English law works for digital assets, Commission reports
Proposals for reform of the law relating to assets such as cryptocurrencies and non-fungible tokens have been published today by the Law Commission of England & Wales.
The UK Government had asked the Commission to carry out a first-ever rigorous common law analysis, showing how the law in England & Wales could respond to this kind of emerging technology.
In its Report on Digital Assets the Commission aims to provide a comprehensive legal foundation for digital assets which will allow the new technologies to flourish, enabling a diverse range of market participants to interact with and benefit from them.
It concludes that the common law of England & Wales is well placed to provide a coherent and globally relevant regime for existing and new types of digital asset.
Although these do not fit within traditional categories of personal property, differing significantly both from physical assets and from rights-based assets like debts and financial securities, 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. It also recommends legislation to confirm the existence of this category and remove any uncertainty.
To ensure that courts can respond sensitively to the complexity of emerging technology, it calls on 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 makes recommendations to provide market participants with legal tools that do not yet exist in England & Wales, such as new ways to take security over crypto-tokens and tokenised securities.
Its proposals support the Government’s goal of attracting technological development to cement the position of England & Wales as a global hub for crypto-tokens and crypto-assets.
Professor Sarah Green of the Commission commented: "The use and importance of digital assets has grown significantly in the law few years. The flexibility of the common law means that the legal system in England & Wales is well placed to adapt to this rapid growth.
"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 & Wales remains a dynamic, globally competitive and flexible tool that enables further technological innovation."