Digital assets in Scots law — Part One: why legislate?

In the first article in a new series, Charlie MacKay examines why digital assets have challenged traditional Scots property law, and how new legislation aims to bring clarity to their ownership, transfer and protection.

The rapid evolution of technology over the past four decades has brought with it a category of property that doesn’t fit neatly into the conceptions of property traditionally used in Scots private law: digital assets.

This article introduces those digital assets, and provides insight into the aims of the Digital Assets (Scotland) Act 2026, which received royal assent on 16 April. Two subsequent articles will outline the provisions of the Act and discuss how the Scottish justice system might be equipped to deal with the disputes that may follow enactment.

Categorising property in Scots private law

Scots law generally divides assets into heritable and moveable property: heritable being property comprising land and its associated things, and moveable property being, essentially, everything else. These categories can be further sub-categorised into corporeal and incorporeal property, with the distinction being whether something is tangible (therefore corporeal – such as a bike, a chair or jewellery) or otherwise (therefore incorporeal – such as a right to payment of a debt, shares in a company or intellectual property rights).

These classifications are not merely academic. They determine how rights are created, transferred and protected. For example, transfer of ownership, the nature of security rights and the treatment of assets in insolvency processes or upon death all depend on which of these categories a piece of property falls under.

Digital assets – such as digital photographs, domain names, social media accounts, cryptocurrencies and non-fungible tokens (NFTs) – frustrate these traditional categories of property. This is unsurprising given the reliance of Scots private law on Roman legal concepts – indeed, trying to explain the concept of NFT collection Bored Ape Yacht Club to Gaius or Justinian would likely have sent heads spinning.

Digital assets can broadly be grouped into two categories:

• Traditional digital assets – assets created and stored digitally but not reliant on blockchain technology. Examples include digital images, Word/PDF files, data and cloud‑stored content.

• Blockchain‑native assets – assets originating on and transferred through blockchain or other distributed ledger technologies (DLTs). The most well-known are cryptocurrencies (eg bitcoin and ethereum) and NFTs, but the category also includes smart contracts and tokenised representations of other rights.

Understanding blockchain technology

At its simplest, blockchain is a form of DLT: a ledger stored not on a single server but replicated across vast networks of computers. Every transaction recorded on the ledger is grouped into a block, which is sealed using a cryptographic function known as hashing. Each block contains the hash of the previous block, connecting the blocks in a chain.

This linkage creates a highly tamper‑resistant, or ‘immutable’, system. Altering one block would require recalculating the hashes for every subsequent block and persuading a majority of participating computers that the altered ledger is valid. Because the system relies on consensus among decentralised participants, it operates independently of state oversight or traditional legal mechanisms.

To illustrate how blockchain works using a practical example:

• Consider a long hallway, with boxes of books lined up one after another.

• Each box is a block in the blockchain, with the books representing the data held in each block.

• Before a box is placed in the hallway, it is sealed, with a unique, elaborate code stamped onto the seal which, when scanned, lists all of the books in the box. If someone tries to get into the box and change even one word in a book, the seal would be broken and the code ruptured.

• When you fill a new box with books and seal it, you also stamp the new box with the seal of the box before it. Therefore, if the seal of the previous box was tampered with and changed, you would be able to tell from examining the seal on the next box in the line.

• Everyone in the building has their own hallway of the boxes which replicate one another; when a new box is added, everyone uses the same stamp to seal their boxes.

• Only when most people agree that a box contains the right books, does it get added to the chain.

• Therefore, to change a book in a historical box you would need to:

1.    break the seal on that box;

2.    put the intruder book into the box;

3.    reseal that box with a code reflecting the newly added book;

4.    reseal every box after it, changing each of the seals in the process; and

5.    convince everyone with their own corridor of boxes that your altered hallway is the correct one.

Getting to grips with terminology

Cryptocurrency: a fungible (meaning it can be exchanged for another of identical type and value) digital token created using blockchain or another DLT system. It functions as both a medium of exchange and a store of value. One bitcoin, for example, is interchangeable with any other bitcoin in the same way that one £1 coin is interchangeable with another.

Non‑fungible tokens (NFTs): unique digital tokens that are not interchangeable with others of their kind. Their value lies in perceived uniqueness or scarcity. Popular examples include the Bored Ape Yacht Club NFTs, one of which (BAYC #3001) was purchased by Justin Bieber in 2022 for cryptocurrency equivalent to $1.3 million (it’s now reported as being worth a fraction of that sum – approximately $12,000). These tokens’ value can be conceptualised similarly to tangible artworks, albeit with market volatility far exceeding traditional art markets.

Smart contracts: a self‑executing computer program stored on a blockchain or other DLT system. When predefined conditions are met, the contract automatically performs an action, such as transferring cryptocurrency or updating a record. A common analogy is a vending machine: insert the correct code and payment, and you receive the right snack, without human intervention.

Private key: a code that functions like a highly secure password, allowing the holder to control and transact with their digital assets by providing access to a public address.

Public address: derived mathematically from the private key, this can be openly shared by the holder of the private key as the ‘location’ at which they wish to receive digital assets. Critically, the process is one‑way: the private key cannot be reconstructed from the public address (using current technology), providing the system with built‑in security.

Policy considerations

Digital assets, particularly blockchain‑based ones, blur the conceptual boundary between corporeal and incorporeal property. While they lack physical form and are therefore intangible, the way they are held and transferred is more similar to corporeal assets. This created a problem for the rigidly structured Scots property law, as it was not clear, for example, how ownership of digital assets could be established or transferred (or if these types of assets could be owned at all), or what other types of rights could be held in relation to them.

In an attempt to tackle this problem, the Scottish Government established the Digital Assets in Scots Private Law Expert Reference Group (ERG) in 2019 at the request of the then Lord Advocate, James Wolffe KC. Chaired by Lord Hodge and supported by Professor David Fox, the ERG reported in November 2023, recommending that the issues these assets presented were dealt with via enactment of primary legislation.

The Digital Assets (Scotland) Act 2026 therefore fosters several policy objectives:

• Legal certainty and coherence – a legislative framework avoids fragmented, judiciary‑led development, which the ERG noted risked slow, inconsistent and piecemeal progress, particularly due to the relative size of the jurisdiction. Clear rules drawing on the first principles of Scots property law enhance the attractiveness of Scots law as a governing law for digital transactions.

• Technological neutrality – the Act intentionally uses flexible, technologically neutral language in recognition of the speed at which this sphere develops. This allows courts to interpret provisions in light of new technologies without requiring constant legislative amendment.

• Keeping pace – the Scottish Government has sought to match development in the rest of the UK, while recognising the distinct nature of Scots property law. Scotland is likely to only be a few months behind the rest of the UK, with the correlative legislation for England, Wales and Northern Ireland, the Property (Digital Assets etc) Act 2025, receiving royal assent on 2 December 2025.

Look out for the next articles in the series, which will provide an overview of the provisions of the Act and discuss the hopes and potential hurdles of its practical application.

Charlie MacKay is a trainee in the Dispute Resolution team at Aberdein Considine.