Introduction to digital assets

Materials not considered digital assets

There are digital materials which people may assume are digital assets but don’t usually meet the legal or regulatory definition.

These include:

Digital files without unique security or value representation

For example, PDFs or Word documents.

In most cases these are copies of data, not secured representations of value.

Social media accounts or profiles

For example, a LinkedIn profile or Instagram handle.

These are service accounts, not transferable assets with intrinsic value.

Website domain names

Website domains are registered rights, not secured digital representations of value under distributed ledger technology (DLT) or similar technology.

Digital art and media

Creative works produced, stored or distributed digitally are not automatically considered digital assets under the legal and regulatory definition.

This includes images, videos, music, e-books and other content created using digital tools or technology.

Even when digital art or media is linked to a non-fungible token (NFT), the NFT is considered the digital asset, not the artwork or media file itself.

The underlying artwork remains subject to copyright and intellectual property (IP) law, not digital asset property rules.

Cryptoassets

Cryptoassets are a type of digital asset.

They are digital tokens that are cryptographically secured. This means they use encryption to ensure authenticity and prevent tampering, fraud or duplication.

A cryptoasset represents either:

• value – for example, a cryptocurrency like Bitcoin, or
• contractual rights – for example, a secure token giving voting rights or ownership in a company

Cryptoassets can be stored, transferred or traded electronically using distributed ledger technology (DLT) such as blockchain.

Cryptocurrency

Cryptocurrency is a type of cryptoasset.

Examples include Bitcoin and Ether. Bitcoin is the cryptoasset traded on the Bitcoin network and Ether is the cryptoasset traded on the Ethereum network.

Cryptocurrency is commonly used to:

• transfer value between individuals or businesses without involving a bank
• store wealth outside traditional banking systems
• pay for cross-border transactions

Non-fungible tokens (NFTs)

NFTs are a type of cryptoasset. They are unique and not exchangeable (fungible) with any other similar cryptoassets.

NFTs have a digital identifier that cannot be substituted, changed or erased.

They are typically used to assert ownership of a virtual asset or status on a blockchain. For example, ownership of an image, artwork or book.

Distributed ledger technology (DLT)

DLT is a digital record system. It stores information or data across multiple locations on a shared network.

Multiple users can access and maintain the data. Changes are recorded in a way that is secure and hard to tamper with.

Blockchain

Blockchain is the most popular and widely known application of DLT. Blockchain is often used as shorthand to refer to DLT.

It is often associated with cryptocurrency but can be used in many other ways.

For example, a creative work can be put on a blockchain to give a clear and permanent record of who made it. This makes it easier to prove IP rights.

Not all distributed ledgers use a blockchain as their underlying data structure. Other less well-known data structures include Hashgraph and directed acyclic graph (DAG).

Tokenised securities

Tokenised securities are traditional financial instruments that are digitally represented as tokens on a distributed ledger, such as a blockchain.

These tokens represent a real-world security. For example, equity in a company or a bond.

Tokenised securities can make trading faster, reduce settlement times and allow fractional ownership.

Anti-money laundering (AML) and sanctions

Illicit activity accounted for only around 0.4% of total crypto transaction volume in 2024 according to TRM’s 2025 Crypto Crime Report.

It is still important to be aware of the AML and sanctions risks of working with or advising on digital assets.

For more information on potential risks, read the cryptoassets section of the national risk assessment of money laundering and terrorist financing 2025.

Read our guides to learn more about:

• cryptocurrency money laundering risks
• the UK sanctions regime

Failure to comply with the sanctions regime is treated as strict liability for civil penalties.

For guidance on how to reduce risks, read the Solicitors Regulation Authority’s guides on:

• solicitor AML obligations
• sectoral risk assessment

The Society of Trust and Estate Practitioners (STEP) offers digital assets training and webinars.

Finance

HM Revenue and Customs (HMRC) has introduced the Cryptoasset Reporting Framework (CARF).

It will come into effect on 1 January 2026.

The CARF covers:

• mandatory registration of cryptoasset providers
• requirements for providers to collect and report their users’ activities and tax residency to HMRC
• specific penalties for non-compliance

CARF makes cryptoassets more visible to tax authorities and regulators. This could affect:

• divorce settlements – crypto holdings will be harder to hide. This will make disclosure easier and valuations more accurate
• probate and estate planning – executors will be able to identify cryptoassets more reliably for inheritance purposes
• insolvency cases – liquidators will be able to trace and recover cryptoassets as part of the debtor’s estate

The Financial Conduct Authority (FCA) is developing cryptoasset regulations.

It has shared a timeline of cryptoasset policy developments.

The final rules are expected in 2026.

Data protection and privacy

Data protection laws apply to personal data stored on distributed ledger technology (DLT), such as blockchain.

The Information Commissioner’s Office (ICO) published draft guidance on the application of UK data protection law to DLTs.

We suggested improvements to the guidance in our DLT guidance consultation response.

International regulation

There have been efforts from the private sector to standardise the treatment of digital assets but there is currently no harmonised cross-jurisdictional regulation.

The Property (Digital Assets etc) Act clarifies the UK position. Other jurisdictions have different approaches to the status of digital assets in property law.

If you are dealing with a cross-jurisdictional matter, you will need to know where cryptoassets are legally located and what legal rights apply to them.

Examples of digital asset rules in different jurisdictions include:

European Union

The European Union Markets in Crypto-Assets Regulation (MiCA) came into full effect December 2024.

It creates a higher level of consumer protection related to cryptoassets. MiCA is applicable to non-security cryptoassets.

MiCA does not apply to:

• cryptoassets which are regulated as financial instruments under UK legislation, and
• rules regulating markets in financial instruments (UK Markets in Financial Instruments Directive (MiFID) framework)

United States

The GENIUS Act focuses on stablecoins.

Stablecoins are a type of cryptocurrency. They are designed to maintain a stable value by linking their price to something stable, like a regular currency.

The forthcoming Digital Asset Market Clarity Act (CLARITY Act) clarifies the regulatory authority and definition of a digital commodity.

Multi-year rulemaking by US regulatory bodies, the US Treasury and the federal banking agencies is anticipated.

Singapore

Singapore’s Digital Token Service Providers (DTSP) framework came into effect on 30 June 2025.

It extends regulatory oversight to all Singapore-based entities.

It requires Singapore-based entities to be licensed in Singapore. This includes where digital token services are only offered outside of Singapore.

Hong Kong

Hong Kong is currently seeking to expand its regulatory regime for virtual assets.

It is proposing ways to streamline licensing regimes to support the tokenisation of existing assets and facilitate further payment use cases.