On November 11, the UK Jurisdiction Taskforce (UKJT) published a statement with two key findings on the legal status of cryptoassets and smart contracts under English law (the Statement). The UKJT is a taskforce of the LawTech Delivery Panel of the Law Society, which is the representative body for solicitors in England and Wales. The Statement was made following a public consultation, which closed in June 2019.
In the Statement, the UKJT considered the features which distinguish cryptoassets from conventional assets (using the term “cryptoassets” generally rather than formulating a precise definition). Following this analysis, they concluded that cryptoassets are “property” under English law — but they are not “things in possession”. Some of the implications of this are that cryptoassets:
- are not “goods” for the purposes of the Sale of Goods Act 1979;
- cannot be the object of a bailment (since bailment requires the transfer of possession); and
- cannot be the object of a pledge or lien because these types of security also require the transfer of possession.
This finding will also have implications for succession on death, bankruptcy and insolvency, fraud, theft or breach of trust, for example.
In term of smart contracts, the UKJT also did not define these precisely but instead identified the key features: terms recorded in a “computer-readable form”, which are performed “automatically and without the need for, and in some cases without the possibility of, human intervention.”
The UKJT found that smart contracts can be valid under English law and may be enforced by the courts; however, the UKJT does not believe that a smart contract would necessarily satisfy a requirement that a contract be “in writing”.
The purpose of the Statement is to provide legal certainty and improve market confidence. The Statement may be persuasive, but it is not legally binding. It remains to be seen whether these findings would be followed by the court.
The Statement is available here.