Personal property law should be reformed to better recognise digital assets such as cryptocurrencies and non-fungible tokens (NFTs) in response to their growth in popularity, the Law Commission of England and Wales has said.
The Commission has published proposals that suggest creating a new category of personal property be created within the law to accommodate crypto-based assets, including cryptocurrencies such as Bitcoin.
The proposals also suggest clarifying the law around the ownership of digital assets, saying provisionally that the concept of control rather than possession could be applied to crypto assets.
The Law Commission said it believed crypto-tokens could be considered appropriate objects subject to property rights and that existing rules around the transfer of title could be applied to the assets when it came to transfers and transactions of crypto assets.
The Commission said some law reform was needed in order to recognise and protect the rights of users as well as maximise the potential of digital assets.
It said further consultation on the topic was needed because as crypto assets are not tangible they have different features to physical assets and therefore do not fit easily into current private property law categories or definitions.
It argues the proposals could help the law better acknowledge their unique features and could help create a stronger legal foundation for the industry going forward.
Professor Sarah Green, the Law Commissioner for commercial and common law, 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.
“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.”
The Commission has now called for responses to its consultation, asking them to be submitted by November 4.