Hansard

Thank you for the far too generous seven minutes.

I welcome the members who have chosen to be present for the debate. I have moved lots of legislation over my 17 years in government. Although this is a short technical bill, it deals with a relatively complex area and those of us who have paid close attention to the bill over the past few months have had our vocabularies expanded—I certainly have.

Despite the fact that it is short and technical, the bill is an important foundation stone in ensuring that Scots law can deal with an area of technology that is constantly evolving and becoming increasingly commercially important. The value of Scotland’s blockchain technology market is projected to reach £4.48 billion by 2030. We have a blossoming financial technology sector in Scotland that has grown from just 26 companies in 2018 to more than 260 today, and many of them are directly involved in developing digital assets. The opportunities that initiatives such as distributed ledger technology offer to create wealth and high-quality jobs are enormous, and the bill is a way for this Parliament to play its role in creating the legal framework that Scotland needs to realise its full potential in this area.

As I said, this is a short bill—only three pages long—but it is an important one. To put it simply, its purpose is to ensure that Scots law can recognise certain digital things as objects of property, despite them being neither physical things nor intellectual property in the usual sense. The digital things that it covers are only those that are “rivalrous”—perhaps one of the new words that we have come to learn during the progress of the bill. Physical things, such as a coin, are rivalrous. If I give someone the coin, I no longer have it. If I give it to someone, I cannot give it to them again. That is in effect the definition of “rivalrous” in the bill. The same is true of, say, a bitcoin, because the system stops me spending it twice. That is another fundamental principle of the bill. It is not true of other types of digital things, such as a photograph on a phone, which we can share with any number of people without losing our own copy or our ability to share it with even more people. Digital things of that kind are therefore not rivalrous, and the bill does not include them in the definition of the types of digital assets that it covers.

Ultimately, it remains up to the courts to decide how to treat the digital things that the bill does not provide for. Under the bill, digital assets are incorporeal property, which is qualified by sections 3 and 4, which cause those assets to be treated in certain ways as corporeal or physical property as opposed to incorporeal property, because that more closely reflects how people who deal with digital assets tend to think about them. Of course, digital assets are not physical things, so the bill accommodates that by saying that having control of a digital asset in the way that section 5 describes is the equivalent to having physical possession of it.

In a leading text on the possession of corporeal moveables in Scots law, Dr Craig Anderson explains, in the context of physical things, that

“to possess, one must establish control over the property”.

In essence, the bill provides the courts with a proxy for physical possession to overcome the difficulty that digital assets cannot be physically possessed. That done, it leaves the courts with the necessary space to develop the law, just as they have developed the law to reflect practical and commercial realities in relation to things of every other kind. That means that legal principles that are developed in the context of corporeal moveables can be applied and developed in relation to digital assets, too. For instance, that includes the idea of civil possession, by which an agent’s possession of a thing on behalf of a principal allows the principal to become the owner of the thing. In a novel area such as this, it is right that the courts should have the same latitude to develop the law in response to new technologies that they have historically enjoyed when dealing with physical things of all kinds.

During the passage of the bill, we touched on the possibility that there may be a need for further legislation in relation to digital assets—for example, to deal with their treatment as a matter of private international law. The bill will not be the last legislative work on digital assets. As was discussed with the committee at stage 1 and reiterated at stage 2, there will be a need for legislation in the future to deal with a number of issues on the wider area of law, given how fast the world is changing around us and how fast technology is developing. We will continue to legislate in the future. We have to ensure that our legal system adapts in due course. However, the bill provides a necessary foundation and it does what the expert reference group recommended to the Parliament, which is now being implemented.

I move,

That the Parliament agrees that the Digital Assets (Scotland) Bill be passed.

14:32