The Law Commission, an independent body, has proposed that UK law should adapt to accommodate crypto assets by introducing a new category of personal property that includes digital assets. In a report commissioned by the government, the Law Commission acknowledged that digital assets like cryptocurrencies and non-fungible tokens (NFTs) do not fit neatly into existing categories of personal property.
Introducing a Third Category: Digital Objects
The Law Commission’s proposal suggests the addition of a third category called “digital objects” alongside the existing categories of personal property: “things in possession” (such as tangible assets like gold) and “things in action” (such as debt or shares in a company).
By doing so, according to Reuters, the Commission aims to provide a legal framework that recognizes the unique nature of digital assets.
Additionally, the Law Commission recommends the creation of an expert panel to advise courts on legal matters concerning digital assets. This panel would provide guidance and ensure that the legal system is equipped to address the complexities of the digital economy.
Supporting the UK’s Global Crypto Asset Hub Ambitions
The Law Commission’s suggestions align with the UK government’s ambition to position the country as a leading global hub for crypto assets.
Sarah Green, the law commissioner for commercial and common law, emphasized the significance of digital assets and the adaptability of the English legal system, stating, “The use and importance of digital assets has grown significantly in the last 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.“
The Law Commission’s measured approach has been met with approval from industry experts. Adam Sanitt, knowledge director at Norton Rose Fulbright, who contributed to the report, commented, “The Law Commission has opted to wield the scalpel, not the sledgehammer, with these recommendations. This will be reassuring for many in the industry.”
Sanitt believes that implementing the Commission’s recommendations will provide greater protection for crypto asset holders and support the government’s goal of establishing the UK as a prominent tech hub.
Addressing Legal Uncertainty and Collateral Arrangements
The Commission also highlighted the lack of legal certainty surrounding collateral arrangements involving crypto assets.
To address this issue, the report recommends the creation of a specialized legal framework that can facilitate such situations.
Responding to the demand for reform, the Law Commission emphasized the need for clarity and consistency in collateral arrangements involving digital assets.
Implications for the iGaming Industry:
- Increased Legal Clarity: The Law Commission’s recommendations offer much-needed clarity for the iGaming industry, providing a legal framework that recognizes the unique nature of digital assets. This clarity will enhance consumer confidence and encourage further innovation in the sector, especially in NFT gambling, Web3 lotteries and crypto casinos.
- Regulatory Alignment: The proposed expert panel will help align regulatory frameworks with the fast-paced developments in the digital economy. By advising courts on legal matters related to digital assets, the panel can ensure that regulations remain up-to-date and effective.
- International Competitiveness: The UK’s ambition to become a global hub for crypto assets is supported by the Law Commission’s proposals, and is on the same trajectory as the introduction of Britcoin. By adapting the legal system to accommodate digital assets, the UK can attract international businesses and investors, bolstering its position as a leader in the iGaming industry.
In conclusion, the Law Commission’s recommendations to introduce a new category for crypto assets and establish an expert panel demonstrate the UK’s commitment to fostering growth in the digital economy.
These proposals provide legal clarity, support regulatory alignment, and enhance the country’s international competitiveness in the iGaming industry. By embracing the opportunities presented by digital assets, the UK is well-positioned to lead the way in this burgeoning sector.
The Law Commission’s recognition of the importance of digital assets and its willingness to adapt the legal system reflect a proactive approach to facilitating innovation and protecting stakeholders.