In a move to solidify the United Kingdom’s position as a digital asset hub, the UK Law Commission is calling for a bespoke legal framework that classifies cryptocurrencies as property. The Commission, funded by the Ministry of Justice, seeks to extend the current regulations for collateral arrangements in traditional finance to encompass the unique features of crypto assets.
The report published on June 28 marked a significant step in the government’s efforts to embrace and regulate the growing crypto market. However, it follows the first-ever government-commissioned analysis in the UK, examines how existing legal frameworks can adapt to accommodate crypto assets and non-fungible tokens (NFTs).
The UK Law Commission Seeks to Create New Category of Personal Property
One of the key proposals is to establish a new category of personal property to better recognize and safeguard the unique features of digital assets. While the current personal property laws in England and Wales have proven to be flexible enough to accommodate cryptocurrencies, the Commission acknowledges the need for a distinct legislative category that caters specifically to the characteristics of digital assets.
To address the complexity of legal issues surrounding this asset class, the Commission suggests forming a panel comprising technical experts, legal practitioners, academics, and judges. This panel would provide guidance to courts on intricate matters involving cryptocurrencies.
Furthermore, the Commission emphasizes the inadequacy of existing laws regarding the use of crypto as collateral and calls for a tailored legal structure that facilitates the entering into, operation, and enforcement of crypto collateral arrangements.
The Law Commission’s recommendations align with the UK government’s ambition to transform the country into a leading global hub for digital assets. By introducing a clear and consistent legal framework, the Commission aims to enhance clarity and security for users and market participants in the crypto space.
While the recommendations from the UK Law Commission are significant, they are not immediately binding. The government will now review the report and decide whether to implement the proposed reforms. The outcomes of this review will shape the future of crypto regulation in the UK and have implications for the development of the global digital asset market.