This blog article has been written by Professor Burcu Yüksel Ripley and Dr Alisdair MacPherson. As part of a SPICe academic fellowship, they have previously written a briefing on Digital Assets in Scots Law considering the treatment of digital assets in Scotland and with reference to developments in other countries and internationally.
What follows are the views of the authors, not of SPICe, or the Scottish Parliament, or any other organisation or group to which the authors are affiliated.
Background
The Scottish Government introduced the Digital Assets (Scotland) Bill in the Scottish Parliament on 30 September 2025 to clarify the status of ‘digital assets’ as a type of property in Scots law and to confirm rules for acquisition of ownership.
We provided an overview of the Bill and next steps for its parliamentary journey in an earlier blog post. In this follow-up article, we identify and examine issues regarding the Bill’s scope and the definition of ‘digital asset’ which would benefit from further attention and consideration during the legislative stages of the Bill and beyond.
Territorial scope of the Bill
The Bill does not have any provision defining its (territorial) sphere of application. The question of when the legislation will apply naturally arises given the cross-border dimensions of digital assets and the interaction with private international law (PIL).
Even in the absence of an explicit provision in the Bill, it would seem to apply if the issue in question is governed by Scots law (see MacPherson and Yüksel Ripley’s Digital Assets in Scots Law, p.48). However, the determination of the applicable law (or governing law) is generally challenging in the context of digital assets. This is a PIL question and is not addressed by the Bill.
Given the complexities of PIL matters in this area and ongoing PIL reform projects in England and Wales and internationally, e.g. in the HCCH, (see further B. Yüksel Ripley, A. MacPherson and L. Carey, “Digital Assets in Scots Private Law: Innovating for the Future’ (2025) 29 Edinburgh Law Review (May, 2025) 175, pp.197-208), we suggest that PIL matters are primarily included in future phases of reform work in Scotland, not in the current Bill.
Choice of law?
There is, however, one further question we will mention here, relating to choice of law, because of the reference to it in the Bill’s Policy Memorandum. It is stated that the current lack of legal certainty in relation to the status of digital assets under Scots law “may discourage tech developers and digital asset owners from choosing Scots law to govern their dealings with digital assets” (paragraph 10).
That reference seems to assume that parties can choose the applicable law regarding property issues. This is, however, not the case under the existing Scottish PIL rules. Party autonomy is, in general, limited to matters of obligations (particularly contract). Proprietary matters, on the other hand, are traditionally governed by the lex situs (i.e. the law of the place where the thing/property is located). The Bill would not change this in respect of digital assets, unless the legislation includes a provision stating that it applies to digital assets (whether or not Scots law would otherwise apply) where parties expressly designate Scots law as the applicable law or specify that the legislation’s provisions are to apply (for a similar approach see e.g. Article 3(2)(b) of the Act on Tokens and Trustworthy Technology Service Providers in Liechtenstein).
If the legislature’s intention is to further extend the role of party autonomy for property issues regarding digital assets in PIL, this could alternatively be examined as part of future reform of PIL rules in Scotland. This would involve a more holistic approach, including jurisdiction and applicable law issues. In relation to the applicable law, consideration could be given to adopting a conflict of laws rule based on party autonomy, along with rules to apply in the absence of such a choice (see e.g. Section 12-107 of the Uniform Commercial Code in the US and Principle 5 of the UNIDROIT Principles on Digital Assets and Private Law). Other related PIL matters in areas such as debt enforcement could also be addressed as necessary.
Under the existing PIL rules, if parties choose Scots law to govern their digital asset transactions, this choice of law would in principle apply to contractual matters, not property issues. Nevertheless, for on-chain transactions among participants within digital asset systems, we think that there would be no strong reason for the chosen law to govern not only contractual matters but also property matters involving those parties (see further B. Yüksel Ripley, A. MacPherson and L. Carey, “Digital Assets in Scots Private Law: Innovating for the Future’ (2025) 29 Edinburgh Law Review (May, 2025) 175, pp.205-206).
Material scope of the Bill
‘Digital asset’ is a broad umbrella term, which can refer to an asset in electronic or digital form. A social media account or an email address, for example, can be regarded as a digital asset in a wide sense. The existing law already provides solutions for them and therefore the Bill does not seek to apply to them.
Novel types of digital assets are, however, challenging for the law to accommodate. This includes cryptocurrencies like Bitcoin, non-fungible tokens (NFTs), stablecoins, central bank digital currencies (CBDCs), and electronic trade documents (ETDs) (see further MacPherson and Yüksel Ripley’s Digital Assets in Scots Law, pp.9-14). The question therefore arises, which of these digital assets are within the Bill’s scope, and which ones fall outside?
Are any digital assets explicitly included in the Bill?
The Bill does not provide a list of digital assets which fall into its scope of application (yet the Bill’s Explanatory Notes do refer to Bitcoin and NFTs in illustrating points). Instead, in section 1, the Bill sets out a definition of a digital asset. This is an appropriate approach given that any legislation in this area should be as future-proof as possible. However, it also means that each digital asset is to be assessed on a case-by-case basis against the criteria provided in the Bill to determine whether it is within the Bill’s scope or not. As will be explained below, this may not always be straightforward under the proposed criteria.
If an asset does not meet the Bill’s criteria, the legislation will not apply to it. This, however, does not mean that the asset in question cannot be property in Scots law. It may still be recognised as a property object under the wider (property) law if it meets relevant tests under that law.
Should any digital assets be explicitly excluded from the Bill?
The Bill does not expressly exclude any categories of digital asset from its scope. However, there may be particular reasons (policy-based, commercial, or otherwise) that the Bill should not apply to certain types of digital assets. For those assets, the Bill should provide an explicit carve-out in section 1 (for a similar approach in the US, see the carve-outs provided in Section 12-102(a)(1) of the Uniform Commercial Code). One pertinent example to consider is ETDs.
Exclusion of electronic trade documents?
There has been recent UK-wide law reform concerning ETDs, resulting in the Electronic Trade Documents Act (ETDA) 2023. This Act gives electronic forms of certain trade documents the same legal status as their paper counterparts if they satisfy criteria set out in the Act. The non-exhaustive list of trade documents provided in the Act includes the following: bill of exchange, promissory note, bill of lading, ship’s delivery order, warehouse receipt, mate’s receipt, marine insurance policy, and cargo insurance certificate. The Act ensures functional equivalence between paper and electronic forms of trade documents falling within its scope. It also provides the possibility of change of form from electronic to paper (or vice versa).
The Bill, on the other hand, introduces substantive law provisions for digital assets. If the Bill applies to electronic forms of trade documents (by considering them digital assets under the Bill), this will undermine the existing functional equivalence between paper and electronic trade documents established by the ETDA 2023 and could have unintended consequences.
One example is the good faith acquisition provision in section 4(2) of the Bill. In Scots law, obtaining ownership from a non-owner is an exception in relation to, for example, bills of exchange as negotiable instruments. Although there seems to be some consistency between the rule for these instruments under the Bills of Exchange Act 1882 and the rule for digital assets under the Bill, there would be uncertainty as to which of them would apply to bills of exchange (or promissory notes) in electronic form. Further, a good faith acquisition rule does not apply to all trade documents. There is no strong reason why the Bill should change this for those trade documents just because they are in electronic form that complies with the Bill, rather than being paper.
ETDs are substantially different from (other types of) digital assets. ‘Pseudonymity’, which is a relevant justification for the application of the good faith acquisition rule to, for example, Bitcoin and similar cryptocurrencies (see paragraph 59 of the Bill’s Policy Memorandum), is less relevant for many trade documents. Trade documents (in electronic or paper form) are typically used by parties whose identities are known to each other in a business context. This is particularly necessary for various requirements associated with, for example, trade sanctions, anti-money laundering and counter-terrorism financing (AML/CTF) compliance, and know your customer (KYC) checks.
If ETDs are not excluded from the Bill, this will create interpretation difficulties and uncertainties for ETDs which meet the requirements of both the Bill and the ETDA 2023. Applying different legal regimes to electronic and paper forms of the same trade document would also not be desirable given the functional equivalence between paper and electronic forms of the same trade documents and the possibility of change of form.
Consequently, the Bill should have an explicit carve-out for ETDs in its definition. Otherwise, there will be problems determining which legal regime and rules apply to trade documents under Scots law. Traders might be less willing to use ETDs and some of the benefits Scotland expects to gain from the recent ETDs law reform under the ETDA 2023 may be jeopardised. ETDs (and any future law reform for them) should be considered under the law relating to trade documents, rather than digital assets (see further MacPherson and Yüksel Ripley’s Digital Assets in Scots Law, pp.31-32).
Definition of ‘digital asset’ under the Bill
The Bill provides a definition of a digital asset in section 1. If ‘a thing’ meets the following cumulative criteria, it is a digital asset under the Bill:
(1) arises from an electronic system,
(2) is made rivalrous by that electronic system, and
(3) exists independently from the legal system.
The second criterion of rivalrousness is further defined. The electronic system must maintain an ‘immutable’ record of transactions in relation to the thing, to ensure that if someone uses it by, for example, transferring or spending it, that person can no longer use it in the same way again (e.g. cannot double spend it).
The proposed definition of digital assets raises some questions.
Does ‘a thing’ need to be ‘digital’ or ‘electronic’ under the Bill?
The Bill indicates that the digital asset itself is not ‘digital’ or ‘electronic’; rather, it must arise from an electronic system. Based on the Bill’s Explanatory Notes, this seems to be a deliberate decision reflecting a distinction between ‘the thing’ (which is not itself electronic) and ‘the system’ that the thing arises from. Paragraph 12 states that: “…Section 1 limits what counts as a “digital asset” for the Bill’s purposes to a subset of the things that could, in general terms, be described as assets which are digital.” But then paragraph 14 continues that: “It is not the digital asset per se that is electronic (or digital) in nature, what must be electronic in nature is the system that gives rise to the thing.”
We are not aware of legislation in other countries or international legal instruments that adopt the Bill’s approach. Generally, relevant definitions specify or refer to the electronic characteristic or nature of digital assets in some way, such as ‘digital or electronic in nature’ (e.g. section 1 of the Property (Digital Assets etc.) Bill in England and Wales and Northern Ireland), or ‘electronic record’ (e.g. Article 12 of the Uniform Commercial Code in the US and Principle 2(2) the UNIDROIT Principles on Digital Assets and Private Law). The standard approach is to view the content of the digital asset as inherently connected to an electronic system, justifying a reference to the asset itself as being electronic.
It is true that a digital asset can instead be viewed as something (a transactional power) distinct from the electronic system it relates to, as the Bill envisages. In a technical and narrow sense, that thing (the transactional power) is indeed not electronic, yet this approach and the standard approach will generally achieve the same outcomes.
However, defining an asset by referring to the features of a system (as the Bill does), rather than simply the features of the asset itself, could lead to different results in some cases. There may also be debate about what ‘arises from’ an electronic system means and how far it extends. For example, could the definition potentially capture physical items produced by an electronic system where blockchain records transactions involving that asset? Under a purposive approach and given the Bill’s focus on incorporeal property, this would be highly unlikely. However, if these considerations create concerns, they can be avoided by the Bill stating instead that the thing must be electronic (or digital) in nature, similar to the approach proposed for the rest of the UK (see further MacPherson and Yüksel Ripley’s Digital Assets in Scots Law, p.40).
Does the Bill differentiate between ‘electronic’ and ‘digital’ systems?
To be a digital asset, the Bill requires the thing to arise from ‘an electronic system’ that makes it rivalrous. It seems that ‘electronic’ has been considered wide enough to also encompass ‘digital’, and so the latter has been intentionally omitted. However, it would be helpful if the Bill’s Explanatory Notes clarified this point when discussing the required nature of the system.
Why is ‘immutability’ a criterion for rivalrousness (and for being a digital asset) under the Bill?
The Bill further defines rivalrousness with reference to ‘immutability’ in electronic systems giving rise to digital assets. According to the Bill’s Explanatory Notes, this means that “the system has to solve the “double-spend problem” by ensuring that “the digital coin, like its physical counterpart, cannot be spent and spent again infinitely by the same person” (paragraph 16). Therefore, if an electronic system does not keep an immutable record of transactions, digital assets arising from that system would not qualify as digital assets under the Bill.
There are, however, issues regarding the proposed definition of rivalrousness based on ‘immutability’:
- Technological neutrality is an important consideration and commonly encountered in national and international legal frameworks concerning digital assets (see MacPherson and Yüksel Ripley’s Digital Assets in Scots Law, pp.14-20). ‘Immutability’ is, however, a label typically attached to a particular type of technology, blockchain. Although the Bill’s Explanatory Notes state that “section 1(2) is not necessarily only describing tokens arising from blockchain-based systems” and it is “technology neutral”, there would be uncertainties in that respect.
- Immutability brings some problems. An immutable ledger can be fed by erroneous data. There can be mistakes in transactions, or there may be hacking. Because of immutability, they may not be amended or reversed. These are not hypothetical scenarios. Such problems have occurred concerning cryptocurrency transactions, including Bitcoin. This raises the question of whether the immutability element of the technology should be a criterion in the Bill.
- There are digital asset issuers exploring ways to make it possible to reverse transactions in cases of fraud or disputes (see e.g. Circle, the world’s second-biggest issuer of stablecoins, as reported by the Financial Times). Such assets would be excluded from the Bill’s scope simply because relevant records could be amended in some circumstances, such as to unwind records of transactions involving fraud. Similarly, digital assets are being explored in a variety of contexts (beyond the use cases of cryptoassets) by the private and public sectors. If a digital asset system has central administration with the authority to amend records of digital asset transactions where necessary (e.g. in cases of error), we are unsure why those assets should not qualify as digital assets under the Bill if the system is secure against unauthorised alterations and ensures the integrity of the records.
- It is also unclear how ordinary people (including consumers) who choose to invest in digital assets would or could know whether (or not) the system in question maintains an immutable record of transactions in relation to digital assets, and accordingly whether their digital asset is a type of property under the Bill (or not). This might not be known in advance even by sophisticated investors and without going to court since, as per the Bill’s Explanatory Notes, “whether a given system of whatever kind achieves the required result is a matter of fact which will ultimately be determined by the courts” (paragraph 17).
We are not aware of legislation in other countries or international legal instruments requiring immutability in defining a digital asset. We think that what should matter here is not immutability of the record of transactions but rather the integrity of that record.
We also think that any definition of digital asset provided with reference to certain characteristics of systems, as is done in the Bill, would inevitably lead to questions in practice as to which systems have those characteristics and which ones do not.
How to understand and apply the criterion of existing ‘independently from the legal system’?
In order to be a digital asset, the Bill requires the thing to exist independently from the legal system. In other words, the thing’s existence must not depend on the legal system’s recognition of that existence. The Bill’s Explanatory Notes state that this is “to distinguish digital assets from other forms of incorporeal property, such as legal rights and their correlative obligations” (paragraph 24). This is sensible enough, although an argument could be made for using ‘law’ instead of, or in addition to, ‘legal system’ to reflect the significance of substantive legal rules rather than enforceability within the jurisdiction.
The requirement of ‘independent existence from the legal system/law’ is relatively easy to understand and apply in relation to digital assets which are not linked to other things or legal rights, such as Bitcoin. Bitcoin has been bought, stored, sold, and transferred since its introduction, regardless of whether the law has recognised its existence (or not).
The requirement is less straightforward for digital assets which represent other things or legal rights, usually referred to as tokenised assets. The Bill’s Explanatory Notes mention tokenisation at paragraph 25, which seems to suggest that tokens should be viewed separately from the assets they represent:
“The fact that a class of notional things arising from electronic systems have been tokenised to represent legal rights does not mean that those things can no longer to be said to exist independently from the legal system, just as a piece of paper being used as a negotiable instrument would still exist as a piece of paper even if the law stopped recognising it as a token representing a legal right.”
This indicates that a token’s existence is not dependent on legal recognition of its representational status. The Bill’s Policy Memorandum makes the broader point that: “…should Scots private law cease to exist, the digital asset would continue to exist” (paragraph 38). That is technically correct, but digital assets representing rights which only exist due to legal recognition (e.g. claim rights or IP) indirectly depend on the legal system for their value, both commercially and legally, and without this they would probably not have been created. While the token’s value would rely upon the legal recognition given to the represented right, the Bill seems to view the token separately from that right and so the token itself has an existence independent of the legal system/law.
Digital assets exist on a spectrum in terms of their (in)dependence from the legal system/law. It is therefore likely that the requirement would create doubt for some types of digital assets. For example, would CBDCs exist independently from the legal system/law and meet this criterion, potentially qualifying as digital assets under the Bill, particularly if legislation is necessary to create them? On this point, we refer to, for example, the legislative proposal on the establishment of the digital euro in the EU, and the Bank of England’s digital pound update that “if the decision was taken to build a digital pound, it would only be introduced once Parliament had passed the relevant primary legislation”. We also wonder whether it would make any difference, for the purposes of this requirement, if a CBDC is account-based or token-based.
Alternative approaches to the definition of ‘digital asset’
It appears from the wording of section 1 of the Bill and from the relevant parts of the Bill’s Explanatory Notes that the definition of digital asset in the Bill was formulated by keeping mainly Bitcoin and alike digital assets in mind.
Digital assets are diverse with different features. Under the Bill’s definition, it is difficult to know with certainty what types of digital asset could be captured by that definition unless and until this is determined by the courts. Such determination would likely be for each digital asset individually on a case-by-case basis (rather than for a category it belongs to). This seems to be the position for Bitcoin and NFTs as well, which are the only examples of digital assets used to illustrate points in the Bill’s Explanatory Notes. As is stated at paragraph 8 therein “…it should not be inferred that the courts necessarily will, and for all time, recognise a bitcoin as being a “digital asset” within the meaning of section 1.”
There could be legal uncertainty and unpredictability arising from the proposed definition and this could create concerns for relevant stakeholders. A more flexible and technologically neutral definition might also better embrace current and future developments in the area and promote innovation.
If an amendment to the definition is to be contemplated, there are different options available, for example:
- the proposed definition of rivalrousness could be amended in relation to the immutability requirement, along with adjusted wording that the thing must be digital or electronic in nature (see e.g. A. MacPherson, B. Yüksel Ripley, J. Ainslie, C. Emedosi, D. McKenzie Skene and E. West, ‘Response to Scottish Government Consultation on Digital Assets in Scots Private Law’ (2025), pp.5-6).
- there are existing UK definitions of cryptoassets provided for financial and money laundering and terrorist financing contexts (see the Financial Services and Markets Act 2000 section 417(1); and Regulation 14A(3)(a) of the Money Laundering and Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017). They could be used as a starting point and be amended for digital assets as necessary for a more expansive and technologically neutral definition. Interestingly, this is what seems to have been done with the definition of digital asset provided on the Scottish Parliament website when the Bill was introduced: “A digital asset is any item that exists in digital format and can be identified, stored, and traded electronically.” However, this would need to be narrowed further with specific criteria to limit the range of assets covered.
- the definition of a digital asset in the UNIDROIT Principles on Digital Assets and Private Law, inspired by the definition of ‘controllable electronic record’ in Article 12 of the US Uniform Commercial Code, could be considered for the Bill with adaptations as necessary. According to that definition in Principle 2, “‘Digital asset’ means an electronic record which is capable of being subject to control.” As is the case with the UNIDROIT Principles on Digital Assets and Private Law and US Uniform Commercial Code, the concept of control has a central role for digital assets in the Bill (see in particular sections 3-5), so a definition based on control could be considered suitable.
As part of an alternative approach, consideration could also be given to whether there should be an element of the definition of digital assets reflecting their special feature of being attributable (or allocated) to a particular person or a particular group of persons. It seems that it is a common characteristic of digital assets, which are intended to fall into the scope of the Bill, that they are in essence electronic values which can be attributed to a particular person or group by digital asset systems (see e.g. B. Yüksel Ripley and F. Heindler, ‘The Law Applicable to Cryptoassets: What Policy Choices Are Ahead of Us?’ in A. Bonomi, M. Lehmann, and S. Lalani (eds), Blockchain and Private International Law (Brill, 2023)).
The definition should also be followed by explicit exclusions as necessary, including for ETDs, as discussed above.
Final remarks
Given the intended timeframe for the Bill’s passage, major amendments may not be possible. However, various points identified in this article should receive further consideration during the Bill’s parliamentary scrutiny, so that the law reform can achieve its potential.
We also note that the Bill’s purpose is primarily clarificatory. It should not be seen (particularly by the public) as an endorsement of (any type of) digital assets. Some digital assets, such as cryptocurrencies like Bitcoin, are controversial. In the traditional sense, Bitcoin and similar cryptocurrencies are not money or currency. They are privately issued. They do not have a physical existence. Their market value is volatile and they are highly speculative (see further MacPherson and Yüksel Ripley’s Digital Assets in Scots Law, pp.9 and 11). Cryptocurrencies are also typically traded pseudonymously, and people do not know exactly who they are transacting with. Pseudonymity therefore exposes people to risks of fraud and other forms of illegal activity. It also brings significant barriers to be able to identify a wrongdoer (e.g. a hacker) and sue them as ‘persons unknown’ in Scotland (see further MacPherson and Yüksel Ripley’s Digital Assets in Scots Law, p.29). The Bill will not change this. Therefore, consumers who may wish to invest in Bitcoin and similar types of digital assets should be informed of the risks involved in such investments.
The Bill’s Financial Memorandum factors in potential costs to be borne by law firms for informing their staff and providing them with training/CPD to understand the Bill, its legal effects and application (see paragraph 14). We think that knowing what the Bill does (and does not) is equally important for the public and particularly for consumers and non-sophisticated investors. A digital literacy campaign in Scotland would be desirable to inform the public about the new legislation (once it passes) and digital assets more broadly.
*This blog article can be cited as Burcu Yüksel Ripley and Alisdair MacPherson, Digital Assets (Scotland) Bill: Scope and Definitional Issues, Aberdeen Law School Blog, 2025.
