UK Law and Practice Contributed by: James Burnie, Kathryn Dodds, Nicky Androsov and Olga Antonova, gunnercooke llp
1.2 Crypto-Assets 1.2.1 Property Considerations
There is inherent tension between the immutability of blockchain and the right to erasure under the UK GDPR, which is exacerbated by decentralisation net- works with no central operator. The right to erasure (referred to as the right to be forgotten) applies in vari- ous situations, such as where an individual has with- drawn consent (but this does not affect processing prior to consent being given), where the data has been unlawfully processed, or the data subject objects to processing and there are no overriding legitimate grounds to continue processing the data. While recent changes to UK data protection laws made by the Data (Use and Access) Act 2025 have introduced recognised legitimate interests, this does not resolve the fundamental tension. In practice, providers have developed a number of strategies to address the issue, including off-chain storage and anonymisation. 1.1.4 Smart Contracts The law in the United Kingdom is sufficiently flexible to recognise the ability to form a contract using smart contracts, so long as the relevant requirements for a contract are met (such as offer, acceptance, consider- ation, intention to create legal relations, authority and capacity, and certainty). This means that a smart con- tract is not, by definition, a validly enforceable legal contract. For example, a smart contract to perform a service simply by virtue of a timing requirement being met (eg, to pay GBP10 every Monday at 9am) is not in itself a legal contract because there is no considera- tion in return for the payment being made. In this respect, therefore, a smart contract can be con- sidered as evidence, and evidence of the terms, of a legal contract. 1.1.5 Industry and Trade Bodies There are various associations representing the blockchain industry in the United Kingdom, including CryptoUk, the UK Cryptoasset Business Council, the Blockchain Association UK, Solana Superteam UK and the Digital Pound Foundation. These associations do not regulate the industry, however they do com- municate and lobby on behalf of the industry with a view to facilitating the growth of the UK blockchain and crypto-asset ecosystem.
The draft Property (Digital Assets etc) Act has clari- fied the position that crypto-assets can be recognised as personal property under English and Welsh law, and as such can benefit from the remedies tradition- ally reserved for property. However, what is currently unclear is how property rights will be enforced in prac- tice, as this has been left to case law to develop. The Law Commission has, however, developed addi- tional guidance regarding the fact that generally con- trol should be seen as indicative (whilst not determi- native) of ownership – in the same way that position is indicative of ownership with respect to tangible assets. In this respect, therefore, a transfer of control may indicate, however does not determine, a change of ownership. With respect to the use of crypto-assets as collateral, therefore, this is clearly permitted. However, what is less clear is how security could be taken over collat- eral. In this respect, we are seeing the market take a cautious approach to taking security, and we would expect the position to become clearer over time. 1.2.2 Access to Banking There is no legal restriction on who firms providing crypto-asset services can use for general banking and payment services, however in practice we have seen UK banks being wary on onboarding such clients. This has raised concerns of the industry being debanked in the UK, and resulted in UK firms often using for- eign providers of banking and payments services. The position here is, however, gradually shifting as new banking providers are entering into the UK market, which have a greater tolerance for crypto-asset firms. 1.2.3 ESG/Sustainable Finance The UK does not impose ESG/sustainable finance requirements on digital assets. 1.2.4 Tax The UK regime is being updated incrementally for blockchain and digital assets, with particular areas of focus including stabling and DeFi lending. HMRC (the UK tax regulator) has also provided guidance on the taxation of matters such as airdrops, mining and NFTs.
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