August 1, 2022
The Commission explains that digital assets, which include crypto-tokens and non-fungible tokens (NFTs), are used for an increasing variety of purposes, including being valuable in themselves, used as a form of payment, or used to represent or be linked to objects or rights, such as equity or debt securities.
The Government asked the Law Commission to review the law on digital assets, to ensure that it can accommodate them as they continue to evolve and expand.
The Commission says that its proposals aim to deliver wider recognition and legal protections for digital assets. While the law of England and Wales has gone some way to accommodate the rise of new technologies, the Commission argues that there are several key areas that require law reform, to recognise and protect the rights of users and maximise the potential of digital assets.
In its consultation paper, which seeks views from legal experts, technologists and users, the Commission examines how existing personal property law does, and should, apply to digital assets. Because they are not tangible, digital assets have many different features to traditional physical assets. Their unique qualities mean that many digital assets do not fit easily into current private property law categories or definitions.
The consultation paper argues the law must therefore go further to acknowledge these unique features. Through these reforms, the legal system would help to create an environment that is more conducive to digital assets and their markets.
The Commission says that its proposals are designed to ensure that the law remains dynamic, highly competitive, and flexible, so that it can support transactions and other arrangements involving the technology.
The Commission’s proposals include:
- explicitly recognising in law a distinct category of personal property, provisionally called “data objects”, which is better able to accommodate the unique features of digital assets;
- options for how this distinct category of personal property could be developed and implemented under current law;
- clarifying the law around ownership and control of digital assets; and
- clarifying the law around transfers and transactions involving digital assets.
The deadline for responses to the consultation is 4 November 2022. To access the consultation paper, click here.