Commonwealth Law Ministers, Attorney General's, and Senior Officials from 32 member countries of the Commonwealth recently met in Zanzibar to discuss emerging trends in digitalisation. The specific theme of the meeting was "Technology and Innovation: How digitalisation paves the way for people-centred access to justice."
One of the major topics discussed at the meeting was digital assets. In particular, members discussed a Model Law on Virtual Assets, which has been developed by the forum over the past two years and is intended to act as a framework model law which aligns with Commonwealth values. The proposed Model Law is intended to comply with the Financial Action Task Force (FATF) Recommendation 15, which requires that virtual asset service providers (VASPs) be regulated for anti-money laundering and counter-terrorism financing purposes, and that they additionally be licensed or registered and subject to effective systems for monitoring or supervision.
The drafting of the Model Law was led by Loretta Joseph, the Co-Chair of the International Digital Asset Exchange Association (IDAXA). In a LinkedIn post, Joseph stated that the Model Law was intended to act as an example of how countries can adopt a digital assets regime even if they lack sufficient resources or guidance to do so themselves. Alternatively, countries may be able to choose to develop their own framework from the Model Law based on their own specific needs and circumstances.
Joseph highlighted the importance of adaptive laws:
As crypto evolves, the model law must adapt, addressing emerging trends like DeFi and stablecoins. Financial stability risks, especially in jurisdictions with weaker currencies, underscore the need for robust regulation.
By closely monitoring standard-setting bodies' recommendations, such as the FATF, the model law aims to ensure effective implementation and trust in the [virtual assets] sector.
It is important to note that the Model Law does not have force of law in any Commonwealth country. It must be adopted and implemented by a particular member country on a national level before it is enforceable. In this sense, the Model Law is in the form of best practice guidance and not a comprehensive cross border legal framework like the EU's MiCA crypto-asset regulation which has direct application in the EU alongside national laws. In this sense, it will operate more like the UNCITRAL model law on international commercial arbitration, which countries can choose to adopt in the interests of establishing consistent rules based on international best practice
The Model law has not yet been published on the Commonwealth's website. The Commonwealth has in the past published a number of Model Laws and best practice guidelines as part of its Office of Civil and Criminal Justice Reform.
This Commonwealth is part of a series of initiatives by global standard setting bodies aimed at ensuring consistent digital assets regulation. As nations recognise the need for fit for purpose digital assets regulation, blockchain enthusiasts and developers are hopeful that compatible legal frameworks will emerge, mitigating conflicts, and paving the way for future innovation and consumer protections.
Written by Steven Pettigrove and Luke Higgins