The Digital Assets Bill before Parliament is still stuck at the second reading stage in the House of Commons. Although we hope the draft will eventually become law, as we all need more legal clarity on these matters.
The preamble to the bill reads ‘to make provision about the types of things that are not prevented from being objects of personal property rights’. We went in search of a definition of this title in plain English.
The Primary Types of Property in the UK
English property law originally distinguished between fixed land and buildings, and movable possessions we may still call chattels. Saving and investing with third parties gave birth to a third category, financial assets. These opened the door to virtual digital assets residing on the internet.
The Fourth Category: Digital Assets In The Bill
Digital assets are things that people create, and store as data on electronic devices. So we could perhaps say they are a type of chattel, although we could only ‘touch them through a digital screen’.
The Digital Assets Bill before Parliament should include data, images, videos, written content, and more, in its final form. In fact anything anybody created digitally, or obtained rights to from the original creator or previous owner.
So do digital assets really exist, within the traditional sense of possessions? Probably not, although investors may have owned shares in companies they have never seen, or touched either.
We are writing about digital assets because people own them. This means they can leave them to their heirs when they die. Executors will increasingly find these digital assets in the estates they administer.
Placing the Digital Assets Bill in Context
Richard Dundee, writing in The Gazette official public record, explains how rapid technological change has transformed the concept of property. Wily investors are now giving cryptocurrencies and non-fungible tokens more than a second glance:
- A cryptocurrency uses a computer network to receive and pay wealth tokens, without external authority regulation.
- Non-fungible tokens are assets like artworks, digital content, or videos that have been tokenized via a blockchain.
When passed into law, The Digital Assets Bill before Parliament aims to regulate virtual wealth, by officially including it under the umbrella of property under English and Welsh law. The legislation should therefore further legitimize decisions by testators and executors.
An official endorsement of digital assets in the law should undoubtedly have an effect on succession planning. As cryptocurrencies and non-fungible tokens affect implementation of deceased estate wills.
An executor or administrator needs to make sure they will have access to the necessary user names, passwords, and login pages. Digital administrators are often virtual personalities, who may be anywhere in the world, and will need careful convincing!
More Examples of Digital Assets
Cryptocurrencies and non-fungible tokens may still be mysteries, to those who prefer more traditional investments. However, many other categories have been with us since the birth of the personal computer and the internet:
- Digital files, digital records, email accounts.
- Domain names, in-game digital assets.
- Social media accounts, digital carbon credits.
The new bill, when passed into law, should help ensure that these digital assets go to their rightful heirs, on the death of the testator. However, solicitors advising them do need to ensure that a custodian has their login codes for these assets.
Impact On Administrators and Executors
The Digital Assets Bill before Parliament is another good reason to appoint an executor in one’s will. Having the document in their hands will empower them to speak to financial institutions, and now digital administrators too.
Those intermediaries will have to learn new digital skills too. Unless they already have experience of this special class of assets. Their roles will include, but are not necessarily limited to the following:
- Understand the nature of digital assets such as cryptocurrency, and blockchain technology. Remain up to date regarding developing trends and new investment models.
- Trace, identify and value a deceased’s digital assets on the day of their death. This is a complex task, because the value may fluctuate dramatically, even day to day.
- Some digital assets may be under the control of service agreements. This may restrict their transfer to their legitimate heirs, and leave them potentially open to hacking.
Testators, and solicitors assisting them, must develop sufficient understanding to draft wills that are practical, and effective too. They must agree between themselves how to secure the all-important logins, and maintain an up-to-date digital asset inventory.
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