The consultation paper examines how personal property laws apply to digital assets and proposes the creation of a new category for digital assets like cryptocurrencies.
As well as highlighting the multi-faceted nature of cryptocurrencies, non-fungible tokens (NFT) and other digital assets, the paper argues that there are several key areas that require law reform in order to recognise and protect the rights of users and maximise the potential of digital assets.
A New Category
A key finding from the paper is that the Law Commission believes many digital assets such as cryptocurrencies and NFTs do not easily fit into current private property law.
As a result, it recommends the creation of a new category called ‘data objects’ that would account for things composed of data in an electronic form like databases, software, digital records, domain names and crypto.
By explicitly defining a distinct legal category of personal property to accommodate the unique features of digital assets under the banner of ‘data objects’, the Law Commission believes that a more diverse range of groups and companies will be able to benefit from them.
Another proposal suggests creating different options for the development and implementation of ‘data objects’ around existing law, while the final two recommendations allude to the clarification of law around ownership and control of digital assets.
Importantly, the Law Commission has proposed that in order to qualify under the new category, a digital asset must be composed of electronic data and meet other criteria, such as only being used by one person at a time.
This comes as Britain introduced a draft law last week that will enable certain types of stablecoins to be regulated as a form of payment, with a further consultation on regulating other types of crypto-assets due later this year.
The Law Commission, which is independent of the government, was created under the Law Commissions Act of 1965 for the purpose of promoting law reform. It is an advisory non-departmental public body sponsored by the Ministry of Justice.