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, comprising lawyers, judges, and professors, set forth four specific recommendations in its report published on June 28.
These related to legislation for a distinct category of personal property, creating an industry-specific panel, implementing a bespoke legal framework on crypto collateral arrangements, and law reform to clarify these arrangements.
The recommendations
The commission said the current personal property laws are “sufficiently flexible” to encompass cryptocurrencies. However, cryptocurrencies have unique features that set them apart from physical assets, securities, and other forms of property.
Therefore, it noted that a distinct category should be legislated “to better recognize and protect their unique features.” This recommendation was also made in its consultation paper published in 2022.
The Law Commission saw value in creating a panel of experts advising the court on complex legal matters involving cryptocurrencies. The panel should comprise technical experts, legal practitioners, academics, and judges, per the report.
It said the existing laws around using crypto as collateral are “not adequate.” To address these limitations, the U.K. should create a tailored legal structure that “better facilitates the entering into, operation and enforcement of collateral arrangements relating to crypto-tokens and crypto-assets.”
The commission also recommended changes to statutory laws to define if and how certain cryptocurrencies align 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:
“aim to create a clear and consistent framework for digital assets that will provide greater clarity and security to users and market participants.”
Justice Minister Mike Freer was quoted in the report saying:
“We must ensure our law remains equipped to meet the complexities of these technologies well into the future, and we will carefully consider these findings as we look to further strengthen the future of our globally-renowned legal system.”
The report stating the recommendations would support the government’s crypto hub ambitions.
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