Its report, published this week, shows how the law can accommodate digital assets like NFTs (non-fungible tokens) and cryptocurrencies. The Commission found that the flexibility of common law has worked well to date, although some residual uncertainty remains.
It recommends legislation to confirm the existence of a distinct third category of personal property, to more clearly protect the unique features of digital assets. It suggests a nuanced approach so as to recognise that a variety of intangible assets such as crypto-tokens, export quotas or types of carbon emissions allowance can be objects of personal property rights.
Second, it recommends the creation of a panel of industry-specific technical experts, legal practitioners, academics and judges to provide non-binding advice to courts. Third, it proposes a bespoke legal framework to facilitate the entering into, operation of and enforcement of collateral arrangements regarding crypto-tokens and crypto-assets. Fourth, it recommends statutory law reform to clarify whether certain digital assets fall within the scope of the Financial Collateral Arrangements (No 2) Regulations 2003.
Professor Sarah Green, Law Commissioner for Commercial and Common Law, said: ‘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 and 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.’
Justice Minister Mike Freer said: ‘We must ensure our law remains equipped to meet the complexities of these technologies well into the future, and we will carefully consider these findings as we look to further strengthen the future of our globally-renowned legal system.’
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