The thing about crypto ownership

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The Thing is one of the most mysterious characters in the Marvel Universe. Seemingly clumped together from giant puffs of cheese, he’s noticeably less human than his Spandex-wrapped compadres. A similar ambiguity surrounds crypto assets. These are recognized as things by UK law. This means that they exist beyond the feverish imaginations of crypto bros. But what kind of things are they exactly?

The Law Commission, a statutory review body, asked that question in a report this week. The answers are crucial for the property rights of potential investors. These aren’t just important if you’re meddling in cryptocurrencies, such as bitcoin, which is currently trading at less than half of its peak value of nearly $69,000. Stocks and bonds could eventually become digital assets, exploiting the purported advantages of distributed ledger technology.

We tend to assume that we have an enforceable title to the assets we buy and sell. There’s no point in paying for something you might not have. But unwitting investors can find themselves in trouble when property rights prove fragile. Ten years ago, for example, the British shareholders of Bumi, an Indonesian coal group listed in London, found that it did not have control of certain mines it supposedly owned. Stocks hit rock bottom.

Doubts constantly weigh on the shares listed in the United States of many Chinese groups with intermediate holding companies. It is unclear whether these titles provide true partial ownership of companies in China. This is one of the many reasons to never overpay for these stocks.

Ownership of crypto assets can be equally uncertain. Blame the conduct of unregulated platforms such as FTX for allegedly misusing client funds. The additional difficulty, for example when pursuing reimbursement, is the legal ambiguity of crypto assets.

They are not physical things in possession such as cars or houses. Nor are they things in action, which can only be owned by legal contracts like stocks and bonds. They are created digitally rather than through physical or legal processes.

The Law Commission therefore wants legislation to define bitcoin and its ilk as third-class things. It also proposes that laws governing collateral, in lending transactions for example, be extended to fully encompass crypto assets.

Lavish case law should gradually normalize the ownership of digital assets, the body believes.

The proposals are good for consumer protection, according to Dion Seymour of specialist tax consultancy Andersen LLP: Courts will spend less time considering whether digital assets are property that investors can seek.

But whether you should own digital assets, even with strong ownership rights, is debatable. Lex’s opinion is that cryptocurrencies have no use except for speculation, secret transactions, or as badges of maverick ideology. We see bitcoin price as an indicator of speculative exuberance, nothing else.

Non-fungible tokens, which among other things certify ownership of online art, are status symbols. A Birkin handbag has the same function but you can also store your keys and phone in it.

There may be better use cases for other digital assets that deploy distributed ledger technology. An example could be the tokenization of stocks and bonds so that they are cheaper to trade. Central bank digital currencies could be another. But the glacial pace of development and adoption suggests that these solutions are still looking for a problem, regardless of their ownership status.

Renewable tech: the seductive desire to demerge

Running a business by getting it on a separate stock exchange can electrify a company’s share price. That may be the hope behind Renault’s plan to launch Ampère, its independent electric vehicle maker. Yet Renault’s long-term future hinges on moving away from combustion engine vehicles. So why sell one of its EV businesses?

The energy transition could put a number of historic companies into liquidation. Some can afford to keep new businesses with high growth potential in-house as insurance policies. Others do not have the necessary capital. A third group believe that a spin-off in which shares of a separately listed subsidiary are distributed to investors will create new currency for anticipated mergers and acquisitions.

Consider the possibilities. Renault sold 228,000 electric and hybrid vehicles in Europe last year. This placed the French automaker third in terms of market share.

An Ampere IPO could yield $1 billion to $2 billion in stock sales. But is the transaction really necessary? Renault wants to accelerate its growth. He has enough cash on hand to cover Ampères needs for years, some 4-5 billion thinks Dan Roeska at Bernstein,

Germanys Thyssenkrupp is in a different boat. She would like to float her Nucera hydrogen unit. The parent company does not have the capital to give the business a decent boost.

Nucera has an electrolyser production capacity of 1 GW per year, Lex estimates. It’s high. But profits may take time to materialize and competition is bound to intensify.

The parent company wants to simplify its structure and decarbonize other capital-intensive activities, including steelmaking. He could use all the funds raised. The share of the Thyssenkrupps joint venture in Nucera could be worth 2 billion.

A successful IPO can, meanwhile, offer a smaller division a chance to grow independently. Competition for capital is difficult within a conglomerate. CFOs favor divisions with rapid ROI.

Italian energy group Eni expects its Plénitude renewables business to grow in part through acquisitions and believes a stock currency will help. So far, markets haven’t warmed to the idea of ​​a spin-off. Eni can try again. TotalEnergies and BP, both with in-house renewable energy units, will follow with interest.

We have omitted a reason to create energy transition companies: business chance. Managerial ambition and activity for fun are real factors. They would seem to apply at Renault more than a strategic logic. Ampere may ultimately be worth more to its parent company as a spinoff than through a spinoff.

Lex is the FT’s concise daily investment chronicle. Expert writers from four global financial centers provide informed and timely opinions on capital trends and big business. Click to explore

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