The Law Commission of England and Wales proposes a new crypto asset category to improve classification and legal clarity.
In an unprecedented move, the Law Commission of England and Wales has proposed a classification for cryptocurrencies and other digital assets.
The independent body, which is responsible for reviewing and recommending legal reforms, has submitted a report to the UK government that advocates for the creation of a new category of personal property that is solely dedicated to crypto assets.
UK Regulatory Bodies’ Approach to Crypto Assets
The Law Commission of England and Wales has submitted an unprecedented proposal to the government, advocating for the creation of a new category of personal property specifically designed for crypto assets.
On July 30, the Commission issued its final report on digital assets, which includes this recommendation.
The Law Commission emphasized the weak spots of the existing system in its report, which divides personal property into only two categories: things in possession (tangible property) and things in action (intangible property, such as debts or rights).
The Commission contended that digital assets, such as cryptocurrencies and non-fungible tokens (NFTs), frequently exhibit qualities of both categories, which causes complications in dispute resolution and legal proceedings.
To resolve this issue, the Commission has suggested the creation of a “third category” of personal property.
This new classification aims to guarantee that the property rights associated with digital assets are clearly defined and enforceable.
The Commission believes that this change will more effectively safeguard and accommodate the distinctive characteristics of digital assets.
The draft bill that accompanies the proposal advocates for the distinct classification of crypto assets.
The purpose of this legislation is to establish a strong legal framework that will facilitate the expansion of the digital assets sector in England and Wales.
The draft bill enables courts to establish the specifics of this third category, thereby allowing for future amendments without disrupting legal proceedings for other forms of personal property.
At present, the government is in the process of reviewing the proposed legislation and the Law Commission’s recommendation.
This development aligns with the efforts of other UK regulatory bodies to address the changing digital asset landscape.
The Financial Conduct Authority and the Bank of England recently conducted a joint consultation on draft guidance for their Digital Securities Sandbox.
The aim is to facilitate testing of distributed ledger technology for the trading and settlement of digital securities.
US Developments in Cryptocurrency Regulation
There have been significant developments in cryptocurrency regulation and legislation in the United States.
Senator Cynthia Lummis of Wyoming has introduced a groundbreaking Bitcoin measure that suggests the use of cryptocurrency to address the national debt.
The bill, which was introduced at The Bitcoin Conference, would mandate that the Federal Reserve maintain Bitcoin as a strategic reserve asset.
This unprecedented step reflects the increasing interest in cryptocurrency among the most senior government officials and has the potential to have a substantial impact on US monetary policy if implemented.
Simultaneously, a federal judge issued a significant decision in the ongoing lawsuit between Ripple Labs Inc. and the SEC.
The judge determined that Ripple’s XRP token is a security when sold to institutional investors, but it is not a security when sold to the general public.
The crypto industry has seen this nuanced decision as a victory, which has the potential to establish a precedent for the classification and regulation of other cryptocurrencies in the future.
