Fox on Tokenized Assets in Private Law

David Fox (School of Law, University of Edinburgh) has posted “Tokenised Assets in Private Law” on SSRN. Here is the abstract:

Tokenisation is a recent development in distributed ledger technology (“DLT”) systems. Assets that exist off the ledger system, such as securities or rights to the delivery of a service, are represented as tokens issued on DLT system. The tokens evidence the holders’ claims against the issuer of the assets. The system serves as a platform for trading the tokens and the off-ledger assets they represent.

Tokenisation presents many analytical difficulties for private law. My concern in this paper is to outline some of the problems – and possible solutions – of mapping traditional rules of property and transfer onto transactions with tokenised assets on a DLT system. Much depends on the legal analysis used to explain the transactions with tokens on the system, and on the possibility of recognising a legal link between the on-chain token and the off-chain asset that it represents. The paper develops the argument that digital transactions can be analysed as the expression of the parties’ intentions to make an assignment or novation of the rights represented by the assets.