In a consultation paper issued last week, the Law Commission of England and Wales (the Commission) recommended that the British Government expand the scope of recognition and legal protections currently in place for digital assets, including cryptocurrencies and non-fungible tokens (NFTs).
Commenting on the new proposals, Professor Sarah Green, the Law Commissioner for Commercial and Common Law, said:
Digital assets such as NFTs and other crypto-tokens have evolved and proliferated at great speed, so it’s vital that our laws are adaptable enough to be able to accommodate them.
The Commission's paper argues that digital assets do not fit neatly into the existing categories of personal property (things in possession and things in action) and recommends the implementation of a third category of personal property called “data objects”, which could include a wide variety of digital assets including cryptocurrencies and NFTs.
The Commission's key proposals include:
providing explicit recognition of a distinct category of personal property known as “data objects” that is better able to accommodate the unique features of digital assets;
options on how this third category of “data objects” could be developed and implemented under the current law;
clarifying the law around ownership and control of digital assets; and
clarifying the law around transfers and transactions involving digital assets.
The Commission's proposals are intended to ensure that the law remains flexible and progressive towards new and emerging technologies. Professor Green noted:
It’s important that we focus on developing the right legal foundations to support these emerging technologies, rather than rushing to impose structures that could stifle their development. By clarifying the law, England and Wales could reap the potential rewards and position itself as a global hub for digital assets.
The Commission's recommendations are a positive step in developing a strong legal framework to support ownership of digital assets and further innovation in this space. If adopted, the Commission's proposals could pave the way for other jurisdictions to follow suit and recognise digital assets as a unique form of property.
The deadline for public responses to the Commission's consultation paper is 4 November 2022.