Digital assets: Tech is changing Scotland's definition of 'property'

“It is a fast-changing and dynamic playing field,” said Lorna Slater at a recent meeting of the Scottish Parliament’s Economy and Fair Work Committee.

The former Scottish Greens co-leader was talking about digital assets but could easily have been describing the work of the specialist panel, which is tasked with scrutinising economic policy and strategy – and which itself has undergone speedy change in recent months.

The nine-member panel lost its convener, Colin Smyth, in September in the wake of his arrest. The 52-year-old was suspended by Labour after police charged him with possession of indecent images. He made no plea or declaration during a private hearing at Dumfries Sheriff Court in October and was released on bail.

The SNP’s Michelle Thomson, the committee’s deputy convener, had planned a vote to remove him from the head of the panel in light of the criminal proceedings, but this was avoided when he resigned his membership of the group altogether, and Labour’s Daniel Johnson took on the vacant position.

Since then, Johnson has led on work including evidence sessions on the Digital Assets (Scotland) Bill, which was introduced in the month Smyth exited. 

The proposal aims to modernise Scots law by confirming that digital assets can be considered property, as with physical assets. But there’s concern that the drafting lacks clarity on exactly what it all means, and whether the bill can stand up to the frenetic pace of change in the digital age, and in a country which built a reputation for analogue banking prowess.

The committee has recommended that the parliament support the bill's general principles. That follows an evidence session in which  business minister Richard Lochhead said digital assets are “an increasingly important component of financial services and economies across the globe”, with blockchain technology likely to be worth £4.48bn to Scotland by 2030. As such, fintech – the financial technology sector – must be underpinned by robust legislation. 

More than half a million Scottish adults are thought to hold crypto assets, and the Scottish Government expects that to grow. And so, the bill is supposed to provide the legal foundation businesses and consumers need. “The challenge,” said committee member Sarah Boyack, “is that we need to get all of it right at the same time and think about how we future-proof the bill.”

Cue questions from members about the economic impacts of energy-sucking data centres, the implications for carbon credits and what AI means for digital tokens. Keep it simple, answers seemed to suggest.

“The bill is attempting a very specific fix to Scots law,” said parliamentary counsel Fraser Gough. “There are things out there now that, to all intents and purposes, work very much like corporeal property, as we have always understood it, but they are not corporeal – they lack a corpus; they are intangible. The bill is fixing that by saying that it does not really matter that they lack a body, as long as they meet this other condition that makes them rivalrous, which is one of the things that having a body provides. You cannot double spend a coin, because it is a physical thing; here, the blockchain effectively operates the same way and prevents you from double spending. We are saying that, because a technology has solved that issue for those intangible things, we are happy for the law to treat them as property, like corporeal things.”

Still, convenor Johnson had concerns about whether a focus on “big corporate transactions or the future of technology” obscured other areas in which the legislation could have an impact, such as “civil disputes, probate and divorce settlements”.

“In a divorce case going through the courts, you can imagine scenarios in which people might try to claim that they do not have the assets that it is claimed they have because they have lost the ability to access their digital assets and all their wealth,” he said, questioning whether safeguards and procedures – “things that we think of as the nuts and bolts of Scots law and civil law” – should be looked at too.

And what of the “international and global dimension”, wondered Willie Coffey MSP, asking: “How will problems and disputes be resolved if jurisdictions take different approaches to what are essentially global digital commodities?”

“The international private law challenges are undoubtedly acute,” said Gough. “The international flow of things, the rules of international private law, and what the law governs have long been issues. A lot of that takes us into reserved territory, because we are dealing with things furth of Scotland. In the first instance, it will be a case of seeing what the Law Commission recommends at UK level and then looking at where Scotland wants to position itself relative to that.”