The Law Commission of England and Wales publishes recommendations for digital asset law reforms
The Law Commission of England and Wales has conducted a common law analysis and published its recommendations to guide the UK’s regulatory response to digital assets.
The Law Commission has published recommendations for the reform of digital asset laws
The recommendations outlined in its most recent report intend to cultivate a more comprehensive legal foundation for digital assets that’s built around a clear and consistent framework.
It also makes note of how the common law of England and Wales is well-positioned to provide a regulatory regime for all types of digital asset that’s globally relevant and applicable.
Its opening recommendation concerns the characterisation of digital assets as personal property. The Commission argues that digital assets’ unique features are deserving of a distinct third category of personal property.
While the report fails to outline clear boundaries for what stipulations a third category might entail, it instead circles common law as the most appropriate vehicle to determine which objects can fit in with it. Above all, this would allow a more nuanced approach to deciding which objects incur personal property rights.
Infringement of personal property rights could lead to legal ramifications, and the report considers this outcome too. It argues that prosecutors must be as prepared as possible to accurately deliberate on legal issues relating to digital assets.
In this, it recommends the creation of an industry specific panel involving technical experts, legal practitioners, academics and judges, who together can provide courts with non-binding advice on the complex legal issues that will surely arise from such a new and evolving sector.
Additionally, the report also suggests equipping market participants with a wider array of legal tools while promoting the creation of a bespoke legal framework that could better facilitate collateral arrangements relating to crypto-tokens and crypto-assets.
The Commission is also seeking a reformation of statutory law to clarify whether certain digital assets are covered by the Financial Collateral Arrangements (No 2) regulations of 2003.
In a statement, professor Sarah Green, law commissioner for commercial and common law, says the Commission has recognised how the use and importance of digital assets has “grown significantly” in the last few years.
“The flexibility of the common law means that the legal system in England and Wales is well placed to adapt to this rapid growth,” she comments. “Our recommendations for reform and development of the law therefore seek to solidify the legal foundation for digital assets. We also aim to ensure that the private law in England and Wales remains a dynamic, globally competitive and flexible tool that enables further technological innovation.”
Andrew Griffith, economic secretary to the treasury, adds he will “carefully consider their findings and recommendations”.
Following the publication of the report, the ball is now in the UK government’s court, and it must decide whether to act on the recommendations of the Law Commission.
