With governments worldwide recognizing the inevitability of digital assets, the UK government has taken a significant step by assigning the Law Commission of England and Wales to address the establishment of a comprehensive legal framework. The commission has released recommendations for the reform and development of the legal framework concerning digital assets.
While personal property law has been able to accommodate digital assets over the past 15 years, the rapidly changing digital asset market and technology have created legal uncertainty and complexity. To address this, the government tasked the Law Commission with conducting a thorough common law analysis to determine how the law in England and Wales can respond to emerging technologies.
The Commission’s recommendations aim to establish a comprehensive legal foundation for digital assets, allowing for their growth and enabling a wide range of market participants to benefit from them. The report highlights the suitability of the common law to provide a coherent and globally relevant regime for both existing and new types of digital assets.
Digital assets do not align with the conventional classifications of personal property
Given that digital assets do not fit traditional categories of personal property due to their intangible nature and significant differences from physical assets, the Commission suggests that a distinct category of personal property be created under the common law to better recognize and protect their unique features. The report recommends legislation to confirm the existence of this category and remove any uncertainty.
To ensure courts can effectively handle the complexities of emerging technology, the Commission calls for the establishment of a panel consisting of industry experts who can provide guidance on technical and legal issues related to digital asset control.
The recommendations also address the need for legal tools that currently do not exist in England and Wales, such as new methods for securing crypto-tokens and tokenized securities.
Aligned with government’s objective
The Law Commission’s proposed reforms and common law developments aim to establish a clear and consistent framework for digital assets, providing users and market participants with greater clarity and security. These recommendations align with the government’s objective of attracting technological development and solidifying the position of England and Wales as a global hub for crypto-tokens and crypto-assets.
The Law Commission’s recommendations include legislation to establish a distinct category of personal property for digital assets, the creation of an industry-specific panel to provide advice on complex legal issues, and the development of a bespoke legal framework for collateral arrangements related to crypto-tokens and crypto-assets. Additionally, statutory law reform is proposed to clarify the scope of certain digital assets under existing regulations governing financial collateral arrangements.
The government of Rishi Sunak will now review the recommendations and decide on the next steps for implementation. Sunak, since taking 10 downing street office, pushes heavily to introduce CBDC