Crypto-assets need new rights in law, UK legal body says

A stock graph is seen with a representation of bitcoin in this photo illustration taken March 13, 2020. REUTERS/Dado Ruvic/File Photo

LONDON, July 28 (Reuters) – Britain should create a new category of private property law for digital assets such as cryptocurrencies that are used to make payments or represent other assets, independent body the Law Commission suggested on Thursday.

Authorities around the world are taking steps to regulate the crypto-asset sector, which has grown rapidly and been labeled a “Wild West” by EU lawmakers. read more

Cryptocurrencies, such as bitcoin, rose in price in 2020 and 2021, but have fallen sharply this year. NFTs – blockchain-based assets that represent digital files such as images – have also spread rapidly. read more

Rishi Sunak said in April when he was Chancellor of the Exchequer that he wanted to make the UK a global hub for crypto-asset technology. He asked the Law Commission to assess whether current laws can accommodate digital assets.

The commission said Thursday that many digital assets, such as non-fungible tokens, or NFTs, do not fit easily into current private property law.

“Our proposals aim to create a strong legal framework that offers greater consistency and protection for users and fosters an environment capable of encouraging further technological innovation,” said Sarah Green, Legislative Commissioner for Commercial and Common Law.

The commission proposed adding a third category of “data objects” to the existing “things in possession,” or tangible assets such as gold, and “things in action,” such as debt or shares in a company, categories of personal property.

To fall under the new category, a digital asset must be composed of electronic data and meet other criteria, such as being used by only one person at a time, the commission suggested in a paper put out for public consultation.

Last week, the UK tabled draft legislation giving its regulators powers over the use of stablecoins in payments, with a further consultation on the regulation of other types of crypto-assets due later this year.

The crypto market has fallen sharply in recent months, with $1 trillion wiped off the global cryptocurrency market cap since the start of April, based on CoinGecko data, as the prospect of Federal Reserve rate hikes to combat high inflation has caused investors to drop more risky assets.

Reporting by Huw Jones and Elizabeth Howcroft, editing by Jane Merriman

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