The U.K. Law Commission identifies four key proposals for changing the laws governing the usage and ownership of cryptocurrencies.
In response to a government directive, the Law Commission of the United Kingdom has carried out a common law analysis to determine how the legal systems of England and Wales can accept cryptocurrencies, nonfungible tokens (NFTs), and other digital assets.
To accommodate and safeguard the special characteristics of cryptocurrencies and digital assets, the Law Commission advises the introduction of a new and distinct category of personal property. In the United Kingdom, common law would be used to establish the limits of this group.
The Commission believes that by creating a new personal property category, it will be possible to recognize different digital assets, such as cryptocurrencies and digital versions of instruments like carbon emission credits or export quotas.
The Law Commission suggests the creation of an industry-specific group made up of judges, academics, technical specialists, and attorneys. This panel will provide courts with non-binding recommendations on legal matters and factors pertaining to the bitcoin and digital asset industries.
The construction of a special legal framework to ease the use and enforcement of collateral arrangements is also recommended. Clarity and assistance for collateral agreements involving digital assets are sought by this approach.
The Law Commission proposes legislative changes to make it clear which digital assets are covered by the Financial Collateral Arrangements Regulations of 2003 in the United Kingdom. This would make it easier to identify how to treat and classify digital assets legally within the purview of these legislation.
In response to a request from the Ministry of Justice, the Law Commission started looking into global legal issues in the cryptocurrency industry in October 2022. This shows that the government understands the importance of addressing the legal complications brought on by the expanding use of cryptocurrencies and digital assets.
The Law Commission’s proposals stress the significance of modifying legal systems to take into account new technological developments. The U.K. wants to create a more transparent legal environment, encourage innovation, and offer more protection for participants in this developing industry by addressing the special characteristics and difficulties presented by cryptocurrencies and digital assets.