The digital revolution has, put simply, reshaped the global cultural landscape. It has been a paradigm shift, unlocking new routes to productivity and new industries entirely. The shift is far from over, too, as new technological advancements bring about shifts of their own – the most recent of which has seen monetary value meaningfully cultivated in digital spaces. This is best examined through the lens of the ‘digital asset’, and its potential. However, it is not without its roadblocks, legal issues chief amongst them.

What are Digital Assets?

Technically speaking, the term ‘digital asset’ is a broad, even vague one. It can be used to describe practically any form or format of information kept in a digital manner – that is, represented in binary code. A photo, an email, a document, a string of code; all of these can be considered a digital asset in some form. However, the term has come to attain a more specific meaning within the tech sphere in recent years, borne out by the development of blockchain technology.

Blockchain is the technology that underpins cryptocurrency, most recognisable to those outside of fintech in the form of Bitcoin and Ethereum. Blockchain is often described as an ‘immutable ledger’, a neat phrase that highlights the key function and purpose of this new technology. Blockchain is a peer-to-peer, node-based system of transaction that introduces uniqueness to the digital plane.

Where, conventionally, digital assets are easily duplicated and disseminated, digital assets ‘minted’ via blockchain attain rarity akin to real assets. This is how cryptocurrencies retain their value. As such, a new definition for ‘digital asset’ as emerged, utilising the financial definition of ‘asset’ to describe a piece of digital information with rarity, immutability and tangible value.

Digital Assets and the Law

Digital assets in this new, value-informed capacity are extremely alluring for individuals and businesses alike. The fundamental mechanism of blockchain enables the digital transfer of confidential files, with an immutable log-book of transactions and even the potential for receiving digital signatures immutably. But with new technology comes new challenges, particularly with regard to legal obligations in relation to holding or transacting digital assets.

Some existing legal challenges relate to the transferring of valuable items across international borders. Tax laws and financial regulations can still apply, even where an exchange of value occurs outside of conventional centralised markets. As such, businesses and individuals need to remain cautious in engaging with such practices.

Regulating Digital Assets

Instituting proper regulations for crypto markets and the wider handling of digital assets is easier said than done, beyond the existing – and potentially archaic – examples touched upon above. Work is underway to modernise domestic commercial law in line with the incredible technological leaps that define today’s landscape, but between the rate of adoption and change, and the complexity of the field, major headway is yet to have been made.

The Law Commission has recently completed a review into changes that could be made to commercial law, but the report remains forthcoming. Regulation is, nonetheless, a guaranteed move – and potentially an unpopular one for many attracted to the ‘cryptosphere’.