In a recent report, the UK Law Commission has put forward four major recommendations to reform laws concerning the use and ownership of cryptocurrencies and digital assets in England and Wales. The Commission’s mandate from the British government aimed to analyze how existing legal frameworks can accommodate these emerging technologies.
The primary recommendation is the establishment of a new and distinct category of personal property specifically tailored to digital assets. The Commission intentionally refrained from setting clear boundaries for this proposed category, emphasizing that the common law should determine which digital assets fall within its scope. By introducing this new legal category, the Commission believes it would enable a nuanced approach in recognizing various digital assets, such as cryptocurrencies and digitized instruments like carbon emission credits or export quotas.
Additionally, the Law Commission suggests the formation of an industry-specific panel comprising technical experts, legal practitioners, academics, and judges. This panel would provide non-binding advice to courts on legal issues and considerations related to the cryptocurrency sector. This move aims to enhance the understanding and expertise among judicial bodies dealing with complex technological and legal aspects of digital assets.
Another key recommendation involves the creation of a bespoke legal framework to facilitate the operation and enforcement of collateral arrangements. By clarifying whether specific digital assets fall under the purview of the UK’s Financial Collateral Arrangements Regulations of 2003, statutory law reforms are sought to eliminate ambiguity and improve regulatory clarity.
The Law Commission initiated its review of international legal challenges surrounding cryptocurrencies in October 2022 at the request of the Ministry of Justice. In response to concerns about criminal use of cryptocurrencies, the UK Treasury and Home Office have announced plans to implement robust regulations within the sector as of March 2023.
This proactive approach by the Law Commission and the government reflects their commitment to adapt and update laws to keep pace with the evolving digital landscape. By addressing legal uncertainties and providing clarity, these recommendations strive to foster innovation, facilitate responsible use of digital assets, and ensure adequate protection for individuals and businesses operating in the cryptocurrency space.
Overall
The proposed creation of a distinct legal category for cryptocurrencies and digital assets, along with the establishment of an industry-specific panel and the development of a bespoke legal framework, seeks to enhance the regulatory environment and provide a solid foundation for the future growth of the digital asset industry in the United Kingdom.