As global regulators continue to search for how best to regulate the crypto space, the Law Commission of England and Wales has proposed to create a new category of private property law for digital assets.
In a consultation paper published Thursday, the commission acknowledged that digital assets play an important role in modern society, with their popularity increasing by the day.
The Law Commission, which acts as an independent body tasked with reviewing and updating the law, noted that the UK government had asked it to review the law to accommodate the rapidly-growing asset class as part of its goals to make the UK a global crypto hub.
Commercial and Common Law Commissioner Sarah Green said, "Digital assets such as NFTs and other crypto-tokens have evolved and proliferated at great speed, so it’s vital that our laws are adaptable enough to be able to accommodate them. Our proposals aim to create a strong legal framework that offers greater consistency and protection for users and promotes an environment that is able to encourage further technological innovation."
According to the paper, existing property laws can not adequately accommodate digital assets, since they possess several unique qualities that set them apart from traditional physical assets.
The commission proposed to recognize a new category of personal property called "data objects", which would include digital assets. This new category will be in addition to the two existing types of personal property, including "things in possession", or tangible assets like gold, and "things in action", such as debt or shares in a company.
The consultation paper noted that the new proposal would encourage wider recognition and legal protections for digital assets, which will in effect allow a more diverse range of users to benefit from them.
"It's important that we focus on developing the right legal foundations to support these emerging technologies, rather than rushing to impose structures that could stifle their development. By clarifying the law, England and Wales could reap the potential rewards and position itself as a global hub for digital assets," Green concluded.
The commission is currently seeking the input of technologists and users to help evaluate how existing personal property laws apply to crypto. The public consultation on the rules is scheduled to end on 4th November.
A few weeks ago, the UK tax authority consulted investors and crypto-related companies over DeFi taxation.
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