Crypto and other digital assets now sit squarely within UK property law after the Property (Digital Assets etc) Act 2025 received Royal Assent on 2 December. The Law Commission confirmed the date and emphasised that the statute closely tracks its recommendations on recognising a new category of personal property for digital assets such as crypto‑tokens and NFTs. For insolvency stakeholders, that removes a line of defence frequently used to resist tracing and recovery.
The Act applies in England and Wales and Northern Ireland, comes into force immediately, and does not extend to Scotland. Holyrood is legislating separately: the Scottish Government introduced the Digital Assets (Scotland) Bill on 30 September, now at Stage 1. Practitioners operating across borders must account for this split.
What does the law actually do? In a single operative clause it states that “a thing… is not prevented from being the object of personal property rights” merely because it is neither a thing in possession nor a thing in action. Parliament has left it to the courts to develop this ‘third category’-a deliberate choice that builds on recent case law and the Law Commission’s analysis.
For insolvency, the significance is direct. Section 436 of the Insolvency Act 1986 already defines “property” broadly. The UK Jurisdiction Taskforce’s 17 April 2024 legal statement said digital assets fall within that definition but are not “money”, so they cannot found a statutory demand as a money debt. The new Act removes residual doubt about status, strengthening office‑holders’ hand when vesting, tracing and realising digital assets.
Recovery tools that were forged through litigation now sit against a statutory backdrop. English courts have granted proprietary injunctions and worldwide freezing orders over misappropriated tokens, compelled exchanges to disclose information, and even permitted service by NFT when defendants were unknown. Decisions in AA v Persons Unknown, Fetch.ai v Persons Unknown and D’Aloia/Osbourne show the direction of travel that the Act now endorses.
Distribution remains a practical minefield. Rule 14.21 of the Insolvency (England and Wales) Rules 2016 requires a single FX rate for foreign‑currency proofs; but crypto is not money and the rule does not apply to tokens. UKJT and leading firms flag that many crypto‑linked claims will be damages claims valued in sterling, leaving office‑holders to adopt and justify fair methodologies. Expect challenges where timing and liquidity materially affect recoveries.
Liquidators also regain a clearer route to jettison junk. Under section 178 of the Insolvency Act, ‘onerous property’ may be disclaimed-covering unsaleable tokens or assets that carry continuing liabilities. The Insolvency Service’s guidance stresses using this power promptly yet carefully, to avoid discarding value that should flow to creditors.
Competence and speed will decide outcomes. The Insolvency Service has already appointed a dedicated crypto intelligence specialist amid a reported 420% rise in insolvency cases identifying crypto assets since 2019/20. Official Receiver guidance is blunt: identify wallets, notify providers, and liquidate through reputable brokers or exchanges. Creditors should demand evidence that these basics are done on day one.
Territorial scope matters. Northern Ireland’s Legislative Consent Motion enabled the Act to extend there, minimising arbitrage within the UK. Scotland’s bill would recognise qualifying digital assets as incorporeal moveable property and set rules for establishing and transferring ownership-alignment is coming, but not yet complete.
Open questions remain and they are not academic. Courts will still delineate the ‘third category’s’ boundaries, the situs of assets for conflicts questions, and the duties (if any) of software developers-issues ventilated in Ion Science and Tulip Trading. The Act gives judges a platform; it does not answer every point that will decide creditor recoveries.
Ministers sell this as growth policy for a legal services sector worth over £42.5–£44bn and employing roughly 350k–380k people. Our yardstick is narrower: will office‑holders now trace keys faster, ring‑fence tokens sooner and return more to creditors at lower cost? The onus has shifted; excuses about legal uncertainty just fell away.