Digital assets, such as cryptocurrencies, could be classified under a new category of personal property, the Law Commission of England and Wales said in its final recommendation report to the government.
The Law Commission, made up of lawyers, judges and professors, made four specific recommendations in its report published June 28.
These included legislation for a separate category of personal property, the creation of an industry-specific panel, the implementation of a tailored legal framework for cryptocurrency collateral agreements, and legislative reforms to clarify these regulations.
The recommendations
The commission said current personal property laws are “flexible enough” to include cryptocurrencies. However, cryptocurrencies have unique characteristics that differentiate them from physical assets, securities and other forms of property.
Therefore, it noted that a separate category should be legislated “to better recognize and protect their unique characteristics”. This recommendation was also made in the consultation document published in 2022.
The Law Commission saw value in creating a panel of experts who advised the court on complex legal matters related to cryptocurrencies. The panel should be made up of technical experts, legal practitioners, academics and judges, according to the report.
It said the existing laws surrounding the use of crypto as collateral are “not adequate”. To address these restrictions, the UK would need to create a bespoke legal structure that “better facilitates entering into, performing and enforcing collateral agreements related to crypto tokens and crypto assets”.
The committee also recommended changes to statutory laws to determine whether and how certain cryptocurrencies comply with the Financial Collateral Arrangement Regulations (FCAR). According to the report, many digital assets are likely to fall outside the scope of FCARs. This action would:
“Strive to create a clear and consistent framework for digital assets that will provide greater clarity and security to users and market participants.”
Attorney General Mike Freer was quoted in the report as saying:
“We must ensure that our law remains equipped to handle the complexities of these technologies well into the future, and we will carefully consider these findings as we further strengthen the future of our globally renowned justice system.”
The report with the recommendations would support the ambitions of the government’s crypto hub.
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