© Reuters. FILE PHOTO: Representations of cryptocurrencies dive into water in this illustration taken May 23, 2022. REUTERS/Dado Ruvic
By Elizabeth Howcroft
LONDON (Reuters) - British law may accommodate crypto assets by creating a new category of personal property that would include digital assets, an independent body from the Law Commission said on Wednesday.
In a government-commissioned report, the Law Commission said digital assets such as cryptocurrencies and non-fungible tokens (NFTs) do not fit into the traditional categories of personal property.
As expected, the Commission proposed to add a third category of "digital objects" to the existing categories of personal property, which are "things in possession" (tangible assets like gold) and "things in action" ( such as debts or shares of a company).
The group also said the government should set up an expert panel to advise courts on legal issues regarding digital assets.
These moves would support the UK government's goal of becoming a global hub for crypto assets, the Law Commission said in a statement.
“The use and importance of digital assets has increased dramatically over the past few years,” said Sarah Green, Statutory Commissioner for Commercial Law and Common Law.
"The flexibility of the common law means that the legal system in England and Wales is well placed to adapt to this rapid growth."
Prime Minister Rishi Sunak said in April 2022, when he was finance minister, that he wanted to make Britain a global hub for crypto asset technology. He asked the Law Commission to consider whether current laws can accommodate digital assets.
"The Law Commission has chosen to wield the scalpel, not the hammer, with these recommendations. This will reassure many in the industry," said Adam Sanitt, director of knowledge at Norton Rose Fulbright, who contributed to the report.
Sanitt said pursuing the recommendations would pave the way for better protection for holders of crypto assets and support the government's aim of making the UK a technology hub.
The Commission also said that there was not enough legal certainty around collateral agreements involving crypto assets and recommended that the government put in place a bespoke legal framework to facilitate such situations.
“There is a very high degree of demand for such law reform among those consulted, market participants and industry bodies,” the report states.