The Law Commission of England and Wales urged the United Kingdom government to categorize all crypto assets as a new form of personal property in its final report on digital assets.
The Law Commission is an independent body primarily tasked with reviewing and recommending law reforms in England and Wales. On July 30, it published a supplemental report highlighting the inadequacy of the current categorization of personal property and its legal implications on crypto assets.
Demand for a new type of personal property
English law categorizes personal property into two main types: things in possession (tangible property) and things in action (intangible property, such as debts or rights). The commission argued that digital assets, including cryptocurrencies and non-fungible tokens, can possess both qualities and hinder dispute resolution in court proceedings.
As a result, it recommended the creation of a “third category” that ensures property rights related to crypto assets are clear and enforceable:
“We conclude that the flexibility of common law allows for the recognition of a distinct category of personal property that can better recognize, accommodate and protect the unique features of certain digital assets (including crypto-tokens and crypto assets).”
The commission issued a draft bill demanding a separate category for crypto assets to help create a robust legal framework and aid the growth of the digital assets sector in England and Wales.
England and Wales regulators to review the draft bill
The draft bill leaves it to the courts to develop the third category for crypto assets, which could be amended in the future without disrupting the legal proceedings of other forms of personal property.
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The commission said that the government is currently considering the recommendation and the draft legislation.
The Bank of England and the Financial Conduct Authority, the UK’s financial regulator, recently issued a consultation on the draft guidance for their Digital Securities Sandbox.
According to the joint consultation and draft guidance released on April 3, the sandbox is designed to allow participants to test distributed ledger technology for trading and settlement of digital securities such as shares and bonds.
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