From crypto to collateral: what could the Property (Digital Assets etc) Act 2025 mean for secured lending? 

Introduction

On 2 December 2025, the Property (Digital Assets etc) Act 2025 (‘the Act’) received Royal Assent. It implements the Law Commission’s recommendations to update English and Welsh property law to reflect the growth of digital assets. Crucially, the Act confirms in statute that digital assets are capable of being personal property.

This article considers the Act’s likely effects on the UK banking and finance sector, including secured lending, collateral arrangements and enforcement, as well as how lenders and borrowers may respond.

The Act

The Act removes uncertainty around whether digital assets, such as crypto‑tokens and non-fungible tokens (NFTs), can be treated as property. Its single substantive provision states that a thing, including one that is digital or electronic, can still be the object of personal property rights even if it is neither: tangible physical property; or intangible rights enforceable through legal claims, such as claims for breach of contract, for example.

Digital assets fall into neither category. They cannot be physically possessed, yet they exist independently of legal recognition. The Act therefore acknowledges a more flexible “third category” of property and leaves courts to shape its boundaries as technology develops. The Act is intentionally short to allow for interpretive flexibility. It provides certainty while allowing the law to evolve without repeated legislative intervention.

What could the Act mean for secured lending?

The Act may broaden the types of collateral available in secured lending. By confirming that digital assets can attract proprietary rights, lenders gain a clearer legal basis for taking and enforcing security over them. Borrowers, in turn, may be able to leverage digital assets such as tokens, stablecoins or other blockchain‑based assets such as NFTs, as sources of liquidity.

The Act, therefore, creates new opportunities for secured lending over digital assets; however, the realisation of them will depend on robust valuation, custody and enforcement frameworks, and how comfortable lenders and borrowers are with the risks set out below.

Issues for lenders

1. Managing volatility and operational risk

Digital assets remain highly volatile. Consider the fluctuations in Bitcoin during 2025: its value per Bitcoin reached a low of approximately £56,000 in April and a high of around £95,000 in October, representing a variation of nearly 70%. Lenders will need robust loan‑to‑value ratios, frequent valuation triggers and clear margining arrangements to guard against rapid price movements.

As the use of digital assets as collateral evolves, the market may draw on Lombard loan practices to manage volatility and operational risk. Lombard loans involve pledging liquid financial assets such as stocks, shares, and bonds as collateral to obtain credit from a bank. Like digital assets, these assets can be volatile, so similar loan-to-value ratios and valuation trigger mechanisms used in Lombard lending could be adapted to digital asset-backed loans.

Cybersecurity will also be critical: the rise in digital asset theft means lenders holding significant volumes of such assets must invest in high‑grade digital custody, multi‑signature controls and continuous monitoring.

2. Technology and infrastructure

Taking security over digital assets requires systems capable of isolating, protecting and controlling the collateral. Some lenders may invest in in‑house custody platforms, while others may rely on specialist custodians. Both approaches require confidence in wallet architecture, private‑key protection and segregation of client assets.

Enforcement presents further challenges. Unlike traditional property, realisation often depends on obtaining control of private keys or gaining access to wallets. Lenders must understand how control is transferred, how assets can be sold, and what happens if the digital environment hosting the asset becomes compromised. As case law develops, more structured enforcement pathways are likely to emerge.

Issues for borrowers

1. Default risk caused by volatility

By enabling lenders to rely on digital assets as collateral, the Act may expose borrowers to a greater risk of market‑driven Events of Default. Sudden price drops could trigger breaches of loan‑to‑value covenants, even if the borrower has complied with all contractual obligations. Borrowers holding highly volatile assets may therefore face more frequent valuation checks, early warning triggers and margin call obligations.

2. Higher borrowing costs

Because digital assets remain technologically and legally complex, borrowers may face higher interest rates or additional fees. Lenders may price in the cost of custody, cybersecurity, enhanced monitoring and the residual uncertainty surrounding the third category of property. Even with the Act’s clarification, the courts will still need to elaborate principles around control, priority and enforcement, meaning some legal uncertainty may persist for several years. In the meantime, the risk appetite for some banks might be too great for digital assets to be accepted as security.

The Birketts view

The Act strengthens the UK’s position as a leading digital asset jurisdiction by providing statutory recognition and a platform for innovation. Within the banking and finance sector, its impact will depend heavily on lenders’ willingness to build the technological infrastructure necessary to take and enforce security over digital assets, and on borrowers’ willingness to accept potential volatility related risks and higher costs. In essence, using digital assets as collateral in secured lending mirrors the principles of Lombard loans, as both rely on the pledge of liquid, marketable assets to provide credit while maintaining flexibility and mitigating lender risk. Judicial developments will determine how far this new category of property can be expanded and how securely digital assets can operate within mainstream secured lending frameworks.