Establishing expert panels and putting a legal framework around crypto collateral agreements are two other Law Commission ideas.
A new category of personal property for digital assets, including cryptocurrencies, has been proposed by the Law Commission of England and Wales. To offer legal clarity and create a framework for handling digital assets, the Law Commission suggested this classification in its final recommendation report to the government. The research tries to examine how digital assets are evolving and the need for suitable legal frameworks to control who can own them, transfer them, and utilize them.
The Law Commission’s suggestions are intended to resolve the difficulties and ambiguities that the law presents when it comes to digital assets, particularly when it comes to personal property law. The commission seeks to establish a strong legal foundation for the developing digital asset market in England and Wales through the creation of a new class of personal property, the creation of an industry-specific panel, the implementation of a specific legal framework for crypto collateral, and the clarification of the legal framework for these agreements.
These suggestions acknowledge the requirement for updated laws and regulations to take into account the special qualities and complexity of digital assets, paving the way for more distinct legal rights and obligations in the area of cryptocurrencies and other digital assets.
Despite recognizing that cryptocurrencies have unique characteristics, the Law Commission stated that the present personal property laws in England and Wales can accommodate them. In order to properly recognize and safeguard the distinctive characteristics of cryptocurrencies, it advised the development of a special category of personal property designed for them. This suggestion expands on the commission’s prior consultation document from 2022, which emphasized the necessity of recognizing cryptocurrencies legally.
The report suggested creating an expert panel to direct and counsel the court in difficult legal cases involving cryptocurrency. Judges, professors, legal specialists, and technology experts would make up this panel. When addressing legal concerns relating to cryptocurrencies, the court may have access to specialist information by utilizing the experience of numerous stakeholders.
Concerning the use of cryptocurrency as collateral, the Law Commission found flaws in the current legal system. It stressed how the complexity and unique needs of collateral agreements involving crypto-tokens and crypto-assets cannot be successfully addressed by the laws as they stand.
The research suggested developing a special legal framework that makes it easier to form, run, and uphold cryptocurrency-based collateral agreements in order to get around these restrictions.
The Financial Collateral Arrangement Regulations (FCAR) and some cryptocurrencies were both addressed by the commission, along with revisions to existing legislation to make them more clear. The research made clear that many digital assets probably lie beyond the purview of FCARs, calling for a precise definition to be included in the legal framework to assess whether these restrictions apply to certain cryptocurrencies.
The Law Commission’s suggestions and suggested amendments are meant to clarify the law and create an effective regulatory framework for cryptocurrencies in England and Wales. The commission wants to make sure that people and businesses using cryptocurrencies are properly protected by the law by acknowledging the distinctive characteristics of cryptocurrencies and addressing their legal concerns.