The Law Commission of the United Kingdom has presented a set of recommendations to reform laws concerning the use and ownership of crypto and digital assets. The key proposal is establishing a distinct legal category to accommodate the unique characteristics of these digital assets and provide them with adequate protection.
In response to a government mandate, the Law Commission conducted a comprehensive analysis of the existing legal frameworks in England and Wales to assess their compatibility with cryptos and non-fungible tokens (NFTs). Alongside the proposal for a new legal category, the Commission put forward three other significant recommendations.
The primary recommendation is creating a specific personal property category for digital assets. Notably, the Commission purposely refrained from defining clear boundaries for this category, suggesting that determining what assets fall within it should be left to the common law system in the UK.
The Law Commission believes establishing this new category would enable a more nuanced approach to recognising and classifying digital assets, including cryptos and digitised instruments such as carbon emission credits or export quotas.
Another recommendation is forming an industry-specific panel consisting of technical experts, legal professionals, academics, and judges. This panel would offer non-binding advice to courts on various legal issues and considerations related to crypto, providing specialised insights and expertise.
The Commission also proposes developing a customised legal framework to facilitate the operation and enforcement of collateral arrangements involving cryptos and digital assets. This framework seeks to address the specific needs and complexities of the crypto industry.
Lastly, the Law Commission calls for statutory law reforms to clarify whether certain digital assets fall under the scope of the UK's Financial Collateral Arrangements Regulations of 2003. This clarification would provide greater regulatory clarity and certainty for market participants.
The Law Commission's review of the legal challenges surrounding cryptos commenced in October 2022 at the request of the Ministry of Justice. The UK Treasury and Home Office subsequently announced plans to implement robust regulations on the crypto sector in March 2023, aiming to combat potential criminal activities associated with cryptos.
The proposed recommendations by the Law Commission reflect the UK's commitment to adapt its legal frameworks to the evolving landscape of digital assets and establish a conducive environment for their use and growth.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash