printer icon

UK’s Digital Assets Consultation Paper Relevant to NZ

In late July the UK Law Commission (the Commission) released its Digital Assets consultation paper. (At over 500 pages, it is not light bedtime reading!) The consultation paper is relevant to New Zealand, as New Zealand courts often use UK cases as precedents for many areas of the law. A good example is Ruscoe v Cryptopia [2020] NZHC 728 where the New Zealand High Court followed a number of UK cases. The consultation paper is also a demonstration of the increasing importance of cryptocurrencies and other digital assets. Digital assets cannot be ignored. Indeed, the Commission began its report on page 1 with:

“Digital assets are increasingly important in modern society. They are used for an expanding variety of purposes — including as valuable things in themselves, as a means of payment, or to represent or be linked to other things or rights — and in growing volumes. Electronic signatures, cryptography, smart contracts, distributed ledgers and associated technology have broadened the ways in which digital assets can be created, accessed, used and transferred. Such technological development is set only to continue.”

Digital assets are broader than just cryptocurrencies (cryptocurrencies are a subset of digital assets). Digital assets cover, for example, NFTs. Note, the Commission does not expressly use the term “cryptocurrencies”, preferring instead “crypto-tokens”.

Because of the increasing use and importance of digital assets the Commission provisionally recommended the clarification of a number of things in legislation. They include the statutory creation of:

1. A third category of personal property. Currently the law recognises two main types of personal property: things in possession and things in action. Things in possession are tangible (physical) things, which are capable of possession, eg a car or a gold bar. In contrast, things in action are intangible things, which cannot be physically possessed, including intellectual property rights, shares in a company, debts and the ability to sue for contract. A thing in action requires a party against whom a right can be enforced. Digital assets do not fit neatly within one or the other.

2. An innocent acquisition rule. Such a rule would mean that, for example, if someone purchased a stolen NFT, that person would be entitled to keep the NFT if they purchased it not realising it had been stolen. (This is called being a bona fide purchaser for value without notice and is used in other areas of the law). Such a rule is needed because currently the innocent purchaser of an NFT who paid the market rate and had no reason to believe an NFT had been stolen is likely to lose ownership of that NFT. Granted the victim of the NFT theft will lose out, but the effect on innocent purchasers must also be taken into account. The Commission, after weighing the options, has come down in favour of purchasers. 

3. A general pro rata shortfall allocation for comingled holdings of crypto-tokens when a custodian becomes insolvent. 

The Commission’s recommendations are sensible. They would assist with removing elements of the uncertainty surrounding some legal issues in connection with digital assets in the UK. There are additional issues, however, such as whether custodians should be able to comingle (mix) their customers’ crypto-tokens, however, that is an issue for another day.

Because New Zealand faces similar issues over the legal treatment of digital assets, I think it is important that the New Zealand Government follows the Commission’s consultation on digital assets closely, with a view to making similar legislative change in New Zealand.

Alex Sims

BlockchainNZ Executive Council Member

What’s happening at BlockchainNZ?

BlockchainNZ Podcast:
Led by Bryan Ventura (BlockchainNZ Chair) and Jeff Nijsse (BlockchainNZ council), the BlockchainNZ Podcast, holds an interview with one BlockchainNZ member each episode to talk about all things blockchain, crypto, NFTs, DeFi and more! 

Check out our latest episode, where Jeff Nijsse interviews Stephen Macaskill, CEO of Dasset. Hear them discuss precious metals and gold’s role in the recent monetary history including Bitcoin; the definition of money and Australian and Keynesian methodologies within economics; bitcoin and its intrinsic versus subjective value, and more. 

CryptocurrencyNZ Meet-ups:
Come and join us in your city for the monthly cryptocurrency and blockchain community meet-up held on the last Wednesday of every month. For more information and to see where your city meet-up is, check out our website here. Hosted by CryptocurrencyNZ and supported by BlockchainNZ.

Crypto Legal Working Group:

Members are welcome to join our working group to assist our community to understand the laws and regulations surrounding cryptocurrencies. If you would like to be involved, please email us at

Call for Articles: 

Anything interesting being developed in your space? Do you have an opinion on the direction of blockchain and want to produce an insightful thought piece for our website? We’d love to hear from you. To submit an article, or for more information, please email us at

Ngā mihi nui, 

Alison Mackie

BlockchainNZ Executive Director

BlockchainNZ We provide New Zealand businesses and individuals opportunities for connecting, promoting and advancing in all things blockchain, crypto and decentralisation. We believe that by working together and leveraging our globally recognised brand of trust and integrity, New Zealand can become a key player in the move to a decentralised global ecosystem.