While many still regard cryptocurrencies as ‘the emperor’s new clothes’, new legislation for England, Wales and Northern Ireland says that digital assets such as Bitcoin and other tradeable, non-fungible tokens can now be recognised as personal property.
We’re among the first countries in the world to confirm this position in law and, potentially, it’s good news for insolvency estates. Law firm Taylor Wessing says the Property (Digital Assets) Act 2025, which only became statute in December, creates a new third category of personal property; it’s drafted broadly enough to capture crypto-tokens and to allow for further technological change. The Act will hopefully bring confidence and certainty to both Insolvency Practitioners and investors. Office-holders could face fewer disputes and will now be able use their full powers of investigation to recover value in digital asset insolvencies.
That’s not to say there aren’t still challenges for IPs dealing with crypto: volatile prices make valuation difficult; identifying and securing assets remains hard; and digital assets can be moved across jurisdictions, possibly beyond the reach of enforcement orders. Moreover, the new Act doesn’t treat crypto as money or foreign currency, so claims to such assets can’t deploy a statutory demand.
Investing in digital currencies is clearly risky. Crypto ownership has spread quickly, although the Financial Conduct Authority has found that the proportion of UK adults holding the ‘asset’ eased from 12% to 8% in 2025 – still double the 2021 level – with an average holding valued at £3,042. This suggests that relatively inexperienced retail investors are still dabbling.
Recent forced closures of crypto-related companies, including an investment academy and a crypto ‘mining’ business, have accelerated regulatory changes. From this year, operators will be required to collect and report full customer details – including names, addresses, tax IDs, and transaction data – under new tax transparency rules aligned with the OECD’s Crypto-Asset Reporting Framework.
Assuming a crypto punter hasn’t yet reached the point of bankruptcy and is sitting on theoretical losses they can afford to bear, how can they mitigate their financial position? HMRC is, unsurprisingly, up to speed with the tax treatment of crypto assets and liabilities. UK crypto investors can “bank” losses with HMRC to offset against future gains. Profitable disposals, as with other investments, attract capital gains tax at 20%. Sales at a loss, however, can offset future gains on other types of investments, such as shares or property. Losses need to be claimed within four years of the end of the tax year in which they were realised.
If the crypto position is unfortunately a wipe-out, It is also possible to bank a ‘negligible value claim’ with HMRC when a crypto asset becomes worth ‘next to nothing’. No sale is needed and the window for carrying forward is indefinite. This rule also applies to ‘lost’ crypto assets, for example if a private key or password can’t be retrieved.
Fraud is different, however. Negligible value and capital losses are allowed if proof of holding at some point can be established; but not receiving crypto asset tokens that were paid for are unlikely to be seen as a disposal since the individual still owns the stolen asset and has a right to recover it.
The new Act, which follows key hires at the Insolvency Service for dealing with this area, shows that crypto is set to be pursued in bankruptcies with the same resolve as cash, real estate and traditional securities. It’s also likely to help force the pace of wider changes in financial markets, whereby better integration of crypto into the established global trading landscape ultimately supports easier tracing and lower fraud.
Written by Bea Vakharia, analyst at Buchler Phillips, a UK based independent boutique firm with an impeccable Mayfair heritage, specialising in corporate recovery, turnaround, restructuring and insolvency.