Sir Geoffrey Vos, Chancellor of the High Court, has hailed the UK Jurisdiction Taskforce’s ‘Legal statement of 18 November 2019 on cryptoassets and smart contracts’ as, “a watershed for English law and the UK’s jurisdictions.”
The UK Jurisdiction Taskforce (UKJT) is part of the Law Society’s LawTech Delivery Panel, which is comprised of industry experts, members of the government and the judiciary, and promotes the use of technology in the UK’s legal sector.
The statement sets out the UKJT’s view on the current position under English law of the legal status of cryptoassets as property, smart contracts as valid contracts, and private keys as valid signatures.
Cryptoassets can be ‘property’
The UKJT’s opinion is that cryptoassets have all the legal indicia of property and therefore are to be treated as property for purposes of English law, even though they may be intangible, decentralised and purely ‘informational.’
The statement draws other guidelines on the treatment and understanding of cryptoassets including that:
- bailment is not possible over virtual cryptoassets which are not capable of physical possession;
- cryptoassets are not documents of title, nor are they documentary intangibles or negotiable instruments; and
- it is possible for some types of security to be granted over cryptoassets.
Cryptoassets being considered to be property under English law will have implications for the treatment of such assets on insolvency and succession, as well as in cases involving fraud, theft or breach of trust.
Smart contracts are contracts
According to the UKJT, smart contracts, which are characterised by their automatic nature and define contractual obligations by way of computer code, are still capable of being identified, interpreted and enforced in accordance with established English contract law principles.
A private key can be a valid signature
The view of the UKJT is that any statutory signature requirement is ‘highly likely’ to be capable of being met by the use of a private key. The UKJT reached this view based on the fact that an electronic signature will generally satisfy a statutory signature requirement and a digital signature produced using public-key cryptography is just a particular type of electronic signature.
The UKJT argues that the crucial question is not what a signature looks like, but whether or not it is clear that a party intended to authenticate the full terms of a document.
The statement by the UKJT is not legally binding; it is the UKJT’s view of the current legal position. The next step is for the Law Commission to consider whether any legislation is required in this area, particularly in relation to what remedies might be available in respect of transactions involving cryptoassets.