Hansard

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.