at their heart. They are extraordinarily powerful, but they are technologies in our human hands: we decide, we determine and we choose how to develop and deploy. It is down to us.

On the opportunities of digital assets, I could cite any statistic from one of the four consultancy firms. I am not going to, but take this: by 2030, the majority of value exchange will take place under or using digital assets. By 2030, tokenisation of real-world assets will be in excess of $10 trillion. This technology came into being only in 2017 and is still highly nascent—my noble friends may be aware of non-fungible tokens or stablecoins, which are the two obvious examples—but we are talking about more than $10 trillion by the end of this decade.

The opportunities for the planet are extraordinary. The opportunities for the UK are immense, not least because of our financial services ecosystem, our fantastic higher education, our start-up and technology communities, and the greatest gift of all: English common law. Some £250 billion of M&A activity takes place around the globe and 40% of commercial arbitration is done under English common law. We have a unique opportunity in this country: as individuals, to assist with financial inclusion, through to financial market transformation, the dematerialisation of capital markets, and a transformation of our economy and society for the benefit of all, if we get it right—all potential, none of it inevitable.

I will quickly list some use cases. The Electronic Trade Documents Act that we passed last year, which also came from Professor Green’s team at the Law Commission, is an excellent example of a short Bill with a significant impact: enabling efficiency in international trade, driving economic and environmental benefits, and collapsing the time it takes to perfect trade, potentially from 10 to 14 days to a matter of moments.

With regard to individuals and the housing crisis we have in this country right now, what about looking at fractionalised models for home ownership so that our young people in particular can get a grip on and a piece of the housing market? There are extraordinary opportunities through all the social and economic challenges that we currently face. For our global workforce in the UK, there is transforming overseas payments, taking friction and cost out, so that they can send that money back to their families around the world. On the environmental challenge, we should all be highly cognisant of the environmental impact of blockchain and AI, not just in development but in each and every query and interaction. But none of that is inevitable. We can choose, we can determine, and we can say that all digital assets have to be driven by and generated through renewable sources. All this is in our power. If we get this right, to quote a phrase, digital assets could be a key enabler of “growth, growth, growth”.

I turn to the Bill itself. What do we need to consider? What do we currently not have when it comes to the law of property in England and Wales? The question must revolve around clarity, certainty, consistency and coherence. We have already seen the role the EU has played with MiCA and its definition of crypto assets, in a prescriptive code, and how that is currently evolving. Perhaps more pertinent to the UK are the examples in the UAE—Dubai—and Saudi and, indeed, the approach of the Hong Kong Monetary Authority. This is a global game, and the UK needs to decide what role we want to play within it.

The Bill is short in nature but could be extraordinarily significant in impact. At the heart of it is that question set out by the Minister: are the current classifications and categorisations of property in this country, developed over centuries, insufficient to cover digital assets? It is a significant question, because set out in the Bill is a suggestion that a third category of property right should be developed as a consequence, if we pass the Bill as drafted. There are so many elements at play internationally but, looking at home, is there a case to consider that the courts have in some ways overtaken the Law Commission and, indeed, the parliamentary process? I am thinking not least of recent High Court decisions.

When it comes to Committee, I believe that we will need to go into a series of issues in significant detail, and this brings me to the questions for the Minister. First, and most important, are the Government sure that the current categorisation of property into things in possession and things in action is not exhaustive and not able to accommodate digital assets? If not, is the development of a third category desirable in English common law? If we take that path, what are the implications for the courts? Will it become inevitable that the courts follow the parliamentary steer and think, “Well, there must be a need to develop this jurisprudence as a result of the activities of Parliament in passing the Bill”?

Similarly, what will it mean internationally for our common-law community, in which we are such a key player? One of the strengths of common law is consistency in whichever jurisdiction one finds oneself. To that extent, can the Minister say what the Government’s position is on the impact of the Bill on other common-law jurisdictions, which have already determined that digital assets can be classified as things in action? I am thinking not least of Singapore and New Zealand, and the relevant cases well passed at precedent level in those jurisdictions. Perhaps closer to home, we should strongly consider the situation in Scotland, as its law on incorporeal movable property seems highly capable of taking digital assets into account.

Noble Lords will have an extraordinarily interesting and detailed exposition of all these matters in Committee. The Bill may seem small, but it is incredibly significant, and we need to consider whether the existing two-state classification of property law is in fact sufficient for the task in hand, and if not, what case law and evidence we are bringing to bear. For example, do we find the 2012 High Court decision in Armstrong compelling in this respect or not?

Ultimately, this is not about the law—the statute itself. It is about what we do in this place and in courts up and down the land as a consequence of this statute, and what that means for individuals, businesses, our economy, our society and our very democracy. I believe that, if we get this right, there will be an extraordinary, almost limitless, unique opportunity for the UK to drive benefits for citizen and state alike to pass a Bill which drives economic and social benefits, which shows Parliament playing her role in this digital future, enabling the courts to play their role in interpretation and development, and reaching out to our common-law communities right around the world. That will be a fine digital assets Bill.