Official Report 796KB pdf
The next item of business is a debate on motion S6M-20485, in the name of Richard Lochhead, on the Digital Assets (Scotland) Bill at stage 1. I invite members who wish to speak in the debate to press their request-to-speak button.
15:45
The Digital Assets (Scotland) Bill is about the fast-changing world in which we live and the fact that our world is becoming a lot more digital. The bill will implement key recommendations made by the digital assets in Scots private law expert reference group, which was chaired by the Rt Hon Lord Hodge.
In 2023, the expert reference group reported to Scottish ministers that primary legislation was necessary to clarify the status of digital assets as objects of property in Scots law and for that legislation to set out basic provisions on how ownership of digital assets can be acquired. Legislation was deemed to be necessary because of a lack of substantive case law from the Scottish courts to provide the legal answers that are required on ownership of digital assets, and that remains the case. Emerging technologies and innovations, such as distributed ledger technologies, have given rise to those assets, which are not readily incorporated by existing classifications of property under Scots law.
The identified need for primary legislation has been supported by respondents to the Scottish Government’s public consultation, as well as by witnesses providing evidence to the Economy and Fair Work Committee. The bill addresses the current lack of clarity around the legal status of digital assets by providing a necessary legislative foundation in Scots law. Scots law will therefore be better equipped to accommodate the modern business practices that are already in existence in our country.
Digital assets are used for a wide range of purposes, from payments and investments to innovative financial products and services by businesses and individuals. With those assets becoming ever more integrated into our financial markets, providing greater legal certainty for those who choose to engage with them is becoming increasingly important. With estimates that the value of the blockchain technology market in Scotland is likely to reach £4.48 billion by 2030—to give one big example—the Scottish Government is focused on building an environment in which businesses can flourish, encourage innovation and help economic growth. It is not just businesses that embrace digital assets. The crypto asset market, which is the largest category of digital assets, is currently worth around £2.42 trillion.
We are already seeing increasing uptake of all that among the public. I was pretty astonished, as I am sure others were, including those on the committee, to learn that around 12 per cent of United Kingdom adults now hold crypto assets. That is around half a million adult Scots. It is therefore important to be clear at the outset that the bill has a deliberately narrow scope of application. It is a short piece of legislation with just nine sections that is restricted to clarifying that certain digital assets have property status in Scots law. It achieves that by confirming what is meant by a digital asset for the purposes of the bill; by categorising those digital assets as incorporeal moveable property; and by weaving how digital assets are acquired and transferred into well-established common-law rules—and, in doing so, reflecting existing commercial practices in relation to the acquisition and transfer of digital assets.
The bill includes a provision that will extend protections to good-faith acquirers who have obtained a digital asset in exchange for value from a person who, unbeknown to the good-faith acquirer, held a defective title to the asset.
I am aware that stakeholders identified other areas of law that could benefit from reform—areas where there is likely to be engagement with digital assets, such as diligence and insolvency. However, most stated that the bill was not the place to deliver any such reform; in any case, insolvency is largely a reserved matter. Ministers agree. We are of the view that, where further changes may be beneficial, it is appropriate for them to be developed and formed by consultation that is specific to the relevant devolved areas of law and by engagement with all key stakeholders in each area.
Although some may have wanted the bill to go further, I am aware of the view expressed during committee evidence sessions that consideration should be given to the exclusion of certain digital things from the application of the bill, such as electronic trade documents and voluntary carbon credits.
The Scottish Government will reflect on all the views that we hear today, as well as on the committee’s recommendations. Where appropriate, we will keep an open mind to amendments at stage 2, but we will see how, over the next few days, the issues develop in response to the debate. We are committed to working with Parliament and stakeholders to ensure that the legislation is effective and fit for purpose, and that it is as technologically neutral as possible, to help to keep it up to date and to keep pace with emerging innovations.
Overall, having listened to the stage 1 evidence and considered the committee’s stage 1 report, I am pleased that there is broad consensus on the approach that has been taken in the bill. I welcome the committee’s recommendation that Parliament agrees to the general principles of the bill.
Finally, I put on record my thanks to the expert reference group for its considerable work in analysing the legal landscape and formulating the recommendations for primary legislation. I thank the group’s chair, the Rt Hon Lord Hodge, and Professor Fox of the University of Edinburgh, for the time and effort that they gave to the group, the Scottish Government and everyone else with whom they interacted during the development of the bill. I also thank those who gave evidence to the Economy and Fair Work Committee, committee members, clerks and anyone else involved, for all their hard work in scrutinising the bill.
I move,
That the Parliament agrees to the general principles of the Digital Assets (Scotland) Bill.
I call Daniel Johnson to speak on behalf of the Economy and Fair Work Committee. You have a generous six minutes.
15:52
Thank you, Presiding Officer. I am delighted that we have such a packed chamber this afternoon to debate this important topic. I emphasise that it is important for many of the reasons that the minister just set out.
Just as the minister expressed his thanks in his speech, I would like to offer mine as well. I thank my fellow committee members. We all agree that this has been an interesting topic, and although we had to get our heads around a great deal of terminology and avoid going down rabbit holes, we all concluded that this was an important piece of legislation. I thank our clerks for their diligent assistance in that work, and I thank everyone who responded to our call for evidence and, indeed, those who provided oral evidence to the committee. I also, somewhat unusually, thank the Scottish Government’s bill team—who are seated at the back of the chamber—for the considerable interest that they took as we gathered evidence. We are very appreciative of that.
I do not intend to cover every recommendation in the committee’s report; instead, I will focus on the purpose of the bill, its definitions and the committee’s key observations.
As the minister pointed out, the Digital Assets (Scotland) Bill is a technical but necessary piece of legislation. It arises from a gap identified by the expert reference group: the need to ensure that Scots law keeps pace with digital technology, given the significant increases in such technology, and because, unlike other jurisdictions, Scotland does not have the body of case law that might enable it to keep pace. Further, the UK Government has legislated in England, Wales and Northern Ireland through the Property (Digital Assets etc) Act 2025, and we do not wish to see gaps emerge between the different jurisdictions in the United Kingdom.
The bill sets out a definition of digital assets, how they are to be treated in Scots law and how they can be acquired and transferred. It is worth taking time to go through that definition. Section 1 defines a digital asset as something that
“arises from an electronic system that makes it rivalrous, and … exists independently from the legal system.”
We spent a bit of time interrogating the concept of rivalrousness, which is clearly understood among the legal community even though it is only now being introduced into Scots law. Critical to the concept of something being rivalrous is the understanding that it is discrete, that it cannot be used more than once and that there is clear control over it. A car or an apple can be rivalrous in that only one person can be in control of the car or consuming the apple at a time. That is unlike electronic things such as PDF and JPEG files, which can be reproduced without the initial person’s consent or awareness.
Another critical element is that, for something to be counted as a digital asset, there must be a reliable and immutable record of transactions that prevents someone else from using or transferring the asset more than once. We debated the nature of immutability and whether, for something to be included, it has to be absolutely immutable or whether, because of the electronic nature of these assets, there is some ambiguity. We want the Government to note that and address it in guidance.
Finally on this point, for something to be considered a digital asset, it must be independent of the legal system, in that it would still exist even if the legal system disappeared. Some witnesses questioned whether anything in Scotland can truly exist independently of the law, but the committee accepts that the bill’s definition provides a workable framework for lawyers and the industry.
A number of witnesses stated that there should be explicit exclusions so that we do not create digital assets inadvertently. Carbon credits are an example that could fall into that category, and we heard that uncertificated securities that are traded through the certificateless registry for electronic share transfer—CREST—system might be excluded for those reasons. The committee recognises that risk and we have called on the Scottish Government to consider whether exclusions are necessary and to lodge amendments at stage 2, as appropriate.
A further area of scrutiny was the treatment of ownership and exclusive control. Section 3 seeks to create a presumption that the person with exclusive control of a digital asset owns it, and section 5 explains that control means being able to initiate, transfer or divest an asset entirely. In that way, the bill classifies digital assets as incorporeal moveable property but treats them like corporeal property for the purposes of acquisition and transfer. We heard that that could be confusing and jarring.
We note the Scottish Government’s explanation that it is necessary to allow concepts such as possession and delivery to operate in a digital context. However, there are practical challenges, such as the fact that some digital assets have shared key arrangements and the fact that someone might have exclusive control of an asset but not own it due to workplace settings or other practical considerations. We note that the bill defines “control” and “exclusive control”, but we draw attention to the evidence that we heard that that might be at odds with what happens in practice. Again, we suggest that clear guidance is important in that area.
The bill seeks to introduce an important departure from traditional Scots law in that it would allow a person who acquires a digital asset in good faith and for value to become its owner even if the seller acted improperly. That is a departure from the long-standing principle that no one can give what they do not have. We heard that protecting good-faith acquirers could undermine consumer confidence in a sector that is already vulnerable to fraud. We have asked the Scottish Government to review protections and remedies to those affected.
I will briefly mention some other critical elements that the committee heard evidence on. There is concern that there has not been greater consideration of the wider environmental impacts that the increasing use of technology can bring about. In addition, there have been calls for the establishment of a separate panel of experts to advise on Scots law and to ensure that there is representation on the United Kingdom jurisdiction task force for Scots law.
We heard about international examples such as Australia, Liechtenstein and the United States, which have a much more specific focus on issues such as tokenisation. We recommend that the Scottish Government maintains a watching brief on such measures and initiatives.
I note that witnesses called for a digital trust strategy to maximise the benefits between academia and industry as technology progresses. We also heard about uncertainties to do with insolvency, debt enforcement and court procedures, as noted by the minister, and using digital assets as loan security. We recommend that the Scottish Government reviews those areas with a view to future reform.
The Economy and Fair Work Committee supports the general principles of the Digital Assets (Scotland) Bill and looks forward to stages 2 and 3, should Parliament approve the bill at decision time today.
16:00
I join the convener, whom we have just heard from, in thanking all those who gave evidence to the committee, the Scottish Parliament information centre for its advice to our clerking team, and my fellow committee members for agreeing unanimously on what was a very consensual report.
As the only lawyer on the committee, I was occasionally turned to for advice, which I was ill equipped to provide. [Laughter.] In that respect, I declare my interest as a member of the Law Society of Scotland, although I am not currently practising.
It was a particular privilege to be able to take evidence in committee from Lord Patrick Hodge, who is the deputy president of the Supreme Court and one of the most able Scots lawyers of the current generation. We are very grateful for his insights. My colleague Michelle Thomson, who I do not think is in the chamber this afternoon, joined me in admiring Lord Hodge’s contribution.
We have heard from the convener a fair summary of the key issues that are addressed in the bill. We start by asking what exactly a digital asset is. Section 1 of the bill describes it as
“a thing that … arises from an electronic system that makes it rivalrous, and … exists independently from the legal system.”
I am not sure that that provides a great deal of clarity for the person in the street, so it might be easier to give some examples. A cryptocurrency is a digital asset—it does not exist in any physical form, but it exists nonetheless, has value and is tradable. It is also supported by an electronic system. Into the same category might fit non-fungible tokens, which members of the gaming community will be very familiar with. What does it mean to be “rivalrous”? Something is rivalrous if only one person can use or consume it at one time, so a digital asset is deemed rivalrous because only one person can possess it at once.
The bill is necessary simply because Scots law, as it exists currently, does not properly recognise digital assets as property, or at least it does not properly define them. As the minister said, it is important that the law of Scotland keeps up to date with changes in technology and provides an appropriate legal framework for those who own, possess and trade in digital assets. As we have heard, the bill classifies digital assets as incorporeal movable property—that is, property that is not attached to land and that does not have a physical existence.
Section 1 of the bill goes on to state that, in order to make a digital asset rivalrous, there must be an
“immutable record of transactions”,
which means that there must be a system of recording who owns that asset at any particular time.
Sections 3 and 5 of the bill deal with the presumption of ownership. It is presumed that somebody who has exclusive control of a digital asset owns it. In that respect, as Professor David Fox said in his evidence to the committee, the bill goes further than the existing UK legislation in providing a definition of control. That is necessary because it is not expected that there will be a high level of litigation in the Scottish courts, and therefore there is a need to be more prescriptive for the benefit of the Scottish judiciary.
An important aspect of the bill is that it provides a legal framework for transacting with digital assets, classifying them as incorporeal movables generally but treating them as corporeal for the purposes of acquisition and transfer.
That leads us to one of the most interesting aspects of the bill—at least for me—which is the question of protection for the acquirer of a digital asset in good faith. The bill sets out that somebody who acquires a digital asset
“in good faith and for value”
becomes the owner of that asset even if the person selling to them was acting dishonestly.
In a sense, this casts us back to medieval England and the market overt, whereby, if somebody bought during the daytime with everyone watching them, they got the title even if the good was stolen. Does Murdo Fraser consider that this is a throwback that might cause problems?
I am fascinated by Mr Whitfield’s reference to medieval England. Sadly, that did not form part of the committee’s evidence, but I am sure that the convener would be happy to reconvene evidence sessions so that we can take evidence from Mr Whitfield on that particular point. It is an interesting illustration.
I was going to illustrate this quite important point in a different way. Let us say, for example, that the committee’s convener owns extensive wealth in cryptocurrency—I do not know whether that is the case in actuality—and I am an international cybercriminal who manages to hack into his systems and seize control of his cryptocurrency. I then sell it on to, say, the minister, who acquires the cryptocurrency in good faith and pays me value for it. In that case, the minister is deemed to be the true owner, and he acquires good title to the cryptocurrency.
Choosing that approach is not uncontroversial, and some people who gave evidence to the committee feel that that is unfair—in the circumstances of my example, it would be unfair to the committee’s convener, who has been deprived of his asset and done nothing wrong. He has been the victim of a cybercriminal. In theory, the true owner of the property—in this case, the convener—has a claim against me for recovery of his value. However, I am an international cybercriminal hiding behind the worldwide web and I am untraceable, so the true owner has been deprived of his asset and there is no effective remedy.
The reason why the bill takes the approach that it does was explained by Lord Hodge as being a means to ensure that digital assets can be traded and that there is no undue requirement on the purchaser—in this case, the minister—to conduct due diligence as to the validity of the seller’s title. The committee accepted that argument, but we observed that it is a controversial matter and that the definition of good faith is potentially troublesome. We felt that the Scottish Government should keep the issue under review, as it also should the question of a remedy to somebody who has been deprived of their assets unlawfully. The Faculty of Advocates expressed the view that the drafting of the good faith provision is ineffective and that it should be reconsidered.
The committee accepted that the bill is limited in its reach and that there are a number of issues that will need to be considered in the future by the Parliament. One of those is private international law, which is where there is an international dimension to the question of ownership and the law of which country should apply to a transaction between individuals based in different jurisdictions is in question. What should happen when a person dies holding digital assets? What is deemed to be the location of those assets, and what laws of succession should apply? As we have heard, there are also issues around insolvency that have not been resolved in the bill and will be required to be addressed at some future point.
The bill is not the final word when it comes to the legislation on digital assets. It is a useful starting point, and I very much look forward to future bills that we can get into on this important topic. The Scottish Conservatives will be happy to support the bill at stage 1.
16:08
It is a privilege to open the debate on behalf of Scottish Labour and to echo the previous speaker—we, too, will support the bill at stage 1.
It is right that we address the issue, because the law has not kept pace with the rapid evolution of digital technology, and Scotland now faces a level of legal uncertainty that is neither sustainable nor acceptable for individuals, businesses or the wider economy. The expert reference group has already been mentioned in the debate, as have submissions from those—including the Law Society of Scotland—who have stressed that we cannot rely on the slow, case-by-case development of Scots common law to resolve complex novel questions about digital property. That also means that we lose the opportunity for timely and considered views on what the answer should be and that we are moving forward at a pace that means we must rely on those who sat on, and guided, the expert reference group if we are to avoid the risk of incoherence in the future.
The overarching purpose of the bill is clear: to confirm that certain digital assets are, in Scots law, capable of being owned and to establish the rules governing their recognition, control and transfer. However, if we are to legislate with clarity and foresight, we must also grapple honestly with the conceptual foundations of the bill. I would say that we have already delved into the undergrowth, but that is perhaps unfair, so I will say that we have circled the roundabout of understanding the characteristics of rivalrous goods and independent existence, grounded in work done by the Law Commission. That is reflected in recent case law from R v Lakeman in the Court of Appeal, which more understandably explains what rivalrous means. In that case, there was a discussion about virtual in-game currency, which was recognised as being an asset because its use by one person necessarily prevented its use by another.
That is an essential distinction between mere data—which was referred to by the convener as the PDF—and true digital assets. The Law Society of Scotland made the important point that the requirement for an “immutable record of transactions” risks being too closely tied to one technological model—the standard block chain, which I think people have a growing understanding of—and that that may inadvertently exclude other systems being developed that allow authorised modifications in order to correct a genuine error, for example. That is why the bill must safeguard technological neutrality as we progress.
The bill seeks to offer clarity about ownership, control and transfer, and much of that is welcome. The Law Society of Scotland rightly cautions that treating digital assets as corporeal movables for the purpose of acquisition could cause future uncertainty. It would be unfortunate if a device intended to simplify ownership were actually to complicate the situation, particularly, as we have already heard, with regard to insolvency, property doctrines and the existing rules governing incorporeal rights. A more direct approach that links transfer to the intention to transfer ownership and to the transfer of exclusive control might warrant reflection at stage 2. That is not an argument against the bill but a reminder that precision matters, particularly with regard to our private law system.
There is a strong case for some specific carve-outs, as has been mentioned by the committee, SPICe and the Law Society of Scotland. Those might be for assets such as the electronic trade documents dealt with in the Electronic Trade Documents Act 2023, uncertified securities dealt with by existing UK regulations, and financial collateral under the movable transactions regime. All of those are already governed by detailed statutory frameworks, and bringing them within the scope of the bill threatens to create conflict, uncertainty and unintended consequences. The Government should therefore confirm whether it intends to pursue explicit exclusions or statutory instrument powers to clarify the scope of the bill as technology develops.
I will have the great pleasure of closing on behalf of Scottish Labour later, when I will revisit the market overt and the question of ownership. I reaffirm that we will be supporting the bill.
I detect a frisson of excitement in the chamber.
16:13
The Digital Assets (Scotland) Bill is a narrow bill that will define the existence of digital assets in Scots law. It is clearly needed. Like it or not, digital assets, from cryptocurrencies to tokenised records, are now part of how some individuals and businesses operate. However, until now, their status in Scots private law has remained uncertain. The bill clarifies that digital assets are capable of being treated as property within our legal framework and of being owned.
By establishing clear definitions, including the requirement that digital assets be rivalrous and capable of being recorded immutably within an electronic system, the bill attempts to provide a foundation for legal certainty and investor confidence. As colleagues have mentioned, that is necessary because of the lack of a body of case law in Scotland to cover the matter.
The bill responds to recommendations from the expert reference group on digital assets in Scots private law and from others. Their work has highlighted the gaps, risks and practical challenges that arise in attempting to categorise digital assets within our long-standing legal framework. The bill draws directly on several of the expert group’s recommendations, especially with regard to defining digital assets and clarifying the principles of ownership and control, and their expertise has shaped much of the bill’s structure and rationale.
The bill seeks to be technology neutral and future proof, establishing a legal baseline that will then need to have frameworks of regulation and guidance built on top of it. Digital assets are evolving rapidly, and our legislative response will need to be sufficiently dynamic to manage the risks arising from the increased use and legitimacy of digital assets, such as blockchain-based currencies. I believe that such currencies, if unregulated, present significant risks to individual investors and to the structure of our banking system, and that robust regulation will be required to mitigate those risks. The Scottish Government, like other Governments around the world, will need to be informed and proactive to keep ahead of those risks. They are too great and too closely linked with fundamental elements of our economy for us to wait for a crisis to happen before regulations are brought in.
I also recognise that “digital assets” is a very broad category of what this bill allows us to legally consider as “things” that can have positive and constructive impacts on our society. I am sure that my colleagues share my distress at, for example, the energy-intensive nature of bitcoin mining. At a time when we are racing to electrify our industry and transport to try to keep ahead of a collapsing climate, it is horrifying that a great deal of energy is being used to generate speculative assets that can be used to avoid taxation, bypass legislative safeguards and otherwise undermine the reliable and transparent operation of our economy. It would be useful to understand from the Scottish Government what devolved powers, if any, it has in this space to bring in regulations and to diverge from the rest of the UK. I look forward to asking questions about that at stage 2.
The Scottish Greens intend to support the bill at stage 1, but we expect the Scottish Government to move quickly in providing guidance and further legislation in this space to address the broader risks that digital assets present.
16:16
I thank everyone who has been involved in the scrutiny of the bill. Like the convener, I thank in particular the bill team—a very assiduous team, in my opinion.
I am pleased to speak in support of the general principles of the Digital Assets (Scotland) Bill. It recognises the simple but crucial reality that value today is increasingly held, transferred and secured digitally. Whether that value exists as a crypto asset in a public blockchain, a tokenised security or a digital representation of a real-world asset, Scots law must be able to recognise it as property.
Digital assets are sometimes spoken about as if they exist only in theory, but in practice they are secured by cryptography, recorded in distributed ledgers and controlled through private keys. Ownership, in functional terms, is exercised by the ability to control and transfer an asset on a blockchain network. Millions of transactions occur daily on decentralised systems that operate continuously, without intermediaries and across borders. The law cannot afford to treat those assets as intangible curiosities when they are already functioning as stores of value and mediums of exchange.
Blockchain and digital asset infrastructure underpin not only cryptocurrencies but decentralised finance, tokenised assets and programmable financial instruments. With estimates suggesting that the blockchain technology market could be worth £4.48 billion to Scotland by 2030, legal certainty becomes a competitive advantage. Jurisdictions that provide clarity on ownership, custody and transfer will attract developers, financial technology start-ups, asset managers and institutional capital. The bill positions Scotland to compete on that basis.
However, Scots property law was developed for a world of physical possession, and paper-based rights and digital assets do not fit neatly into existing categories such as corporeal movables or traditional incorporeal rights.
A crypto asset is not a physical thing, and nor is it simply a contractual right against another party. That mismatch creates uncertainty that the bill seeks to resolve. Without clear recognition of assets as property, parties face risk in areas such as custody, lending and succession. As such, businesses may avoid Scots law altogether, while individuals may be left without clear legal remedies.
By confirming digital assets as property, the bill supports critical market functions, such as custody arrangements, asset management and secure transfer. It provides the legal underpinning for regulated custodians, institutional investors and fintech firms operating in areas such as tokenisation and decentralised finance. Importantly, it also provides reassurance to individuals who hold digital assets directly, often through self-custody, that the law recognises those assets as something that they can own and protect.
The bill is about future proofing Scots law without overlegislating. It provides certainty without rigidity and clarity without constraining innovation. By confirming that digital assets are capable of ownership, we ensure that long-standing legal principles continue to apply in a digital context. As a member of the Economy and Fair Work Committee, I believe that the bill represents a sensible, informed and necessary step forward, and I support the motion that is before Parliament.
16:21
I thought that I had seen the shortest bill in my time in Parliament when I saw the Community Wealth Building (Scotland) Bill, but this one is even shorter—it is set out in only three pages and nine sections. However, its implications are far-reaching, and it is perhaps no surprise that the committee managed to write a 38-page report about it. That is a testament to the thoroughness of committee members’ consideration of all the related issues.
For the first time, private law in Scotland will establish that digital assets are “objects of property” and can be treated as such and are capable of being owned. That is it, basically.
I will probably not get the chance to do this again, so I can say that, for me, the opening section of the bill is a joy to behold. It was pretty daunting to read—at least for me. It says:
“a digital asset is a thing that … arises from an electronic system that makes it rivalrous”,
which means that it cannot be used more than once. It goes on to say:
“An electronic system makes a thing rivalrous if … the system maintains an immutable record of transactions in relation to the thing, and … that record is used to ensure that when, within the system, a person transacts in relation to the thing”,
for example, by spending or transferring it,
“the person loses the ability to transact in relation to the thing in that way again.”
I love that definition. In other words, a digital asset is unique and, once a transaction is done, it is done.
As I said, the implications of all of that are far reaching and will mean that Scotland's legal system can provide legal certainty when managing digital assets in the future.
Digital assets are becoming an increasingly important and established part of global financial services. They are digitally recorded, traded and transferred by means of digital ledgers, which are usually called blockchain, and their increasing use and value is evident.
We have a very strong fintech sector in Scotland, including specialist digital asset trading businesses that are worth around £2 billion to the economy at the moment and employ more than 11,000 people across 260-odd companies. The minister reminded us that it is estimated that the value to Scotland of the blockchain technology market will reach about £4.5 billion by 2030. Therefore, the need for the bill is pretty clear, and it also gives Scotland the ability to adapt to future emerging trends in the digital space—a point that was acknowledged early in the report.
Our committee was extremely forensic in scrutinising the bill, and so, too, were our witnesses, who tried their best to help us through some of the complexities that arose. Some members mentioned the concept of immutability, which means that a digital asset cannot be changed. That got quite a bit of attention, and there was some contrasting opinion from our learned professors. Some thought that absolute immutability was not helpful, and that in cases of potential fraud, there had to be an ability to correct a digital record from unauthorised or distorted changes. Others suggested that absolute immutability was, in fact, essential and that systems that permitted changes to be made should be excluded. Others preferred to describe the term in terms of the integrity of the records, whereby a degree of flexibility is enabled but, at the same time, the records are secure from unauthorised alteration.
Members can see that we were grappling with some fairly complex and technical issues in the bill. In the time-honoured manner and in a masterstroke of wisdom, the committee recommended that the Government should monitor developments in this area, working with industry, academia and the like to develop the guidance on and interpretation of those important issues as they apply to digital assets.
Section 3 of the bill defines ownership of a digital asset as having “exclusive control” of it. Section 5 says:
“A person has control of a digital asset”
if he or she has the ability to transfer it, and that exclusive control rests with a person who has sole control of the asset. There was quite a bit of discussion around that, too, touching on what was meant by control—exclusive or not. An example was offered in which a person could have exclusive control of something but not actually own it—for example, in a work context; and in the opposite situation, a person could own a digital asset but did not have exclusive control of it, such as in the case of a shared private key. Again, the committee opted to draw the Government’s attention to those issues and recommend that they be addressed in the accompanying guidance to the bill.
The bill is very short but incredibly significant for Scotland in moving forward in the digital assets space. In this brief glimpse of that space, I have mentioned a couple of issues—of immutability and ownership and control—which were given considerable attention by all my committee colleagues. I hope that, in taking the bill through stages 2 and 3, the Government will be able to clarify those important matters and that the bill will be strengthened as a result.
We now move to winding-up speeches.
16:27
I would like to indicate my support for the Economy and Fair Work Committee’s stage 1 report, which notes the potential for digital technology to have wide-ranging impacts across society. There are economic benefits and opportunities, but there are also risks for Scotland.
The committee calls on the Scottish Government to maintain a proactive approach, to engage with changes and to adopt approaches that ensure that benefits are maximised and risks are mitigated as technology changes.
The committee recommends that
“the Scottish Government works with stakeholders to ensure Scottish interests are represented on the UK Jurisdiction Taskforce, as well as any other relevant expert group which may be established.”
In addition, the committee
“calls for the Scottish Government to establish a Scottish panel of experts to advise the courts, businesses and the legal sector on emerging digital technology issues in Scotland.”
The committee acknowledges
“that further legislation is inevitable, given the pace of change in the digital world.”
The committee also believes that the
“important issues of definition and application should not be left to subordinate legislation”,
so it does not recommend the inclusion of additional regulation-making powers in the bill. The committee acknowledges the Scottish Government’s stated intention and the bill’s narrow purpose, and it supports that approach to ensure legal recognition of digital assets in Scots law.
16:28
I echo my thanks to all those who have been involved—including those who submitted evidence to the committee, those who support the committee and the Government and the bill’s drafters—in what is possibly one of the shortest bills that has made its way through the Parliament. No matter how short a bill is, it still needs the right level of scrutiny. It is important that, as we increasingly move into a digital age, scrutiny takes place.
The debate allows me to contemporise the discussion about market overt. I am doing so for a practical reason. If we cast our minds back to medieval times, when people travelled by foot or horse, we know that there were nefarious individuals who stole from people and sought to profit by selling to others. The challenge was that it was very hard for the purchaser to know whether something was stolen and who was selling it. What developed was a legal fiction in which, if something was bought in public in a certain market during the hours of daylight, ownership would transfer.
I reference that because of the challenge that we are talking about in relation to the bill: the need to have transparency in the passage of ownership and the need to have commerce that works. The medieval answer was that, if there was a certain market, there would be good ownership. The answer in the bill that is in front of us today is, “Oh, you’ll be all right.” Evidence has been submitted to the committee about the authority for doing that. The committee’s report makes reference to it, and it is an important element for the Government to consider at stage 2. That problem sits at the heart of a number of areas in which there have been requests for guidance and understanding, so it is important that we know the view that the Government intends to take. Other areas must be considered, too.
I seek the Government’s assurance that it will reach out, provide guidance and do the thinking, particularly about the wider questions that surround digital assets. We have talked about the situation with regard to insolvency and the reserved nature of much of that, but there are also questions of international law, diligence, security, borrowing, civil procedure and taxation with regard to digital assets.
I welcome the committee’s call for a programme of future reform, and I echo the calls for Scotland to remain aligned with developments across the UK and internationally. I confirm that Scottish Labour will support the general principles of the bill, but I urge the Scottish Government to act on the concerns that have been set out by the Law Society of Scotland, the committee and others, to ensure that the bill not only is workable on paper but is effective, fair and future proofed.
16:31
This has actually been quite an enjoyable debate in many ways.
Until now.
I am being told that I have gone too far already.
Daniel Johnson started off by warning us about the danger of going down rabbit holes, and then Martin Whitfield got up and took us to medieval England—that was a rabbit hole, if I have ever heard one. He continued down that rabbit hole when he got a second chance to speak, which is remarkable.
I remember having to stand up in the Parliament to announce that
“I am not a potato”.—[Official Report, 8 November 2022; c 79.]
That might be the only thing that anyone will remember about my time in the Scottish Parliament—I do not know. However, I never thought that I would see the day when a member would get up and say, “I’m an international cybercriminal,” but that is what Murdo Fraser announced this afternoon. Given that that will appear in the Official Report, I think that that can probably be used as court evidence—in case anyone is listening. [Interruption.] “Guilty, guilty—I’m an international cybercriminal,” he says.
In all seriousness, I support the general principles of the bill, and I do so having been directly involved as a committee member in most, although not all, of the stage 1 committee scrutiny sessions.
This is a complex and highly specialised area, and it is probably obvious to all my colleagues—it is certainly obvious to me—that I am not an expert in digital assets. When Martin Whitfield announced that there is a growing understanding of blockchain, I confess that I shrank a little in my seat. I do not have a growing understanding of blockchain, but I am open to tutorials. If anyone is willing to sit down and take me through the dummy’s guide to blockchain—
[Made a request to intervene.]
[Made a request to intervene.]
Oh, a number of members wish to intervene. I am happy to give way to Martin Whitfield.
I will not give Stephen Kerr a tutorial, but I note that blockchain is referred to a lot and is used as a basis expectation. However, there are changes in technology that are making even blockchain antiquated, and the bill needs to address that.
That is cold comfort. Just when I thought that I was going to get a tutorial on blockchain, Martin Whitfield tells me that it is now out of date.
Daniel Johnson also wanted to come in.
I suspect that Stephen Kerr might just be trying to fill his time by encouraging others to do it for him. However, I wonder whether he is demonstrating the need for the bill. Most people are probably unaware of how these things operate, but there will be people in Scotland who are holding such assets who might well end up in disputes. That might happen to businesses, and it might happen in divorce cases, so, in those situations, we will need Scots law to be able to understand and incorporate digital assets so that we can settle such cases fairly. Does Stephen Kerr agree that that is fundamentally what we are here to do?
I agree with Daniel Johnson on everything that he said, except for the bit when he said that I was inviting people to contribute in order to fill my time. I think that the Parliament knows that I am more than capable of filling up any of the speaking time that I am generously permitted.
Nevertheless, I agree with Daniel Johnson that we are dealing with unfamiliar concepts and unfamiliar legal language, so it is good that the committee includes a learned colleague.
We are living in a technologically accelerating world. Willie Coffey was right when he said that the witnesses did their best to help us to understand things, which they did. The evidence sessions were very helpful, and the quality of the evidence was superlative.
I pay tribute to my committee colleagues for the quality of the scrutiny. Frankly, under the convenership of Daniel Johnson and the deputy convenership of Michelle Thomson, I felt that there was a seriousness, a discipline and an intellectual rigour to our scrutiny. Kevin Stewart was right to mention the quality of the committee’s scrutiny.
The committee heard a wide range of evidence, some of which was contested. The committee’s report reflects that there were different points of view, which were refreshing to hear. As Willie Coffey said, the report is 38 pages long, and I have to confess that it is not a leisurely read—it is pretty difficult to read. When complimenting the report, I said to Murdo Fraser that I thought that it was 100 pages long, but, when I checked, I realised that it was 38 pages. It must have felt as though it was that long because of the density of the information that it contains. I place on record my thanks to the clerks for their expert work.
As a number of members have said, the bill is deliberately narrow. It focuses on providing legal certainty in Scots law by recognising that certain digital assets are capable of being property, of having ownership and of being lawfully transferred. Given our existing property categories predate digital technology, the clarification in law is necessary and overdue. As a committee, we accepted that concepts such as rivalrousness and immutability, although not everyday language, are sufficiently clear to provide a workable legal framework.
We also accept that this is a framework bill. It sets foundations, rather than answering every downstream question. Not only do we not know the answers; we do not know what questions we might face in times to come. Issues such as tokenisation, environmental impact, insolvency, jurisdiction and enforcement are all flagged by the committee’s report as areas in which further work will be needed.
That leads me to strike a note of caution. The pace of technological change in this area is not slowing down; it is accelerating. The committee was clear that complacency would be a mistake. As colleagues have said, if Scotland is to remain a credible and competitive legal jurisdiction for this kind of activity, which will be a task in and of itself, given the nature of the market and where it is centred, the Parliament and the Government will need to stay properly advised, properly resourced and alert to what the legislation will set in train. Further legislation will be inevitable. The capacity of the Parliament and we, as parliamentarians, to scrutinise it properly will be tested. As a current member of the committee, I have no doubt about that.
Compliments have been paid to the Government’s bill team. I also point out that this bill might well be the last one that Richard Lochhead is in charge of as the minister. If that proves to be the case, it is hard to imagine a more intricate and demanding subject on which to legislate. I am sure that the minister longs for a return to the UEFA European Championship (Scotland) Bill. It would be churlish of me not to say that I recognise the work that the Government and Government officials have done on the bill.
For all the reasons that I have outlined in my short contribution, as well as the contributions of colleagues across the chamber, I am happy to say that the Conservatives will support the general principles of the bill. I encourage other members to do the same.
16:40
I thank everyone who has contributed to the debate. I also repeat my thanks to the expert reference group for the work that it has undertaken to inform the development of the bill, and to the Economy and Fair Work Committee for its work in scrutinising the bill. Daniel Johnson, who is chair of that committee, gave an easy-to-understand explanation of many of the concepts in the bill. I was grateful for that to be put on the record.
Like others, I also thank the bill team. I assure members that, as a business minister dealing with quite a legalistic bill, I was often reliant on my bill team to explain many of the concepts behind it to me. As recently as yesterday, we were discussing bored apes. If someone had said to me that I would ever discuss the concept of bored apes with a bill team, I would not have believed them. Bored apes are non-fungible tokens—NFTs—which are digital tokens that are generally considered not to be exchangeable for a similar type of token. They are unique pieces of art, there are thousands of them and they are very valuable and can be worth thousands of pounds each.
That is what bored apes are: collections of those unique pieces of art. That is the changing world in which we live, and that is why this bill is before us today; we have to make sure that our legislation is catching up with what is happening out there and that we can give legal certainty in the sense of identifying property, which is what the bill is all about.
Digital assets are an increasingly important component of a range of areas, including financial services and the daily economic life of our citizens. By providing the greater legal certainty that is required on the property status of digital assets, the bill provides a significant legislative foundation for Scots law. As I said, it will enable Scotland not only to keep pace with legislative developments in other jurisdictions but to take better advantage of all the economic benefits and opportunities that digital asset technologies and innovations can offer. It is clear from today’s debate that there is widespread support for the general principles of the bill, which I very much welcome.
I will quickly address a couple of issues. On carve-outs, as Daniel Johnson and other members of the committee have said, many recommendations from the committee deliver good guidance on a number of issues. We will reflect on those, take them forward and respond to the committee in due course on all of them.
One of the issues that were raised was the prospect of carve-outs on things such as voluntary carbon credits. Voluntary carbon credits will be confirmed as objects of property if they meet the criteria in the definition of a digital asset that is contained in the bill, as would any other token. As objects of property, digital assets enjoy the protection of the right to the peaceful enjoyment of possessions under article 1 of protocol 1 of the European convention on human rights. However, we should all remember that the right to the peaceful enjoyment of possessions is not an absolute right. Therefore, should voluntary carbon credits meet the definition of a digital asset in the bill, they can be confirmed as objects of property. However, as we go into stage 2, we will reflect on the concerns that were expressed to the committee by some witnesses about what that would mean for the voluntary carbon credits that may arise from the ownership of land and so on.
The point that was made by witnesses in relation to carbon credits—and I understand that that issue was provided as an example—was that there may well be things that exist, either in Government or in other organisations, which, given the point about rivalrousness arising from an electronic system and there being an immutable record, may inadvertently satisfy the criteria yet are merely means of recording certain things or of regulating certain elements. Does the minister accept that point, and will the Government undertake work to identify any regimes that might fall into that category?
Yes, we will look at that point and reflect on it.
Other issues, such as electronic trade documents, were also mentioned, and some academics from the University of Aberdeen raised concerns to the committee about whether they should be recognised as digital assets. We will also reflect on that issue in relation to potential carve-outs.
As many members have said, there is a need for legislation. The committee heard from a range of witnesses that there is a lack of legal certainty on the status of digital assets as objects of property in Scots law. The overwhelming majority agreed that greater certainty is necessary and that that should be provided for in primary legislation. That was reflective of the views shared by respondents to the Scottish Government’s consultation and from members speaking in today’s stage 1 debate, so the need for a bill is not in doubt.
The bill will put beyond doubt that certain digital things can be owned if they meet the definition of a digital asset in the bill. However, given the rapid proliferation of digital assets, we should not wait until an appropriate case is brought before the Scottish courts to confirm their legal status as objects of property. Therefore, the bill will have the opportunity to make the law clearer, and we want to take that forward as a Parliament.
I am pleased that the committee supports the general principles of the bill. I could talk for a long time, but I will bring my remarks to a close. There are many other issues in the committee’s report, but we understand that the bill is required. It is a short, sharp bill that is necessary to recognise digital assets as property in law.
Without further ado, I say that Scotland’s independent legal system—I know that we heard about medieval England earlier—and legal heritage are something that we are committed to preserving, while ensuring that Scots law remains a forward-looking and enabling environment for the technologies of tomorrow. That is what the bill is all about, and it will help us to achieve that. Therefore, I urge Parliament to support the general principles of the bill.