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UK Statement on Legal Status of Cryptoassets and Smart Contracts

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A UK Government-backed, industry-led initiative has published an expert legal statement recognising cryptoassets as property and smart contracts as enforceable agreements under English law. The statement is published by the UK Jurisdiction Taskforce (UKJT), a taskforce of the UK’s Lawtech Delivery Panel.

The report concludes that:

  • Cryptoassets are, in principle, to be treated as property under English law. They are not disqualified from being property by their distinctive features (intangibility, cryptographic authentication, use of a distributed transaction ledger, decentralisation, rule by consensus), nor by the fact that they are “pure information”.
  • A smart contract (characterised by its “automaticity”) is capable of having contractual force, although whether the requirements for an enforceable contract are met in a given case will depend on the parties’ words and conduct.

Uncertainty over the legal status of cryptoassets and smart contracts is often blamed for hindering their adoption. The statement has been developed by leading barristers in consultation with technical, legal, judicial and academic experts, and therefore provides some comfort that cryptoassets and smart contracts have a solid foundation in English law. However, the statement has no binding legal force and so, although it provides the “best possible answer”, is unlikely to be the final word.

The UK is the first jurisdiction to produce an authoritative statement on these issues. At the launch event of the report, the speakers highlighted several next steps for the UK:

  • Regulation of dealing in cryptoassets, and remedies. Now that the legal status of cryptoassets and smart contracts has been confirmed, the stage is set for regulators to consider what specific regulation is necessary, and for the courts to consider what remedies are appropriate in disputes.
  • Legislative confirmation of legal status. Although the report concludes that the legal status of cryptoassets and smart contracts is clear under English common law, the next step is for the UK Law Commission to consider whether legislation in this area is necessary.

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Sue is a partner in Baker McKenzie's IP, Data and Technology team based in London. Sue specialises in major technology deals including cloud, outsourcing, digital transformation and development and licensing. She also advises on a range of legal and regulatory issues relating to the development and roll-out of new technologies including AI, blockchain/DLT, metaverse and crypto-assets. Her IP and commercial experience includes drafting, advising on and negotiating a wide range of intellectual property and commercial agreements including IP licences and assignment agreements, long-term supply and distribution agreements. She also assists clients in preparing terms of business and related documentation for new business processes and offerings and coordinating global roll-outs. Sue is also a key member of our transactional practice, providing strategic support on the commercial, technology and intellectual property aspects of M&A transactions and joint ventures, including advising on transitional services agreements and other key ancillary IP and commercial agreements. Sue is ranked as a leading lawyer in Chambers for Information Technology & Outsourcing and Fintech Legal and in Legal500 for Commercial Contracts, IT & Telecoms, TMT and Fintech. Clients say of Sue "Sue is outstanding", "She is a really good and very committed lawyer", "Excellent…. Very capable, wouldn’t hesitate to use on IT/TMT/Outsourcing matters." Sue was named in the Standout 35 of the Women in FinTech Powerlist 2020.

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