Law Commission consults on digital assets

The Law Commission has launched a consultation paper aimed at reforming private international law rules pertaining to digital assets and electronic trade documents. The proposals also include changes to section 72 of the Bills of Exchange Act 1882, which addresses the law applicable to contracts involving bills of exchange and promissory notes. Alongside this, an FAQ document addressing property issues within permissioned distributed ledger technology (DLT) systems is being published.

Private international law typically requires parties in legal disputes that跨国界 to navigate questions about which country's courts have jurisdiction and what laws should govern their cases. Historically, such laws have relied heavily on geographical factors, pointing to “the courts of the place where the property object is situated” or “the law of the place where the damage occurred.” However, with the rise of new technologies, particularly decentralised applications of DLT, these established principles face new challenges. DLT’s framework distributes records across a network of computers scattered globally, complicating the task of determining the location of an asset or activity. This situation often leads to legal ambiguities and inconsistent applications of law in the context of modern digital operations.

The necessity for a clear and adaptable legal environment becomes paramount for users and investors in emerging technologies, as they require laws that accurately reflect modern commercial practices. David Hertzell, Senior Counsel for Commercial and Common Law, articulated this point, stating “From assisting victims of crypto fraud to recognising how users interact with smart contracts and coding protocols, our provisional proposals respond to the socio-economic realities of the 21st century to ensure that the law of England and Wales remains at the cutting edge.”

Among the provisional proposals is a review of the existing jurisdictional gateways for property and tort in context with crypto litigation. The Commission also advocates for a new, standalone information order designed to assist claimants who fall victim to crypto fraud or hacking, allowing them to gather information about their stolen tokens or the identity of the perpetrators without navigating existing legal gateways.

Furthermore, the Commission has identified wholly decentralised applications of DLT as a particular source of complication in private international law. Its recommendations propose a shift away from the rigid identification of a single applicable law, suggesting that courts consider various factors to achieve a fair resolution of disputes, taking into account the legitimate expectations of the parties involved. This additional consideration might involve a focus on the terms of any protocols the participants have agreed to.

The proposed reforms to section 72 of the Bills of Exchange Act 1882 aim to modernise this legislation, ensuring that it applies equally to both paper and electronic documents. Interested parties can find more details on the project, along with submission guidelines, on the Law Commission’s website. Responses to the consultation are welcomed until 8 September 2025