The UK’s independent legal body, the Law Commission, published a report on 28 June outlining the challenges of accommodating digital assets, such as cryptocurrencies and NFTs, within existing property law.
The report, commissioned by the UK’s Ministry of Justice, says that digital assets are not tangible in the conventional sense. However, unlike other non-tangible financial assets, cryptocurrencies have an existence independent of persons or legal systems, and are, for that reason, not “involuntarily inalienable” (the capacity for property to be involuntarily lost).
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The Commission proposes the creation of a third category of “digital objects” to be added to the existing property law categories of “things in possession” (tangible assets like gold) and “things in action” (a cash balance at a bank or a debt) in order to accommodate digital assets.
However, the report concludes that it is not necessary to define in statute the hard boundaries of such a third category because “the common law is the better vehicle for determining those things that properly can (and should) be objects of personal property rights”. Milk quotas or carbon emission allowances, for example, might also fall within the “digital objects” category.
The review is part of a wider plan to make the UK “a global crypto asset technology hub”. In April, Prime Minister Rishi Sunak said: “We want to see the businesses of tomorrow – and the jobs they create – here in the UK, and by regulating effectively we can give them the confidence they need to think and invest long-term.”
The report echoes similar debates in the US where federal regulators remain divided on whether most crypto assets are securities, commodities or some other form of asset. Earlier this month, the Securities and Exchange Commission charged the cryptocurrency exchanges Coinbase and Binance for operating as an “unregistered securities exchange” as part of its wider crackdown against the crypto industry.
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By GlobalDataCrypto market to reach $1.1trn by 2030, says GlobalData
In a recent report, research analyst GlobalData estimates that the global cryptocurrency hardware, software, and services market will be worth about $1.1trn in 2030, up from $33bn in 2022.
The report notes that “[r]egulatory uncertainty is a significant hurdle to broader crypto adoption”, while countries’ and agencies’ disparate approaches are sowing confusion amongst crypto companies and prospective investors.
GlobalData’s analysts, however, expect the EU’s well-received Markets in Crypto-Assets regulation to accelerate institutional adoption of cryptocurrencies.
