Restructuring And Insolvency And The Property (Digital Assets Etc) Act 2025 – Now In Force

The Property (Digital Assets etc) Act 2025 (the "Act") came into force on 2 December 2025, providing helpful statutory confirmation that digital assets may be considered "property" as a matter of law in England, Wales and Northern Ireland.

The Act, working together with current insolvency law, is a significant step in providing further certainty to investors, lenders, and custodians in the digital asset market.

Background

• The Act is in response to the Law Commission's review of the law in light of the development of new types of assets such as crypto-tokens, and its conclusion that certain types of digital assets are things to which property rights relate.

• Digital assets do not easily fit within the traditionally-recognised categories of personal property i.e:
  • a thing in possession (such as assets which are tangible, moveable and visible),or
  • a thing in action (such as a debt, right to sue for breach of contract or shares).

• These principles were developed long before the concept of digital assets was contemplated. The Law Commission found this did not prevent digital assets being recognised as property, and the English courts have already moved towards recognition of digital assets as personal property however, they are better regarded as belonging to a separate category of personal property.

The Act – a new "third category" of personal property

• The Act provides for a new third category of property, and is drafted succinctly but broadly enough to capture digital assets such as crypto tokens, and to respond to technological developments and new types of assets which do not obviously sit within the common law definition of being a thing in possession or a thing in action.

• Pursuant to the Act:

• The drafting is intentionally light – the Act deliberately does not confirm the status of any particular type of thing as the object of personal property rights-its purpose is to "unlock" the development of common law by providing for this third category of property rights, thereby enabling the courts to continue to shape the law of personal property rights and build on centuries of judicial development.

What does this mean for restructuring and insolvency?

• The Act does not make drastic changes to the current legal landscape in this area, but it does provide more certainty.

• The definition of "property" pursuant to s 436 of the Insolvency Act 1986 is already wider than the common law definition. It includes money, goods, things in action, land and every description of property wherever situated and also obligations and every description of interest, whether present or future or vested or contingent, arising out of, or incidental to, property.

• This definition is arguably wide enough to include cryptocurrencies and the UK Jurisdiction Task Force confirmed in April 2024 that digital assets are to be viewed as property in its Legal statement on digital assets and English insolvency law .

• The passing of the Act and development of the common law will however, undoubtedly lead to more confidence that digital assets can fall within the scope of the insolvency estate, meaning insolvency office holders are likely to face fewer "threshold" disputes and move faster to preserve and recover value.

• That is potentially the easy part for practitioners. Whether the asset falls within the estate will be a question of fact, dependent on the nature of the business, the asset in question, and how it is held. In some cases the insolvency estate will own tokens; in others—especially exchanges and custodians-the digital assets will be held on behalf of the customer, which may or may not be held by a trust holding structure (and therefore outside the estate).

• Whether a digital asset is held on trust will also be highly relevant to determining whether, and to what extent, claims in respect of digital assets can be compromised by restructuring procedures such as schemes of arrangement, restructuring plans or CVAs under English law.

Remaining Issues

Although providing clarity on the issue of whether digital assets may be "property", the Act does not remedy or provide answers to other issues that may typically arise in this developing and complex area. The UK Jurisdiction Task Force concluded in its 2024 legal statement however, that English insolvency law is entirely capable of convenient and sensible application to disputes concerning digital assets.

• Powers of office holders: If digital assets are deemed to fall within the insolvency estate, the usual obligations and powers of the insolvency office holder to investigate, collect and administer them will apply, such as in relation to the sale or distribution of, and price obtainable for, the asset, as well as existing avoidance and clawback provisions (such as transactions at an undervalue and preferences), and interlocutory, investigatory and enforcement powers.
• However, challenges for office holders specific to the nature of the asset – such as price volatility, asset pooling and the technological inability to undo a particular blockchain transaction will remain, although these are not insurmountable and the English courts have various powers available to them which can assist in providing a suitable remedy.
• Crypto currency is not "money": Digital assets are not treated as money in England and Wales and although will be considered property, a claim to such assets will not of itself found a statutory demand. They are also not foreign currency for the purpose of Rule 14.21 of the Insolvency Rules 2016, which requires an office holder to convert all debts incurred or payable in a "foreign currency" into pounds sterling, at a single rate for each currency determined by the office holder, by reference to the exchange rates prevailing on the relevant date. Office holders will need to continue to adopt fair, transparent approaches to convert or value token denominated claims for distributions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.