The Law Commission of England and Wales has recommended that digital assets, including cryptocurrencies, should be classified under a new category of personal property. In its final recommendation report to the government, the Law Commission outlined four specific recommendations. These recommendations focus on legislation for a distinct category of personal property, the creation of an industry-specific panel, the implementation of a bespoke legal framework for crypto collateral arrangements, and law reform to provide clarity on these arrangements. While the current personal property laws are deemed flexible enough to encompass cryptocurrencies, the Law Commission acknowledges that these assets possess unique features that differentiate them from physical assets, securities, and other forms of property. As a result, the commission suggests that a distinct category should be established to better recognize and protect these unique features. This recommendation was previously outlined in the commission’s consultation paper published in 2022.
Industry-Specific Panel
The Law Commission also highlights the value of creating a panel of experts to advise the court on complex legal matters involving cryptocurrencies. This panel would consist of technical experts, legal practitioners, academics, and judges. By drawing on the expertise of these individuals, the court can make more informed decisions regarding the legal implications of cryptocurrencies.
Bespoke Legal Framework for Crypto Collateral Arrangements
According to the Law Commission, the existing laws surrounding the use of cryptocurrencies as collateral are inadequate. To address these limitations, the commission suggests the creation of a tailored legal structure that better facilitates the entering into, operation, and enforcement of collateral arrangements related to crypto-tokens and crypto-assets. This framework would provide greater clarity and security to users and market participants, ensuring that their rights and interests are protected.
Changes to Statutory Laws
The commission also proposes changes to statutory laws to define the alignment of certain cryptocurrencies with the Financial Collateral Arrangement Regulations (FCAR). Currently, many digital assets are likely to fall outside the scope of FCARs. Therefore, the commission suggests creating a clear and consistent framework for digital assets, which would bring greater clarity and security to users and market participants.
The report received support from Justice Minister Mike Freer, who emphasized the need for the law to remain adaptable to the complexities of emerging technologies. Freer stated that the government would carefully consider the Law Commission’s findings as it seeks to strengthen the future of the legal system. These recommendations are in line with the government’s ambitions to establish the UK as a crypto hub, enabling the country to remain at the forefront of technological advancements in the financial sector.