Advertisement
Advertisement

UK Law Commission Proposes Changes to How Property Law Applies to Crypto

By:
Mohadesa Najumi
Updated: Jul 28, 2022, 12:52 UTC

A new consultation paper published by the UK Law Commission examines how property laws apply to digital assets

UK flag hanging on wall

Key Insights:

  • The UK Law Commission has proposed legislative reforms to provide wider recognition and legal protection for digital asset users.
  • They propose the creation of a new category for digital assets like cryptocurrencies.
  • To qualify under the new category, a digital asset must be composed of electronic data. 

The Law Commission of England and Wales, a statutory independent body tasked with reviewing and updating the law, has been assessing existing legislation on digital assets in an effort to regulate a sector which has grown so rapidly that it has been labelled as a “Wild West” by European Union officials.

At the request of the British government, the Law Commission has proposed legislative reforms to provide wider recognition and legal protection for digital asset users.

Public Consultation

The government has asked the Law Commission to review the law on digital assets to ensure that it can accommodate them as the industry continues to evolve and expand. As such, the Law Commission announced a call for public consultation from legal experts, technologists and users.

The consultation paper examines how personal property laws apply to digital assets and proposes the creation of a new category for digital assets like cryptocurrencies.

As well as highlighting the multi-faceted nature of cryptocurrencies, non-fungible tokens (NFT) and other digital assets, the paper argues that there are several key areas that require law reform in order to recognise and protect the rights of users and maximise the potential of digital assets.

The Law Commission, which is independent of the government, was created under the Law Commissions Act of 1965 for the purpose of promoting law reform. It is an advisory non-departmental public body sponsored by the Ministry of Justice.

A New Category

A key finding from the paper is that the Law Commission believes many digital assets such as cryptocurrencies and NFTs do not easily fit into current private property law.

As a result, it recommends the creation of a new category called ‘data objects’ that would account for things composed of data in an electronic form like databases, software, digital records, domain names and crypto.

By explicitly defining a distinct legal category of personal property to accommodate the unique features of digital assets under the banner of ‘data objects’, the Law Commission believes that a more diverse range of groups and companies will be able to benefit from them.

Another proposal suggests creating different options for the development and implementation of ‘data objects’ around existing law, while the final two recommendations allude to the clarification of law around ownership and control of digital assets.

Importantly, the Law Commission has proposed that in order to qualify under the new category, a digital asset must be composed of electronic data and meet other criteria, such as only being used by one person at a time.

This comes as Britain introduced a draft law last week that will enable certain types of stablecoins to be regulated as a form of payment, with a further consultation on regulating other types of crypto-assets due later this year.

About the Author

Mohadesa Najumi is a British writer who has worked within crypto, forex, financial technology, and the stock market industry. Mohadesa received her MSc in Political Science and International Relations at the University of Amsterdam.

Did you find this article useful?

Advertisement