By Dr Stephen Castell CITP MEWI and Jonathan Bolls, Attorney at Law
Abstract
The Law Commission’s proposed Property (Digital Assets etc) Act 2024, seeking to create a new categorisation of cryptocurrencies as property, is unnecessary. ‘Crypto’ is an algorithmic data object, an unremarkable example of, and exactly like, any such assemblage of digitally created and recorded 1s and 0s. The Law Commission has again misunderstood the essential technical truths of computer science. It is attempting to put in place another egregious legal construct potentially as damaging as its 1999 introduction of the incorrect ‘legal presumption of the reliability of computer evidence’. This situation is arguably now clear evidence of a wider problem: the Law Commissioners do not include any professional digital forensic expert practitioners in their number. This is a lacuna that needs rectifying. In the meantime, the Law Commission’s recommendation for introduction of the Property (Digital Assets etc) Act 2024 should be reconsidered.
Keywords
Law Commission, property, cryptocurrency, algorithm, data object, evidence, admissibility, forensic, expert, valuation.
- Introduction
The English Law Commission’s proposed Property (Digital Assets etc) Act 2024, seeking to create a new categorisation of cryptocurrencies as property, is not needed. Scientifically, ‘crypto’ is simply an instance of an algorithmic data object, exactly like, and indistinguishable from, any such assemblage of 1s and 0s on a server. And any algorithmic data object, such as software, database, crypto etc, is already and has always been capable of being treated, and valued, legally, technically and practically, as property – a digital asset – where needed.
In seeking to fashion some special legal status for what is a routine instance of an algorithmic data object the Law Commission has again misunderstood the essential technical truths of computer science. It is attempting to dream up and put in place another egregious legal construct potentially as damaging as its 1999 introduction of the incorrect ‘legal presumption of the reliability of computer evidence’.
There is clearly a need to prevent any future strange ideas that the Law Commission may come up with for changes in the law where specialist and expert knowledge of computer science and practical digital forensics are crucial. One solution is to include a number of experienced digital forensic expert professionals in the composition of the Law Commissioners. In the meantime, its recommendation for introduction of the Property (Digital Assets etc) Act 2024 should be reconsidered.
- An otiose Act
The English Law Commission published on 22 February 2024 draft legislation, to be known as the Property (Digital Assets etc) Act 2024, to categorise cryptocurrencies as property, specifically proposing to enact that
‘A thing (including a thing that is digital or electronic in nature) is capable of being the object of personal property rights even though it is neither—
(a) a thing in possession, nor
(b) a thing in action’
<https://lawcom.gov.uk/project/digital-assets/>.
This is unnecessary. There is no need for such a new statutory categorisation. ‘Crypto’, indeed any ‘thing that is digital or electronic in nature’ is, as a matter of computer science fundamentals, simply an algorithmic data object, digitally created, recorded and processed by computer software. And, as a matter of scientific and technical existential reality each algorithmic data object is materially exactly like, and indistinguishable from, any and all other such assemblages of 1s and 0s on a server or other digital media.
The expression ‘data object’ is well understood in computer applications development and in the detailed technical practice of software and systems design, coding, and construction. This understanding is for example illustrated by:
- ‘A data object is a region of storage that contains a value or group of values. Each value can be accessed using its identifier or a more complex expression that refers to the object. In addition, each object has a unique data type’
<https://www.ibm.com/docs/en/zos/2.4.0?topic=odod-overview-data-objects>
- ‘Data objects: A data object is a structure for describing a data entity by grouping a set of related fields’
<https://academy.pega.com/topic/understanding-data-objects/v1>
- ‘A data object is a unit of information being manipulated by a program’
<https://superuser.com/questions/743076/what-exactly-is-a-data-object>.
It can therefore be readily appreciated that ‘data object’ has status as an established Term of Art in the field of computer science and professional software and systems building practice. As such, it is not terminology to be appropriated by lawyers, law administrators or legal academics and warped into new definitions for novel but technically naïve legislative or regulatory purposes. Rather, it is to be professionally honoured and respected as an essential technical truth of computer science, with a settled and accepted meaning in its domain.
This technical truth goes deeper, to the fundamental insight of the critical existential importance of algorithms, of software, in the creation, manipulation, processing and recording of data – indeed, of any ‘data object’. No data, i.e. no data object, comes into existence, nor, therefore, can be accessible for reading, copying, amalgamation, processing, update, transformation, transmission and/or deletion without appropriate algorithms, software, being there first in order to carry out all of these actions.
There are no assemblages of 1s and 0s – the standard and essential materialisation of digital data – in existence anywhere on a server that have not been created and recorded there by the availability and operation of algorithms, i.e. by and through computer software.
Furthermore, it was Byron’s daughter Ada, Lady Lovelace, credited as ‘the world’s first computer programmer’, who is said to have first made the proposal, to Charles Babbage, that the instructions which a computer – at the time, Babbage’s Analytical Engine – was to carry out on data could themselves be encoded and stored in exactly the same form: i.e. as data (see for example <https://www.sciencedirect.com/science/article/pii/S0004370216300224>).
This equality of status, as data (assemblages of 1s and 0s), of encoded algorithmic instructions, and of the data on which those instructions are to operate, is still the fundamental standard digital implementation in computer technology and software and systems design and development practice.
This has also been adventurously extended to new concepts and inventions where ‘data’ and ‘algorithmic processing on and of the data’ are even more intimately fused, for example in the shape of the probit (Castell S (1976) ‘On an evolutionary memory concept’, The Computer Journal 19(4), page 382. doi: 10.1093/comjnl/19.4.382
<http://comjnl.oxfordjournals.org/content/19/4/382.1.full.pdf+html?sid=f1be4d3b-6c44-4889-bb38-d5f42f597b1a>); and the memristor
<https://www.sciencedirect.com/topics/physics-and-astronomy/memristor#>.
For all these reasons, we prefer the clarifying term algorithmic data object to simply data object, and we use this more comprehensive and insightful terminology herein. A proposed UK Act of Parliament cannot, and should not, simply ignore, or attempt to make irrelevant, scientific fundamentals and established technological Terms of Art like this. That way lies forensic confusion.
- The technical and forensic background as to why the Act is unnecessary
One of the authors of this article, Dr Stephen Castell, has over three decades of experience acting as a nationally and internationally recognised ICT expert witness professional, in a wide range of hundreds of complex, high-value disputes and litigation centred on computer software, systems, technology, data, digital assets, FinTech, and evidence, including ongoing high-profile blockchain and cryptocurrency cases, working closely with experienced instructing solicitors and attorneys, and leading counsel. Both authors of this article are pioneers and scholarly thought-leaders in IT law, electronic evidence, and data forensics.
During these substantive years of scholarly legal analysis and wide experience of IT litigation, an algorithmic data object, be it software, database, digital image, electronic record of financial transactions, crypto, a combination, or whatever else, has, wherever required in a particular dispute or litigation, already and always been perfectly capable of being treated, assessed, valued and dealt with, juridically, practically and commercially, without difficulty, as property.
That substantive experience has been widely consistent, whether in, for example, the jurisdictions of the English High Court, the Sydney Supreme Court, and/or US Federal and District Courts; and in Arbitrations under the London Court of International Arbitration, International Chamber of Commerce (ICC) Paris, JAMS Mediation, Arbitration and ADR Services, USA, or the Hong Kong International Arbitration Centre rules and procedures.
An important example of this activity is the decision of 13 September 2019 by Mr Justice Bryan, in the English High Court, in the case of AA v Persons Unknown & Ors, Re Bitcoin ([2019] EWHC 3556 (Comm)), granting a proprietary injunction sought by the applicant insurance company over Bitcoin, on the basis that cryptocurrencies constitute property under English law, and are therefore capable of being the subject of interim proprietary injunctions
In doing so, the Court endorsed the view of the UK Jurisdictional Taskforce of the LawTech Delivery Panel, in its ‘Legal Statement on the Status of Cryptoassets and Smart Contracts’, that cyptoassets constitute property under English law (see <https://www.judiciary.uk/the-chancellor-of-the-high-court-sir-geoffrey-vos-launches-legal-statement-on-the-status-of-cryptoassets-and-smart-contracts/>).
Furthermore, whether such a cryptocurrency – reminder, simply an algorithmic data object – is ‘in possession’ or ‘in action’, neither, both, or something complex else entirely, is, on correct forensic technical analysis, a matter simply of the application domain, or functionality, of the algorithmic data object, and this does not affect the legal, technical and commercial capability of it being treated forensically, and valued, as personal property.
As Laura Veldkamp, of Columbia Business School, in a 2022 paper put it:
‘In the twenty-first century, the most valuable firms in the world are valued primarily for their data. … Data is an important asset to price … there are a variety of different approaches to measure and value data that may work …Approaches to valuing data include a cost approach, a revenue approach, value function estimation…’.
<https://www0.gsb.columbia.edu/faculty/lveldkamp/papers/ValueDataArticle_aug2022_edited.pdf>.
In the case of crypto, the ‘value function estimation’, in the shape of ‘market value’, or ‘price’, may often be – usually is – an applicable approach for algorithmic data object valuation.
It is abundantly clear that this existing established technical and commercial standing of any data object, and the range of widely-used and well-understood techniques for dealing with, and valuing, such a digital asset – that is, any ‘thing that is digital or electronic in nature’ – is not only a matter of fundamental technical truth, but is also backed up routinely by substantive litigation experience in many English High Court, US Federal Court, and other cases.
It is plain therefore that the status of the Law Commission’s ‘thing … capable of being the object of personal property rights’ is already – judicially, under the Common Law, in light of regular and sustained litigation experience, and as a matter of both foundational science and established commercial valuation practice – perfectly well covered, and understood.
In short, algorithmic data objects are already routinely dealt with, legally, technically, commercially and pragmatically. New legislation is therefore not needed. This proposed new law fulfils absolutely no unmet forensic or practical need.
- The misunderstandings and lack of technical expertise of the Law Commission
Moreover, in seeking to conjure up some sort of distinct or special legal status for what is an unremarkable instance of routine algorithmic data the Law Commission has again misunderstood the essential technical truths of computer science. Why do we say ‘again’? The answer is that the Law Commission is here attempting to dream up and put in place another egregious legal construct that could arguably be as damaging as its technically naïve introduction in 1999 of the incorrect ‘legal presumption of the reliability of computer evidence’.
That wholly mistaken ‘presumption’, still legally operating, was the defective bedrock on which the Post Office founded its unsound private prosecutions in UK courts of hundreds of innocent victims. In trials over twenty years, the Post Office relied on unchallenged computer evidence from its knowingly faulty Horizon system – arguably the ‘greatest miscarriage of British justice’ (see Castell S (2024) ‘The fallout from the Post Office Horizon scandal: legal professionals under fire’, Solicitors Journal 18 April 2024
It is appalling, professionally and methodologically, that this single technically erroneous act by the Law Commission in 1999 was a foundational cause of the ready ability of the PO subsequently to pursue a 20-year campaign of unsafe private prosecutions and civil legal actions against hundreds of innocent victims, to the point where today, as shocking revelations as to the culpability of PO and Fujitsu managers, and their professional advisers and agents, emerge daily from the Post Office Horizon IT Inquiry under Sir Wynn Williams (<https://www.postofficehorizoninquiry.org.uk/>), there are understandably angry calls for appropriate action, including restorative justice and punishment, of the most severe nature.
These calls include:
- Lord Arbuthnot, long-time campaigner on behalf of Post Office Horizon victims, has reportedly commented ‘very, very serious retribution needs to be visited on these people who visited such terrible things on the Sub-postmasters’ <https://uk.news.yahoo.com/post-office-recordings-paula-vennells-141322662.html>.
- The Voice of the Postmaster Committee, a group representing current sub-postmasters, has accused ‘individuals within Post Office Ltd’ of having ‘engaged in a pattern of deceit, actively misleading Parliament, Members of Parliament, the judiciary, postmasters, and the public at large’. They have urged the Business Secretary to suspend these individuals until the conclusion of the Inquiry, arguing that ‘merely waiting for the Inquiry to conclude is insufficient … Concrete decisions and swift action are imperative to ensure accountability and prevent further harm’
<https://uk.yahoo.com/news/suspend-post-office-executives-involved-161408414.html>.
So how did that alarmingly unfortunate and invalid ‘presumption of the reliability of computer evidence’ come about? It essentially happened because of a misunderstanding and mangling by the Law Commission, in its 1997 paper Evidence in Criminal Proceedings: Hearsay and Related Topics, of the advice of two experts who provided evidence.
Those two experts were barrister Alistair Kelman (<https://sites.google.com/view/alikelman
>), and one of the authors of this article, Dr Stephen Castell, whose full recommendations in his 1980s Verdict and Appeal Studies for and commissioned by H M Treasury were ignored (published as Castell S (1990), The APPEAL Report (London: Eclipse Publications, ISBN 1-870771-03-6)). The authors of the Law Commission paper misrepresented both experts, as is told and thoroughly reviewed by James Christie in his 2023 article ‘The Law Commission and section 69 of the Police and Criminal Evidence Act 1984’(20 Digital Evidence and Electronic Signature Law Review 62 – 95, <https://journals.sas.ac.uk/deeslr/article/view/5642>).
The recommendations in Castell’s extensive 1980s work for H M Treasury had led to the introduction, in the Police and Criminal Evidence Act, 1984, of the admissibility of computer evidence in court – before that, such evidence risked being inadmissible or treated as ‘hearsay’. However, ‘presumed reliability’ of computer evidence was never recommended in those Verdict and Appeal Studies for H M Treasury. To the contrary, in published journal articles of the early 1990s onwards, Castell specifically clarified that ‘a trial relying on computer evidence should start with a trial of the computer evidence’ (see Computer Weekly, 22 December 2021,
It is vital that a similar shocking error by the Law Commission be avoided as regards its technically mistaken, forensically unnecessary, draft Property (Digital Assets etc) Act 2024. Indeed, going beyond this, it is clear that there is a fundamental need to guard against any future odd suggestions the Law Commission may consider for changes in the law where specialist and expert knowledge of computer science and practical digital forensics are crucial.
- A digital competence problem with the Law Commission – and the solution
Experienced forensic ICT expert professionals say and teach: ‘It’s not different just because it’s crypto’. The problem is that the Law Commissioners do not include any such professional digital forensic expert practitioners in their number. This surely needs to be corrected, in order to be certain that the Law Commission has in-house access to correct technical insights and experience, from the vital ICT forensic expert professional viewpoint, of the interaction of the law with, and the law’s due conditioning by, and proper respect for, computer science fundamentals.
Given today’s world of constant evolution of software and systems technologies and applications, and rapidly increasing educational, health, economic, financial, and social total dependency on computer software, systems and services, including AI, it is clearly time that this lacuna in the composition of the Law Commissioners be rectified.
In the USA, judicial conferences that focus on educating judges on the constant evolution of technology have become a regular occurrence, particularly in the digital sphere, to foster a better understanding as they craft their opinions and orders: ‘Judicial Conference Committees These committees focus on specific topics such as information technology, human resources, probation and pretrial services …’ (see <https://www.uscourts.gov/about-federal-courts/governance-judicial-conference/about-judicial-conference#committees>).
This has indirectly but knowledgeably affected the structures of large settlement agreements in disputes in the digital domain, with oftentimes substantial impact on the US economy as well as law enforcement and policing efforts, in particular in the financial services industry. Having the presence and active inclusion of experienced, robust, independent ICT forensic expert professionals, thought-leaders of the ICT/computer science discipline and industry, in the composition of the English Law Commission can only be common sense.
This would prove a great ‘steering’ aid in informing and advising prudent, technically sound decision making in considering and making possible recommendations for changes in the law having due, rigorous regard to these expert technological specialisms, now ubiquitously impacting all areas of the economy and society.
Additionally, we note that it seems educating UK judges as to the inadvisability of expressing a technically expert view, i.e. in fields beyond their own legal expertise and experience, may separately need attending to. In a recent case, a couple were divorced by mistake after solicitors at a leading law firm made a computer error, but a senior judge said it could not be overturned (Sinmaz E (2024) ‘Wrong couple get divorced after solicitor clicks wrong button’, The Guardian, 15 April 2024 <https://www.theguardian.com/lifeandstyle/2024/apr/15/wrong-couple-divorced-solicitor-clicks-wrong-button#>).
In that case, the judge gave the rationale for his finding by way of venturing a technical view that ‘like many similar online processes, an operator may only get to the final screen where the final click of the mouse is made after travelling through a series of earlier screens’.
That is, a senior judge here purported to express his own unfounded technical expert opinion on how a particular computer system worked, or how he assessed (or supposed) it was designed to work. This is a worrying development, and it really should not happen.
- Conclusions
In the meantime, the Law Commission’s superfluous proposed Property (Digital Assets etc) Act 2024 legislation needs to be revisited and re-thought, if only because, far from clarifying some new form of digital property right, it will in practice just cause confusion. There are existing laws around ownership and taxation of property and assets that comfortably apply in practice to algorithmic data objects, including crypto.
Just one example: the danger for non-fungible tokens (NFTs) is that, if there is a new statutory categorisation of crypto, as the Law Commission proposes, i.e. if all crypto is to be legally designated as some kind of new, distinct property (as opposed to a mechanism to secure access and prove ownership of an asset), then that means this will effectively be treating electronic receipts (which is what an NFT is) as property, as well as the actual property. This would clearly be confusing, and unworkable.
In the much wider and more important digital world than merely crypto, it creates a far worse, and more fundamentally hazardous, situation than in that one narrow NFT example. If the Law Commission’s proposed legislation comes to pass, it will mean that any collection of electronic 1s and 0s (i.e. all electronic software, data, records and transactions) could wrongly and irrelevantly be argued to be some kind of novel invented and exceptional ‘digital thing’, in the vacuous guise of whatever new legal category or definition of ‘property’ this proposed new law eventually unnecessarily dreams up and details upon enactment.
This would be nonsensical, and chaotic, legally, technically and practically. As a matter of sound jurisprudence, and science, such befogging superfluity should not be allowed to happen.
- Links
https://lawcom.gov.uk/project/digital-assets/
https://www.ibm.com/docs/en/zos/2.4.0?topic=odod-overview-data-objects
https://academy.pega.com/topic/understanding-data-objects/v1
https://superuser.com/questions/743076/what-exactly-is-a-data-object
https://www.sciencedirect.com/science/article/pii/S0004370216300224
https://www.sciencedirect.com/topics/physics-and-astronomy/memristor#
https://www0.gsb.columbia.edu/faculty/lveldkamp/papers/ValueDataArticle_aug2022_edited.pdf.
https://www.postofficehorizoninquiry.org.uk/
https://uk.news.yahoo.com/post-office-recordings-paula-vennells-141322662.html
https://uk.yahoo.com/news/suspend-post-office-executives-involved-161408414.html
https://sites.google.com/view/alikelman
https://journals.sas.ac.uk/deeslr/article/view/5642
© Dr Stephen Castell and Jonathan Bolls, 2024
About the Authors
Dr Stephen Castell is an award-winning software and systems consultant professional, IT and the Law pioneer, and FinTech visionary, active as an international expert witness in major complex computer systems and technology development disputes and litigation, including the largest and longest such actions to have reached the English High Court, and appointed in the ongoing high-profile FTX, Voyager and Binance US Class Action cryptocurrency lawsuits.
Email: [email protected]
http://www.e-expertwitness.co.uk https://archivesit.org.uk/interviews/stephen-castell/
Jonathan B. Bolls, Attorney at Law (Juris Doctorate, William & Mary Law School, Williamsburg, Virginia, USA, 2005 – 2008) was formerly a magistrate in Fairfax County, Virginia and is currently with FTI Consultants in Washington DC, assisting Jones Day in responding to a DOJ request to review a corporate merger in the agricultural fertiliser industry. He has served in a professional position at the American embassy in London as a Pamela Harriman Foreign Service fellow, serves now on the advisory board, and is a past president of the George Washington Inn of Court in Washington DC. He has published on the importance of the availability of discovery of computer evidence, in particular in regard to the essays in a computer-based bar exam, constituting evidence essential to vindicating a bar student’s rights when a software failure occurs. See Jonathan Bolls and Stephen Castell, 2013: ‘Computer based testing – Bolls v. W. Scott Street, Sec’y of Va. Bd. of Bar Examiners, August 11, 2009, case no. 090915’. Computer Law & Security Review. 29(4): 446-449.
Email: [email protected]
https://www.sciencedirect.com/science/article/abs/pii/S0267364913001039
Dr Stephen Castell CITP CPhys FIMA MEWI MIoD
Email: [email protected]
http://www.e-expertwitness.co.uk
https://archivesit.org.uk/interviews/stephen-castell/
