Digital Assets as Collateral: What the Property (Digital Assets, etc.) Act 2025 Means for Lenders

The Property (Digital Assets, etc.) Act 2025 (the Act) addresses a common uncertainty in English commercial law as to whether digital assets can truly function as property. By confirming that certain crypto-tokens and NFTs can constitute personal property, the Act provides statutory certainty for the use of digital assets as collateral in structured lending transactions.

Historically, English law recognised two categories of personal property, as things in possession and things in action. The Act confirms that certain digital assets can fall into a distinct third category, adopting a principles-based test rather than a standard statutory definition.

Digital assets may qualify where they are:

• definable and identifiable;
• transferable;
• subject to exclusive control;
• sufficiently permanent and rivalrous.

Judicial Foundations

The courts have demonstrated a willingness to recognise digital assets through case law.

In AA v Persons Unknown [2019] EWHC 3556 (Comm), the court allowed Bitcoin to be constituted as property, following a ransomware attack. Subsequently, confirming that the digital assets were capable of being the subject of proprietary protection. Later, Ion Science Ltd v Persons Unknown [2020] followed a similar positioning. In this case, the High Court granted asset injunctions and disclosure obligations in respect to misappropriated digital assets.

Further, the court’s decision in Dasisz v Persons Unknown & Huobi Global Ltd [2022] permitted the issuance of interim injunctions and a disclosure order against a cryptocurrency exchange to facilitate the recovery of stolen assets. The legal framework was trending toward the acceptance of digital assets, but the Act sought to resolve lingering ambiguity about their classification and reduce transaction friction.

What Does this Mean for Lenders?

For lenders, the Act removes any doubt that digital assets that qualify under the above criterion can be used as collateral in structured lending arrangements and confirms the availability of established proprietary remedies, such as injunctive relief, tracing, and freezing orders. As a result, lenders have access to more robust collateral structuring and can rely on greater confidence in the enforceability of security packages.

However, despite the act’s promise, it is important to manage lender expectations. The act does not include a bespoke security regime for digital assets, nor does it resolve practical issues surrounding custody, control and insolvency priority.

Control and Custody

Importantly, recognising digital assets as property does not eliminate all prior risks. Therefore, effective enforcement will depend on control of the private keys and reliable custody arrangements. When digital assets are not properly segregated or subject to contractual claims, lenders may face tracing complexities or fall behind proprietary claims of other stakeholders.

Although ownership does not necessarily terminate if private keys are lost, it can complicate enforcement. To address this concern, institutional lending structures should implement safeguards, such as reliance on third-party custodians, multi-signature arrangements, contractual control mechanisms, or segregation of controls.

For instance, when a borrower retains the practical ability to deal with tokens despite insufficient control, a charge described as “fixed” may shift to “floating”. The distinction is important in insolvency proceedings, as floating charges rank lower in priority, possibly undermining recovery status. To summarise, the court prefers to examine the degree of practical control retained by the chargor, not simply the label applied in the security document.

Subsequently, a floating charge holder ranks behind preferential creditors and becomes an unsecured creditor. Additionally, administrators may also exercise wider powers over floating charge assets. Therefore, insufficient control regarding digital asset collateral may result in reduced recoveries.

Insolvency and Asset Segregation

Recent UK exchange insolvencies, including Re Bittrex Global (UK) Ltd [2025], illustrate the significance of correctly characterising customer holdings, as evidenced by litigation over who was entitled to the company’s remaining currency stored on its blockchain.

Asset segregation can determine if an asset falls within a trust or estate. Therefore, priority outcomes in insolvency proceedings influence whether customers recover in full or rank as unsecured creditors. For secured lenders, this means the status of priority depends on the proper structure of custody and drafting of the relevant charge.

While the Act clarifies the status of digital property, it does not yet automatically provide relief mechanisms to aid in determining priority in disputes. In practice, lenders should consider structure, segregation and enforceability at the outset to ensure best practices and safeguards will hold.

Conclusion

Property recognition is only the catalyst for further legal subtleties around digital assets. In practice, digital assets used as collateral will face the question of recoverability, which depends on control architecture, custody arrangements, and priority standing. As digital asset lending becomes increasingly institutionalised, lenders should review custody and control frameworks designed to ensure that property recognition translates into practical ability to use their digital holdings and attain proper security through recoverability.