Is the UK Creating a New Category for Digital Assets?

Nations worldwide have been investigating strategies to establish rules to govern and encourage the growth of the crypto industry. However, the intricacies of modern technologies, their rapid evolution pace, legal subtleties, and certain contradictions pose problems for lawmakers. Personal beliefs often impede the process, regardless of one's stance.

The British government has now decided to reevaluate the personal property law, which has been effectively applied to digital assets such as cryptocurrencies and NFTs for quite some time. This is driven not just by the aforementioned factors, but also by the burgeoning range of use cases similar to traditional securities, from investments to obligations. Hence, the country's leaders have tasked the Law Commission with performing the first-ever thorough analysis of these laws, to determine how the government should react to the emergence of these new technologies.

In their report, the specialists highlighted that digital assets, such as cryptocurrencies and NFTs, don't fit into the traditional definition of financial tools like securities or debts. Thus, they don't naturally slot into the personal property category. To remedy these legislative gaps, the government is advised to follow several key recommendations:

1. Forge a distinct property category specifically for digital assets. This category should outline the unique attributes of these assets and elaborate on their security and protection measures. While the commission refrained from pinpointing explicit terminology, it highlighted the adequacy of the overall legal framework in setting the right rules.

2. Assemble an industry-focused group comprising technical experts, industry representatives, and active legal practitioners. The group's mandate would be to furnish the government with up-to-date recommendations concerning technical intricacies, legal issues, and prospects for growth, including a comparative analysis with other countries.

3. Carry out an in-depth analysis and subsequently modify the legislation related to the use of digital assets as collateral. The newly instituted rules should streamline the procedure and monitor compliance with agreements between the lender and the borrower, particularly in situations where cryptocurrency is offered as a guarantee.

Though the published report and its recommendations are not legally binding, some government representatives have reacted positively to them. For instance, Andrew Griffith, the Economic Secretary to the Treasury, expressed his gratitude to the commission and pledged to carefully scrutinize the findings. The Minister in the Ministry of Justice, Mike Freer, mirrored this sentiment, expressing optimism for a sensible government approach towards the crypto industry's regulation: