Hansard

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.