Digital Asset Regulation in Energy Trading

1. Introduction

Digital asset regulation in energy trading means the legal control of digital assets used to buy, sell, settle, represent or record energy transactions. Examples may include energy tokens, blockchain-based electricity certificates, digital renewable-energy credits, tokenised contracts, stablecoins used for settlement, and other cryptoassets connected with energy markets.

This area is developing because electricity trading is becoming more digital. Blockchain and smart contracts can allow energy transactions to be recorded and settled automatically. However, the use of digital assets does not remove ordinary electricity-market rules. In the UK, wholesale electricity trading remains subject to REMIT, which prohibits market manipulation and insider trading and requires publication of inside information. (Ofgem)

2. What Is a Digital Asset in Energy Trading?

A digital asset can perform different functions.

1. Electricity representation

A token may represent a quantity of electricity generated or supplied.

2. Renewable-energy certificate

A digital token may represent the renewable characteristic of electricity rather than the physical electricity itself.

3. Financial asset

A token may give its holder an economic or investment interest.

4. Payment or settlement asset

A digital asset or stablecoin may be used to settle an energy transaction.

5. Digital contractual right

A smart contract may automatically record and perform rights between an energy producer and buyer.

Therefore, classification is the first legal question. The same technology may be regulated differently depending on what rights the digital asset actually creates.

3. Property Law

An important development is the recognition that some digital assets can constitute property.

In Tulip Trading Ltd v Bitcoin Association for BSV [2023] EWCA Civ 83, the Court of Appeal accepted that Bitcoin could be treated as property. The court discussed its transferable and rivalrous nature and relied on principles from National Provincial Bank v Ainsworth. (Bailii)

This is relevant to energy trading because a blockchain-based energy token may potentially have proprietary characteristics.

For example, if a token represents a specific renewable-energy entitlement and can be uniquely controlled and transferred, questions may arise concerning:

ownership;

transfer;

theft;

security interests;

insolvency; and

recovery after unauthorised transfer.

However, not every digital record automatically becomes property. Its legal characteristics must be examined.

4. Property (Digital Assets etc) Act 2025

The Property (Digital Assets etc) Act 2025 is an important development in English property law. It provides the statutory framework for recognising certain digital assets as capable of attracting personal-property rights. (Legislation.gov.uk)

This is potentially important for energy trading because tokenised electricity rights and environmental attributes may increasingly exist independently from traditional paper-based documents.

The Act therefore strengthens the legal foundation for treating suitable digital assets as legally protectable property.

5. REMIT and Energy-Market Regulation

Digital assets used for wholesale energy trading do not escape REMIT.

Ofgem states that REMIT applies to wholesale energy markets and prohibits:

market manipulation;

attempted manipulation;

insider trading; and

unlawful failure to publish inside information. (Ofgem)

Suppose a trader uses an energy token platform to create a false impression that electricity supply is limited. The fact that the transaction takes place through blockchain does not make the conduct lawful.

The important principle is:

Digital technology changes the method of trading, but it does not remove market-integrity obligations.

6. Financial Regulation

Some digital assets connected with energy trading may also fall within financial-services regulation.

The UK's new cryptoasset framework will introduce additional regulated cryptoasset activities under the Financial Services and Markets Act 2000 (FSMA). The FCA states that the new regime is expected to come into force on 25 October 2027. (FCA)

The future regime covers activities including:

operating qualifying cryptoasset trading platforms;

dealing in qualifying cryptoassets as principal;

dealing as agent;

arranging transactions; and

certain staking activities. (FCA)

Therefore, an energy company creating or operating a digital-asset trading platform may need to consider both energy regulation and financial regulation, depending on the asset and activity.

7. Energy Tokenisation

Tokenisation can be used to represent energy-related rights.

For example:

Solar generation → verified meter data → digital token → buyer → settlement

A token could represent:

1 MWh of renewable generation;

a renewable attribute;

a contractual right to receive electricity;

a flexibility service; or

another energy-related entitlement.

The legal system must determine exactly what the token represents.

This prevents a major legal problem: confusing ownership of a token with ownership of physical electricity.

8. Smart Contracts

Smart contracts can automatically execute energy transactions.

For example, a smart contract could provide:

If verified electricity generation reaches 1 MWh, automatically transfer the agreed digital payment to the generator.

This can reduce administrative costs and settlement delays.

However, traditional contract law remains important. Questions can arise about:

contractual formation;

mistakes in software;

incorrect meter data;

hacking;

defective code;

responsibility for oracle information; and

legal remedies.

A smart contract therefore does not necessarily replace a legally enforceable contract.

9. Case Law: AA v Persons Unknown [2019]

In AA v Persons Unknown [2019] EWHC 3556 (Comm), the High Court treated Bitcoin as capable of being property and granted a proprietary injunction in circumstances involving cryptocurrency.

Relevance to energy trading

The case supports the proposition that digital assets may receive traditional property-law protection.

If an energy token is stolen from a digital wallet, the legal owner may potentially seek proprietary remedies, depending on the nature of the token and applicable law.

10. Case Law: Tulip Trading

Tulip Trading is particularly important because it examined the technical characteristics of Bitcoin and the legal relationship between digital assets and their developers.

The Court of Appeal noted that Bitcoin's technical structure makes it rivalrous, because the same Bitcoin cannot ordinarily be controlled or spent simultaneously by two people. (Bailii)

Relevance

An energy token designed with similar characteristics may potentially be treated as a proprietary digital asset.

However, the legal rights associated with a token must still be analysed separately from the underlying electricity transaction.

11. Case Law: D'Aloia v Persons Unknown

In D'Aloia v Persons Unknown [2024] EWHC 2342 (Ch), the High Court considered issues concerning cryptocurrency and tracing.

The case demonstrates the importance of identifying the legal owner, transfers and property rights associated with digital assets.

Relevance

For energy trading, this becomes important when digital energy assets pass through several wallets or platforms.

If a token is transferred unlawfully, tracing and recovery may become significant legal issues.

12. Market Abuse and Manipulation

Digital energy markets can create new forms of manipulation.

Examples include:

false token orders;

wash trading;

spoofing;

misleading information about electricity generation;

manipulation of token prices;

insider trading; and

false renewable-energy claims.

REMIT is particularly relevant where the digital asset represents or is directly connected to wholesale electricity or gas trading.

If the asset is also a regulated cryptoasset or financial instrument, additional financial-market rules may apply.

Therefore, the same transaction can potentially raise energy-market, financial-market and contract-law issues simultaneously.

13. Consumer Protection

Digital energy trading can also involve household consumers.

If consumers purchase tokenised energy products, regulators must consider whether information is:

clear;

accurate;

transparent;

not misleading; and

sufficient to explain financial and energy risks.

The FCA already applies rules requiring cryptoasset financial promotions to be fair, clear and not misleading, together with measures such as risk warnings and appropriateness requirements. (FCA)

This becomes important if an energy token is marketed as an investment rather than merely an electricity-related product.

14. Cybersecurity and Data Protection

Digital energy trading also creates cybersecurity risks.

Energy platforms may contain:

smart-meter data;

customer information;

trading records;

wallet information;

private keys; and

system-control information.

A cyberattack could therefore create both financial loss and energy-system risks.

Operators need appropriate cybersecurity, access controls, data protection and incident-response systems.

15. Main Regulatory Challenges

The main challenges are:

1. Unclear classification

Is the token property, a financial asset, an energy certificate or a contractual right?

2. Overlapping regulators

Ofgem and the FCA may have different responsibilities depending on the transaction.

3. Cross-border trading

Blockchain transactions may involve participants in different jurisdictions.

4. Smart-contract errors

Code may produce an outcome that differs from the parties' legal intention.

5. Market manipulation

Digital platforms can create new opportunities for misleading trading behaviour.

6. Insolvency

If an exchange or energy platform fails, users need to know whether they own the digital assets or merely have contractual claims.

16. Conclusion

Digital asset regulation in energy trading is a developing area where energy law, property law, financial regulation, contract law and cybersecurity law increasingly overlap.

The first legal step is to identify what the digital asset actually represents. A token representing physical electricity, a renewable-energy certificate, a contractual right or a financial investment may require different legal treatment.

The cases AA v Persons Unknown and Tulip Trading demonstrate the growing recognition of digital assets as capable of receiving property-law protection. (Bailii) The Property (Digital Assets etc) Act 2025 further strengthens this area of English law. (Legislation.gov.uk)

At the same time, energy trading remains subject to REMIT, including prohibitions on market manipulation and insider trading. (Ofgem) The UK's new cryptoasset regime will add another layer of financial regulation from 25 October 2027 for activities falling within its scope. (FCA)

Thus, the central legal principle is that tokenisation does not create a regulatory vacuum. Digital energy transactions must be assessed according to the nature of the asset, the rights it creates, the activity being performed and the risks it creates for electricity markets and consumers.