Are non-fungible tokens property capable of being held on trust? 

January, 2022 - Shoosmiths LLP

A recent High Court decision raised some interesting questions surrounding the property status of cryptocurrencies and whether they can be held on trust. We consider how certain comments in the judgment may have implications for the property status of NFTs.

The recent English High Court decision in Wang v Darby [2021] EWHC 3054 (Comm) raised some interesting issues regarding whether cryptocurrencies can be held on trust. Although that question itself was ultimately not determined in the case, certain comments from Stephen Houseman QC, sitting as a Deputy Judge of the High Court, could have future implications for the legal recognition of cryptocurrencies and in particular as to how another type of cryptoasset – the non-fungible token, or ‘NFT’ – may be considered at law.

NFTs, unique digital identifiers recorded in ‘blockchain’ (a type of digital ledger), are commonly distinguished from cryptocurrencies such as Bitcoin through being non-fungible (i.e. not mutually interchangeable, as one unit of Bitcoin is with another of identical value, for instance) and readily identifiable. NTFs may be considered more analogous to the digital equivalent of an artwork or antique than to a unit of digital currency. However, such a distinction is not reflected in English law at present. The law has considered cryptocurrencies more broadly but has not distinguished them from an identifiable ‘crypto asset’ such as an NFT.

Although Wang v Darby does not draw any overt distinction, and makes no attempt to elucidate different terminologies within the complex frame of ‘crypto asset’ (indeed, it makes no reference to NFTs at all), the case could be seen to give some indication of where the law may diverge in the future, particularly if a case brought before the English courts plainly considers the proprietary status of an NFT.

Houseman QC noted at 77: “…It is difficult to see how a constructive trust…could arise in respect of entirely fungible and non-identifiable digital assets. There is no obvious analogy to a specifically-enforceable contract for the sale of land or some unique or sufficiently rare piece or parcel of personal property…”.

Reading between the lines, it may then be possible to form a trust for non-fungible and identifiable digital assets, both of which are properties commonly ascribed to NFTs. With certain NFTs, notably Beeple’s ‘Everydays: The First 5000 Days’, selling for millions of dollars at auction, the analogy can also be drawn with “some unique or sufficiently rare piece of…personal property”; certainly, that appears to be what is drawing investors to NFTs.

The UK Jurisdiction Taskforce in its 2019 Legal Statement on Cryptoassets and Smart Contracts has previously noted: “Of particular significance [to whether crypto assets can be considered property] are the rules concerning succession on death, the vesting of property on personal bankruptcy, the rights of liquidators in corporate insolvency, and tracing in cases of fraud, theft or breach of trust. It would…be highly unsatisfactory if rules of that kind had no application to crypto assets.”

The court in Wang v Darby appeared to concur, suggesting that non-fungible crypto assets (such as NFTs) could be held on trust and could be considered analogous to unique items of property. The English courts might then consider NFTs able to benefit from proprietary remedies. Although we are left without a clear position and the law is yet to consider much of the intricacy and complexity within the cryptoasset space, Houseman QC’s observations in Wang v Darby may indicate the English courts’ stance towards cryptoassets and prove influential when an NFT’s status as property under English law is properly tested.


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