Legal certainty provided for smart contracts and cryptoassets in the UK

The UK Jurisdiction Taskforce (UKJT) which forms part of the Lawtech Delivery Panel (LTDP) has published a statement on the legal status of smart contracts and cryptoassets under the law of England and Wales. 

The LTDP was established to support the technological transformation of the UK legal sector and is an industry-led, government-backed initiative.

In summary, the landmark statement recognises cryptoassets as tradable property and smart contracts as legally enforceable agreements for the first time.

The statement has clarified that security in the form of a charge or mortgage can be taken over cryptoassets but not a pledge or lien. However, it is now possible to declare a trust in ownership of interest in a cryptoasset, but the statement sets out that despite this, it remains virtual i.e. tangible but not physical property.

Previously, the uncertainty surrounding the enforceability of smart contracts and the unknown ownership status of cryptoassets has prevented full-scale investment and adoption as both carried an element of risk. Now, investors and users can have confidence in their utilisation. It’s predicted that their use will now grow exponentially.

These areas of lawtech are hugely significant. Smart contracts provide efficiency and security between the parties and the top 100 cryptoassets across the world have an estimated worth of over a quarter of a trillion dollars.

It’s thought that the UKJT’s statement will provide a reliable basis for extensive adoption of smart contracts and cryptoassets and general market confidence and certainty.

The director of the LTDP has commented that this landmark statement shows the “adaptability of our common law system to fast-changing technology”.

Click here to download the full statement from the UKJT.

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