© Reuters. FILE PHOTO: Representations of cryptocurrencies plunge into water in this illustration taken, May 23, 2022. REUTERS/Dado Ruvic
By Elizabeth Howcroft
LONDON (Reuters) – UK law can accommodate crypto assets by creating a new category of personal property that would include digital assets, independent body the Law Commission said on Wednesday.
In a report commissioned by the government, the Law Commission said digital assets such as cryptocurrencies and non-fungible tokens (NFTs) do not fit within the traditional categories of personal property.
As expected, the Commission proposed adding a third category of “digital objects” to the existing categories of personal property, which are “things in possession” (tangible assets like gold) and “things in action” (such as debt or shares in a company).
The group also said the government should create a panel of experts to advise courts on legal issues involving digital assets.
These steps would support the UK government’s aim of becoming a global hub for crypto assets, the Law Commission said in a statement.
“The use and importance of digital assets has grown significantly in the last few years,” said Sarah Green, law commissioner for commercial and common law.
“The flexibility of the common law means that the legal system in England and Wales is well placed to adapt to this rapid growth.”
Prime Minister Rishi Sunak said in April 2022, when he was finance minister, that he wanted to make Britain a global hub for crypto asset technology. He asked the Law Commission to review whether current laws can accommodate digital assets.
“The Law Commission has opted to wield the scalpel, not the sledgehammer, with these recommendations. This will be reassuring for many in the industry,” said Adam Sanitt, knowledge director at Norton Rose Fulbright, which contributed to the report.
Sanitt said that taking forward the recommendations would pave the way for more protection for crypto asset holders and support the government’s aim to make the UK a tech hub.
The Commission also said there was not enough legal certainty around collateral arrangements involving crypto assets and recommended the government set up a bespoke legal framework to facilitate such situations.
“There is a very high degree of demand for such law reform among consultees, markets participants and industry bodies,” the report said.
