There aren’t many single-clause laws in the UK that reshape the map of personal property, but the Royal Assent on December 2nd does just that.
After years of academic papers, Law Commission consultations, and scattered High Court judgments that sought to adapt old categories to modern assets, Parliament has finally said that digital and electronic assets can exist as their own form of personal property, not because they are shoehorned into something else, but because they function as objects in their own right.
This establishes a third category of personal property in English law, alongside ‘things in possession’ (physical goods) and ‘things in operation’ (claims to enforce in court). Tokens are not physical objects, nor are they contractual IOUs, so the cryptography can never be an exact match.
For years, lawyers and judges have improvised and extended principles developed for ships, bearer bonds, and warehouse receipts to handle assets locked with private keys. Still, the system now has a statutory anchor. According to the law, a digital object does not disqualify itself from being property just because it fails the tests in the other two categories.
This is important because English law still has great influence globally. Whether the company itself is based in Switzerland, Singapore or the US, corporate agreements, financial structures and custody arrangements are largely dependent on English law. When London clarifies property rights, the ripples spread far and wide.
And with the Bank of England conducting a live consultation on systemic stablecoins, the timing is all but certain that this legislation will become the cornerstone of the UK’s crypto market design for the next decade.
Prior to this, cryptocurrencies existed in a kind of doctrinal limbo. Courts have repeatedly treated tokens as property in practical situations, issuing freezing orders, issuing their own injunctions, and appointing receivers. Yet, they did it by treating cryptocurrencies as if they were one of the legacy categories.
It worked to some extent, but it was unsophisticated and had many hidden limitations. If an asset doesn’t clearly fit into a category, problems arise when pledging it as collateral, transferring it in bankruptcy, or arguing over ownership after a hack. The new law does not confer any special rights on cryptocurrencies or create a bespoke regulatory regime. This simply tells the court that cryptocurrencies and other digital assets may be sitting in a bucket that has always been missing.
How UK law previously treated cryptocurrencies and where the seams started to split
Britain has spent much of the past five years inching towards this moment through case law. The turning point was the Law Commission’s decision to treat virtual currencies as “data objects.” This is a concept intended to capture assets that exist through agreements rather than physical properties or contractual promises.
Judges began to refer to the idea and apply it on an ad hoc basis, but the lack of legal recognition made any new rulings feel temporary. Those trying to track down stolen Bitcoin or recover hacked stablecoins had to rely on courts’ willingness to extend old rules again.
This was especially troublesome for financing and storage. Lenders want to be clear that the borrower can give them title to the collateral and that interest survives bankruptcy.
In the case of cryptocurrencies, courts could only infer how it would work by relying on similarities with intangible choices that are actually being made. Insolvency practitioners faced similar gaps. If the exchange collapses, where is the interest in the customer’s “property”? Was it a contractual right? Trust claim? Something completely different?
The uncertainty made it difficult to determine whose assets were ring-fenced and whose assets were just unsecured claims in a long line.
The same tensions played out in the struggle for control. Who “owns” the token? Who holds the private key, who paid for it, or who has contractual rights through an exchange? Common law provided a path to an answer, but it was not definitive.
And with each new hybrid asset (NFTs, wrapped tokens, cross-chain claims) emerging, the boundaries of old categories seemed to begin to fray further.
The new law will not resolve all philosophical debates, but it will resolve most of the procedural bottlenecks. By recognizing a separate class of digital property, Congress will make it easier for courts to apply appropriate remedies to appropriate problems. Ownership is not about forcing analogies, but rather interpreting the assets as they exist on-chain.
Control becomes less a negotiation over metaphors and more a factual question of who can move assets. The path to classifying a token as bankrupt will then become more predictable and will directly impact those holding coins on UK-regulated exchanges.
For British nationals who hold Bitcoin or Ethereum, that change is most evident when things go wrong. If a coin is stolen, courts will have a clear legal basis to treat it as proprietary property, making the process of tracking, freezing, and recovering it smoother.
Even if an exchange fails, it will be easier to assess the status of your holdings. Also, when cryptocurrencies are used as collateral, whether for institutional loans or future consumer financial products, security arrangements have a stronger legal basis.
What this actually gives the public, investors and courts
English law drives practical legal outcomes through categories. By giving cryptocurrencies their own cryptocurrencies, Congress is solving coordination problems between courts, regulators, creditors, custodians, and users.
The UK has been proactive in freezing stolen cryptocurrencies and appointing receivers to recover them. Although courts had recognized these powers for years, each decision required new justification. This law now removes the doctrinal tension. In other words, cryptocurrencies are property, and property can be frozen, tracked, transferred, and recovered.
There will be far less interpretive gymnastics and fewer cracks for defendants to exploit. It should result in smoother processes, faster interim relief, and a stronger foundation for cross-border cooperation for both retailers and institutions affected by hacking.
If a UK exchange or custodian goes bankrupt, administrators will need to decide whether client assets should remain in a trust or become part of the general estate. In the old framework, this required piecing together a patchwork of contractual terms, implied rights, and similarities to traditional custody arrangements.
The new categories create an easier path to treating user assets as separate assets, supporting stronger segregation and reducing the risk of customers becoming unsecured creditors. It doesn’t guarantee a perfect result, as poorly crafted terminology can cause headaches, but it can give the judge a clearer map.
Collateral is where the long-term benefits are greatest.
Banks, funds and prime brokers want legal certainty when using digital assets as collateral. Without it, the treatment of regulatory capital will be opaque, the enforceability of security interests will be questionable, and cross-border arrangements will be complicated.
The new category strengthens the basis for digital assets to serve as eligible collateral in structured finance and secured loans. It won’t rewrite banking regulation overnight, but it will remove one of its biggest conceptual blocks.
Custody arrangements also have their benefits. When a custodian holds tokens on behalf of a client, the exact nature of the client’s ownership is important for redemption, staking, rehypothecation, and recovery after a failure.
Under the new framework, customer claims over digital assets will be able to be classified as direct property rights without being forced into contractual square holes. This clarity helps administrators create better terms, increases transparency for consumers, and narrows the likelihood of litigation following a platform failure.
There is also the question of how this will interact with the Bank of England’s structured stablecoin regime, which is currently being negotiated. In a world where stablecoins are redeemable at face value, operate within payment systems, and face bank-like oversight, we need a clean underlying property law framework.
If the BoE wants its systemic stablecoin issuers to meet prudential standards, ensure segregation, and create clear redemption rights, courts will need a strong basis for treating the coins themselves as property that can be held, transferred, and retrieved. This law helps pave the way.
For the average UK cryptocurrency user, the benefits are subtle but real. If you hold your BTC or ETH on an exchange, you have stronger legal mechanisms to protect you in times of crisis. If someone steals your tokens, the process of freezing and recovering them is less improvisational.
When using lending markets and collateralized products, the contracts governing them will be based on simpler rules. And once systemic stablecoins become part of everyday payments, the underlying property rules will no longer lag behind financial design.
The Act also applies to England, Wales and Northern Ireland, giving a uniform approach to most of the UK. Although Scotland operates under its own system, Scottish courts follow their own version of the same intellectual trends.
The UK as a whole now heads into 2026 on clearer footing than almost any major jurisdiction. Compared to the EU’s MiCA framework, which deals with regulation but punts property categories, and the US’s patchwork of state regulations such as Article 12 of the UCC, the UK currently has the clearest legal recognition of digital property among Western countries.
What kind of act is it? I don’t What needs to be done is to regulate cryptocurrencies.
It does not create tax rules, license custodians, rewrite AML obligations, or confer special status on tokens. This simply removes the conceptual inconsistency that makes every crypto incident feel like it’s borrowing tools from the wrong toolbox.
Significant regulatory lifting by the FCA and BoE will take place over the next 18 months, especially once the stablecoin regime is finalized as final regulations. However, the real estate base is currently fixed.
For a decade, the cryptocurrency industry has been joking about “bringing British law into the 21st century.” One clause solved a problem that no one could solve using metaphors alone.
The courts now have the necessary categories. Regulators have a clean runway for systemic stablecoin policy. And those who hold Bitcoin and Ethereum in the UK will enter 2026 with clearer rights than they had at the start of the year.
Every time someone loses coins, lends collateral, or tries to restore a blown-up platform, the effects are felt slowly, case by case, dispute by dispute.
