England and Wales Law Commission Proposes Reforms to Cover Digital Assets

On Thursday, the Law Commission of England and Wales published a consultation paper that forwarded a crypto-friendly stance. It called for the extension of property rules to cover cryptocurrencies and NFTs. This reform will legally define digital assets as personal property. Moreover, it enables investors to claim losses in hacks or scams through legal action without many complications.

“A lot of people just invest in NFTs, but they don’t ask the question ‘what happens when things go wrong?” explained Sarah Green, a Commercial and Common Law Commissioner. “It’s not clear at all what happens if you hack into my wallet and take my bitcoin or if … this system fails and I can’t access my bitcoin,” she added.

Within the consultation paper, the commission refrained from focusing on cryptocurrencies that are used as means of payment. Rather, it highlighted the wider scope of digital assets to include those that can be traded, used to represent other assets, or used as stores of value. The paper also argued that existing property laws — which are directed at traditional assets — do not reconcile with digital assets given their “many different features.”

“The law must therefore go further to acknowledge these unique features, which in turn would provide a strong legal foundation for the digital assets industry and for users,” the commission elaborated. Current property law in England and Wales distinguishes between two types of personal property. These are “Things in possession” — which are tangible objects — and “Things in action” — which covers property such as company shares.

Both of these types fail to accommodate digital assets. Hence, the Law Commission urged the creation of “data objects” which encompass property composed of data in an electronic form. “It would allow the law to develop by analogy with things in possession or things in action where appropriate, while also recognizing that certain things do not fall neatly within either category,” the paper stated.

The commission has been reviewing the laws for digital assets since last year. Its public consultation for this particular project will be ending on November 4. Nonetheless, the commission will most likely have more consultations to come. The U.K. government plans to focus on the rules for decentralized autonomous organizations (DAO) and crypto as investment assets.

The Law Commission serves as an independent body that reviews the law of England and Wales and suggests reforms when necessary. Through its recommendations, it affirmed that this remains in line with the government’s aim of becoming a global crypto hub. However, the proposed reforms would not be applicable in Scotland or Northern Ireland. Granted, the two have their own legal systems in place.

Source: CoinDesk