Cryptoassets, distributed ledger technology and smart contracts - information on the UK Jurisdiction Taskforce consultation
Many uncertainties still exist around cryptoassets, distributed ledger technology (DLT) and smart contracts. It is unclear to what extent they can be relied upon in English private law and how English law interacts with them. In an attempt to clarify the situation the UK Jurisdiction Taskforce (UKJT) has published a consultation paper requesting submissions from interested parties that are intended to inform a legal statement.
There is a need to clarify when a cryptoasset and a private key should be considered personal property, in the expectation of their future development. The focus for now is on property law rather than tax or data protection, as it is accepted that current English property law is incompatible with cryptoassets. Since cryptoassets are not physical things or rights, are not personal or intellectual property, and are not located in a specific place, English property law currently struggles to characterise them. It is recognized that this needs to change.
The enforceability of smart contracts, and the extent to which a smart contract is legally binding if technology malfunctions or functions in an unexpected way is similarly uncertain in English law at present.
DLT and its associated terminology and taxonomy is a constantly and rapidly evolving technology, a perpetual state of flux creating ever-shifting goalposts for legal interpreters. As understanding is essential to the future regulation of both cryptoassets and smart contracts, the consultation process will attempt to define whether DLT may be thought of as a register for evidencing, constituting and transferring title to assets.
This paper follows a recent trend by regulators in the UK, Europe and the US seeking better to understand these emerging sectors and provide greater clarity on the precise legal situation.