Crypto Assets to Be Given Distinct Legal Category, Proposed by UK Law Commission

Crypto Assets to Be Given Distinct Legal Category, Proposed by UK Law Commission

The UK Law Commission's Push for Crypto-friendly Legal Frameworks

The Law Commission of the United Kingdom is advocating for the establishment of a separate and unique category of personal property to cater to and safeguard the singular characteristics of digital assets and cryptocurrencies. This proposal is among four central recommendations arising from an in-depth common law examination, commissioned by the UK government, to investigate how existing English and Welsh legal structures can incorporate digital assets such as cryptocurrencies and nonfungible tokens (NFTs).

Proposition for a New Category of Personal Property for Digital Assets

A crucial aspect of these recommendations is devising a new, unique category of personal property tailored for digital assets. The commission intentionally has not given explicit boundaries for this urged category, underscoring its view that the UK's common law should define which digital assets will be encompassed within this classification.

The commission shared in a statement to Cointelegraph that it believes a fresh category of personal property would enable a more "refined approach" towards recognizing various digital assets - everything from cryptocurrencies to digitalized instruments such as carbon emissions credits and export quotas.

Establishment of a Expert Panel and a Unique Legal Framework

Among other things, the Law Commission is encouraging the establishment of a panel, unique to the industry, composed of technical experts, legal experts, scholars, and judges to offer "non-binding guidance" to courts on a variety of legal matters and considerations related to the sector.

Another part of the proposition includes the setup of a specially crafted legal framework designed to aid the functioning and enforcement of collateral arrangements.

Statutory Law Reforms for Clarification

The final proposal suggests changes in statutory laws to define whether certain digital assets are encompassed by the Financial Collateral Arrangements Regulations of 2003 under UK jurisdiction.

In October 2022, at the request of the Ministry of Justice, the Law Commission had begun to review the global legal challenges related to the crypto industry. Since then, the UK's Treasury and Home Office have announced plans to regulate the cryptocurrency sector "rigorously" in an attempt to combat criminal usage of cryptocurrencies. The implementation of these regulations is planned for March 2023.