The UK should create a new property law category for digital assets, a government-commissioned report has concluded.
The report, commissioned by the UK government and conducted by independent body the Law Commission, said that digital assets including cryptocurrencies and non-fungible tokens (NFTs) do not fit within traditional categories of personal property. It proposes adding a third category of ‘digital objects’ to the existing categories of personal property which currency includes “things in possession” (i.e. tangible assets) and ‘things in action’ (e.g. shares in a company or debt).
Further to the creation of this new category for personal possessions, the Law Commission said that the government should create a panel of experts to advise courts on digital asset-related legal matters.
In a statement, the Law Commission said that the report “aims to provide a comprehensive legal foundation for digital assets which will allow these new technologies to flourish, enabling a diverse range of market participants to interact with and benefit from them.”
The report was a first-of-its-kind examination of how the common law of England and Wales can respond to emerging technologies, and ultimately concluded that the principals – which also serve as the foundation for US law – are “well placed to provide a coherent and globally relevant regime for existing and new types of digital asset.”
The Law Commission however said that there was not enough legal certainty around collateral arrangements involving crypto assets, and as such has recommended the creation of a bespoke legal framework to facilitate these situations.
Commenting on the report, Andrew Griffith, economic secretary to the Treasury, said: “Our reputation for straight dealing, use of the English language and flexible common law attracts business across the world.
“This, combined with our straightforward approach to regulating crypto-assets puts the UK at the vanguard of innovation to drive growth in digital assets and boost our economy.”
When serving as finance minister in April 2022, current UK prime minister Rishi Sunak heavily endorsed positioning the UK as a ‘global hub for crypto asset technology’. It was during his time as finance minister that this report was commissioned.
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