The Law Commission of England and Wales has recommended that digital assets, including cryptocurrencies, should be classified as a distinct category of personal property. In its final recommendation report, published on June 28, the Law Commission put forth four specific recommendations to the government.
The first recommendation emphasized the need for legislation to recognize cryptocurrencies as a unique form of personal property and provide adequate protection for their unique features. While the current personal property laws are flexible enough to encompass cryptocurrencies, the Law Commission believes that a separate category is necessary to better acknowledge and safeguard these assets.
Additionally, the Law Commission proposed the establishment of an industry-specific panel of experts to advise the court on complex legal matters related to cryptocurrencies. This panel would consist of technical experts, legal practitioners, academics, and judges, providing valuable insights and guidance in cases involving digital assets.
The report highlighted the inadequacy of existing laws regarding the use of cryptocurrencies as collateral. To address this issue, the Law Commission recommended the creation of a tailored legal framework that facilitates the entering into, operation, and enforcement of collateral arrangements involving crypto-tokens and crypto-assets. This would ensure that the legal structure is better aligned with the unique characteristics and requirements of digital assets.
Furthermore, the commission suggested changes to statutory laws to clarify whether certain cryptocurrencies align with the Financial Collateral Arrangement Regulations (FCAR). Currently, many digital assets fall outside the scope of FCARs, creating ambiguity and uncertainty. By defining the applicability of FCARs to cryptocurrencies, the commission aims to establish a clear and consistent framework that provides greater clarity and security to users and market participants.
The report received support from Justice Minister Mike Freer, who recognized the importance of adapting the legal system to meet the complexities of emerging technologies. Freer stated that the government would carefully consider the Law Commission’s findings to strengthen the future of the legal system and ensure it remains well-equipped to address the challenges posed by cryptocurrencies.
The Law Commission of England and Wales has recommended the classification of digital assets, including cryptocurrencies, as a distinct category of personal property. The commission’s report outlined the need for legislative changes, the establishment of an industry-specific panel, a tailored legal framework for crypto collateral arrangements, and reforms to clarify the applicability of existing laws. These recommendations aim to provide greater recognition, protection, and clarity for digital assets within the legal system, supporting the government’s ambitions to establish a crypto hub.