Chamber and committees

I am sure that, just as you watched the previous evidence sessions, our previous witnesses will also be watching this session, so I reiterate that clear call to people to provide more information, although they will need to do it quickly because we are up against time, as I understand it. What are your thoughts about the question of tokenisation?

I have a question about tokenisation, which you might have seen come up quite a lot in our discussions. The bill is silent on it, but we know that it is a growing area. I think that the point that we stopped at is that it is not always clear that transferring ownership of a digital token is transferring the underlying asset. What is your thinking about how that issue might be approached, because it is fundamental to the approach to tokenisation in law? Scotland’s place in utilising tokenisation is important, and we are already there. It could bring greater value to the economy and so on.

I appreciate that that is quite a technical question, so if you want to bring in somebody else, I will be quite happy.

Good morning, and thank you for joining us. Following on from what has just been said, the potential exclusions include not only voluntary carbon credits; electronic trade documents and securities traded on the certificateless registry for electronic share transfer—CREST—system have been excluded, because there is already legislation in place that deals with those.

How confident are you that you have captured everything in terms of exclusions? As a counter to your comment that we need to start somewhere, are you sure that you have managed to exclude everything with regard to other types of vehicles? We want to ensure that greyness does not creep in as a result of the bill.

I fully accept that we need to start somewhere, and we all understand that we cannot start with perfection. However, given the legal complexity and the fact that the potential interface with a number of different laws will start to be fleshed out and deepened as we go forward, are you happy that you have the right threshold to allow that to happen?

I fully accept that there will be things that none of us know and that we cannot be expected to know—that is okay—but we are having to hazard an educated guess, given what we know at the moment, in order to make sure that we get the balance right. Are you confident about that?

What you are saying makes sense, and you are applying understood principles. It touches on the merging of the understanding that digital guys have of how things operate and the core principles arising from historical property law.

I understand that, but the example that I asked about in the first evidence session on the bill was what happens where there is generative artificial intelligence and you may have an amorphous entity—a thing—that is constantly evolving. The AI is so advanced that it is constantly rewriting itself. Trying to fix on what that thing is might inevitably lead to it being defined by its token. I am slightly embarrassed to say that, because I am sure that some of the tech guys will say “No, Michelle, you have not got it quite right”, but nobody has said that to me thus far in any of the evidence sessions.

I do not necessarily disagree with you, but I am not convinced—maybe I am not educable enough to be convinced—that there will not be situations like that and that, very soon, the only pivot that we will have is a digital token, if that makes sense. Therefore, have we really bottomed out the consideration of why tokenisation is so important?

Do you want to add anything, Fraser?

Of course, guidance will also allow lawyers to do what they do best. [Laughter.] There was a lot of laughter there, but I was making no comment on what people think that lawyers do best. I simply meant that it might allow lawyers to interrogate individual scenarios as they emerge to enable the formation of precedent.

Framing the bill in such a way allows for the recognition of that uncertainty, because we are where we are. Thank you very much.

Perhaps we could return to the issue of tokenisation, which we have already skirted around and which was led off by Greg McLardie. Last week, we heard evidence from Professor Buchanan, who broadly explained the three types of tokens: payment tokens, utility tokens and security tokens. We can regard carbon credit, for example, as either a utility token or a security token.

My question is bigger than that, though. To what extent is it an issue that the bill is mute on tokenisation, bearing in mind the speed of change in that area? Is the prevailing approach a sensible one? In that case, I suppose that we should bear in mind that modifications will need to be made in relatively short order. Is it better to have something instead of nothing, or is it a serious issue that the bill is mute on tokenisation?

I will put that to Greg first.

Professor Robbie, what role do you see for guidance on the bill as situations emerge? There will be a sweet spot between taking that sensible approach of framing the bill as a step—to protect the innocents, as Greg McLardie said—and realising that the bill will also need utility in a fast-changing environment. I would appreciate your additional reflections on that.