UK Proposes Digital Asset Category

The Law Commission of the United Kingdom is advocating for the establishment of a “distinct” category of personal property to facilitate and safeguard the unique characteristics of cryptocurrencies and digital assets.

Following a mandate from the British government to conduct a common law analysis of how legal frameworks in England and Wales can accommodate cryptocurrencies, nonfungible tokens (NFTs), and other digital assets, the body made the recommendation along with three other key points.

The establishment of a new and distinct category of personal property for digital assets is the most important recommendation.

The commission intentionally omitted distinct boundaries for the proposed category, emphasizing its belief that British common law should be used to determine which digital assets would fall under this category.

An announcement shared emphasized the commission’s belief that a new personal property category would enable a “nuanced approach” to the recognition of digital assets spanning from cryptocurrencies to digitized instruments, such as carbon emission credits or export quotas.

In addition, the Law Commission has proposed the institution of an industry-specific council of technical experts, legal practitioners, academics, and judges to provide “non-binding advice” to courts on a variety of legal issues and sector-specific considerations.

The recommendation also calls for the development of a “tailored legal framework” to facilitate the operation and enforcement of collateral arrangements.

The final recommendation calls for statutory law reforms to clarify whether particular digital assets fall under the 2003 Financial Collateral Arrangements Regulations of the United Kingdom.

In October 2022, at the request of the Ministry of Justice, the Law Commission initiated a review of international legal issues about the cryptocurrency sector.

Since then, The U.K.( United Kingdom) Treasury and Home Office have announced plans to “robustly” regulate the cryptocurrency sector in March 2023 to reduce criminal use of cryptocurrencies.