The Law Commission of England and Wales has published recommendations for reform and development of the law relating to digital assets.
Digital assets – which include cryptocurrencies and non-fungible tokens – are used for an increasing variety of purposes in modern society, such as for investment, for making payments, and for linking to or embodying debt and equity securities.
The government asked the Law Commission to carry out a rigorous common law analysis of how the law in England and Wales can respond to the emerging technology.
The Commission’s view is that the common law of England and Wales is well-placed to provide a coherent and globally relevant regime for existing and new types of digital asset.
Because digital assets are not tangible and differ significantly from physical assets, and from rights-based assets like debts and financial securities, they do not fit within traditional categories of personal property. Nonetheless, the Commission argues that the flexibility of common law can accommodate a distinct category of personal property to better recognise and protect their unique features.
The Commission also recommended legislation to confirm the existence of this category and remove any uncertainty.
It called on the government to create a panel of industry experts who can provide guidance on technical and legal issues relating to the control of digital assets.
The Commission also made recommendations to provide market participants with legal tools to take security over cryptocurrencies and tokenised securities.
“The use and importance of digital assets has grown significantly in the last few years. The flexibility of the common law means that the legal system in England and Wales is well placed to adapt to this rapid growth,” said Professor Sarah Green, Law Commissioner for Commercial and Common Law.
“Our recommendations for reform and development of the law therefore seek to solidify the legal foundation for digital assets. We also aim to ensure that the private law in England and Wales remains a dynamic, globally competitive and flexible tool that enables further technological innovation.”
Andrew Griffith, Economic Secretary to the Treasury, said: “Our reputation for straight dealing, use of the English language and flexible common law attracts business across the world.
“This, combined with our straightforward approach to regulating crypto-assets puts the UK at the vanguard of innovation to drive growth in digital assets and boost our economy.
“I firmly welcome the Law Commission’s Final Report on Digital Assets and the work done to meet the complexities of these technologies well into the future – and will carefully consider their findings and recommendations.”