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Crypto Law/Level I · What crypto is in law/1.2 The labels/Lesson 1

Property: what you can own

Why courts and lawmakers increasingly treat crypto tokens as things that can be owned, stolen, frozen and inherited, and what that label does not settle.

Education, not legal, tax or investment advice. Crypto law differs between countries and states and changes often. Check the current rules where you live with a qualified lawyer or tax adviser before you act.

The lean path

The cheapest, lowest-tax, simplest and most private route the law allows, best first. Each step names the rule it rests on and the condition that keeps it lawful.

  1. Doing nothing is the cheapest tax route: buying and holding property is not taxable under IRS Notice 2014-21, and coins held over one year qualify for the 2026 0% long-term rate up to $49,450 taxable income single; a sale above that is taxed.
  2. Self-custody gives you ‘control’, the core of ownership under UCC Article 12, at no cost and with no platform insolvency risk; the catch is that losing the keys loses the property, and Article 12 applies only in states that enacted it.
  3. Gifting coins is tax-free up to the 2026 annual exclusion of $19,000 per recipient, with no form; above that, file Form 709 against the $15 million lifetime exemption, and the recipient inherits your cost basis for later sales.
  4. Holding until death gives heirs a basis stepped up to market value under 26 U.S.C. §1014, erasing lifetime gains; leave access instructions with your executor rather than in the will itself, since probated wills can become public.

MaterialsIRS Notice 2014-21, Q&A-1, which says virtual currency is treated as property for US federal taxThe Property (Digital Assets etc) Act 2025 on legislation.gov.ukThe judgment in AA v Persons Unknown, 2019 EWHC 3556 (Comm), on the National Archives case-law siteThe custody or “ownership of assets” section of the terms of any crypto platform you use

Wonder

  1. If a coin is only an entry in a shared ledger, what exactly do I own?
  2. Can a court freeze stolen crypto the way it can freeze a stolen car or a bank balance?
  3. Do I own the coins in my exchange account, or only a promise from the exchange?

Explore

  1. In law, “property” is less a thing than a set of rights that hold against everyone: to use something, to keep others out, to sell it, to give it away and to leave it to heirs. The label matters because those consequences follow from it. If a token is property, it can be stolen, frozen by a court, divided in a divorce, seized by the state and passed on at death. If it were only information, like a phone number, many of those remedies would not fit. Most legal systems that have faced the question now answer yes, with some limits.
  2. The United States took its first clear step through tax. In IRS Notice 2014-21 the Internal Revenue Service said that, for federal tax purposes, “virtual currency is treated as property,” so the general rules for property transactions apply. That is why selling, swapping or spending a coin can produce a taxable gain or loss (lesson 2.1.1). The notice settled the tax label only. It did not answer commercial questions, such as how ownership passes from seller to buyer or who wins when two people both claim the same coins.
  3. Commercial law is filling that gap. In 2022 the American Law Institute and the Uniform Law Commission approved amendments to the Uniform Commercial Code (UCC), the model commercial law that US states adopt. A new Article 12 covers “controllable electronic records”, a category that takes in many crypto tokens. Its central idea is “control”, which works much like possession of a physical object. A buyer who obtains control for value, in good faith and without notice of a competing claim can take the record free of other people’s property claims. Each state must enact Article 12 itself, so the answer depends on the state.
  4. English courts reached the property question through a ransom case. In AA v Persons Unknown, decided on 13 December 2019, an English insurer had paid a ransom of 109.25 bitcoin, then worth about $950,000, after hackers locked a customer’s computer systems, and it asked the court to freeze 96 of those coins once they were traced to an exchange account. English law traditionally knew two kinds of personal property: things in possession, meaning physical objects, and things in action, meaning rights enforced by suing, such as a debt. Bitcoin is neither. Mr Justice Bryan nevertheless held that cryptocurrencies are a form of property capable of being the subject of a proprietary injunction.
  5. Parliament then put the point in a statute. After a Law Commission report in June 2023 and a draft bill in July 2024, the Property (Digital Assets etc) Act 2025 received Royal Assent on 2 December 2025. It applies in England and Wales and Northern Ireland, not Scotland. It says a thing is not prevented from being the object of personal property rights merely because it is neither a thing in possession nor a thing in action. The Act deliberately leaves it to judges to decide which digital things fall into this “third category” and what rights attach to them.
  6. The property label does not guarantee that anything can be recovered. Thieves move coins quickly through addresses that are hard to tie to a person (lesson 1.1.5), and transfers cannot be reversed (lesson 1.1.6). The label also says nothing about what you hold through a platform. A balance on an exchange may be a contractual claim against the company rather than coins held for you, and the terms of use can decide which (lessons 4.1.1 and 4.1.4). A practical check: read the custody section of a platform’s terms and note whether customer assets are said to be held for customers or to belong to the platform.

Key facts

  • IRS Notice 2014-21 states that, for US federal tax purposes, virtual currency is treated as property.
  • The 2022 amendments to the Uniform Commercial Code added Article 12, which governs “controllable electronic records” and makes “control” its central concept.
  • Article 12 applies in a US state only once that state has enacted it.
  • In AA v Persons Unknown, decided on 13 December 2019, the English High Court held that cryptocurrencies are a form of property capable of being the subject of a proprietary injunction.
  • The Property (Digital Assets etc) Act 2025 received Royal Assent on 2 December 2025 and applies in England and Wales and Northern Ireland.
  • That Act provides that a thing is not prevented from being the object of personal property rights merely because it is neither a thing in possession nor a thing in action.

Exercise nine, six, three, one

9CollectList up to 9 digital things you hold or use, such as coins in a self-custody wallet, an exchange balance, an in-game item, a domain name, a gift card balance or a social media account.
6ClusterSort them into 6 categories: held under your own control, held by a company for you, a contractual claim against a company, a licence to use something, information only, and items you are unsure about.
3DistillReduce the 6 categories to 3 groups: things a court would likely treat as your property, things that are really a promise from someone else, and things whose status you would need to check in the terms or the law.
1CrystallizeWrite 1 sentence explaining, in your own words, why it matters whether the law treats a crypto token as property.

Fact check

Dates, figures and claims checked against the published sources listed below.

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