The UK continues to step up its efforts to establish a regulatory framework for cryptocurrency, with several proposals being submitted. In this line, the Law Commission of the region has published a consultation document that focuses on determining crypto ownership to protect the rights of users.
The consultation document published on July 28 indicates that guidelines should be developed to recognize and protect cryptocurrencies in a digitized world, while emphasizing that digital assets play an important role in modern society.
In a nutshell, the consultation document provides an overview of how UK property law applies and should apply to cryptocurrencies. The commissions recognized that the intangible characteristics of digital assets do not allow them to be classified as traditional property.
The report notes that when promoting crypto regulation, the law must take into account the unique crypto features as part of creating a crypto-friendly environment. The commission indicated the following:
“Some digital assets (including crypto-tokens and crypto-assets) are treated by market participants as objects of ownership. Property and property rights are vital to modern social, economic and legal systems and must be recognized and protected. Reforming the law to provide legal certainty would lay a strong foundation for the development and adoption of digital assets.”
Some of the proposals also revolve around the transfer of digital assets, with the commission stating that rules for transfer of ownership in existing real estate should apply to cryptocurrencies. In particular, the proposals support the transfer even in cases where a new or modified crypto token is created.
In addition, the draft law points out that if an investor buys a token in good faith and is unaware of another party’s claim, he has the right to retain ownership of the token in question. Furthermore, the proposal calls for clarification of the requirements for the custody of cryptocurrencies.
The commission insists that its proposals would reinforce the UK’s goal of becoming a global cryptocurrency hub by designing dynamic, flexible and competitive laws for the sector. Professor Sarah Green, Commissioner for commercial and customary law, said::
“It is important that we focus on developing the right legal basis to support these emerging technologies, rather than rushing to impose structures that could stifle their development.”
The commission has set the deadline for receiving feedback on the proposals at 4 november. We will of course keep you informed of developments.